What Is The Student Aid Index?

Right now, students receive their expected family contribution (EFC) after submitting the Free Application for Federal Student Aid (FAFSA). The EFC is a number that colleges use to determine how much financial aid to give you if you enroll.

However, the EFC is frequently misunderstood. Many people believe the EFC tells you what you will have to pay or how much aid you’ll receive. But that’s not the case.

To simplify the system and make the financial aid process clearer, the government included elements of the FAFSA Simplification Act in its 2021 Consolidated Appropriations Act, which was signed into law in December 2020. Part of this change includes replacing the EFC with the Student Aid Index (SAI).

Here’s how the SAI works and how it differs from the EFC.

What Is the Student Aid Index?

The SAI is currently used by financial aid administrators when calculating financial aid awards. It helps determine how much students will receive in most forms of financial aid, including federal student loans and work-study programs.

After completing the FAFSA, you will receive your student aid report, which also will include the SAI.

How the Student Aid Index Differs from the Expected Family Contribution

The switch from EFC to SAI is really about clarifying the index’s purpose. The SAI, like the EFC, is used by financial aid administrators to calculate your financial aid options. Here are the main differences between the two.

How the Expected Family Contribution Works

Currently, students are given an EFC after submitting their FAFSA. The EFC is calculated using a formula based on your family’s income, assets and any benefits you receive.

To calculate your financial need, the colleges will subtract your EFC from their cost of attendance to come up with a number for how much you personally need to pay for school.

For example, let’s say the cost of attendance at your selected college is $20,000, and you have an EFC of $5,000. Your EFC will be subtracted from the cost of attendance, resulting in $15,000 in financial need. That number is how much need-based aid you’re eligible to receive. Schools may have their own scholarship and grant programs, but federal need-based options include:

• Pell Grants
• Federal supplemental educational opportunity grants
• Work-study programs
• Direct subsidized loans

After need-based aid, schools also determine how much aid (not based on need) that you can get, such as other student loans. To calculate this additional aid , colleges subtract your current financial aid awards from the cost of attendance. The resulting number is how much you can take out in direct unsubsidized loans and direct PLUS loans.

For example, imagine you were eligible for up to $15,000 in need-based aid. Subtract that number from the cost of attendance—$20,000—and the remaining $5,000 is what you can typically borrow in federal student loans.

How the Student Aid Index Will Work

For many, the EFC is confusing. Because of its name, people tend to think the number represented how much they were expected to pay out of their own savings, rather than just an index used to calculate financial aid eligibility.

The SAI works similarly to the EFC, but the new name reflects how the index works more accurately. There are some key changes to note:

• Range: The lowest EFC you can receive is $0. But applicants can now receive an SAI as low as -$1,500, helping to cover expenses not included in the school’s published cost of attendance.
• Pell Grant eligibility: Students will be able to see if they are eligible for Pell Grants before applying for financial aid. The SAI will be used to calculate Pell Grants for students who don’t qualify for them based on their adjusted gross income alone.
• Special circumstances: Under the new rules with the SAI, financial aid administrators can make adjustments to the cost of attendance or the values used to calculate the SAI for students on a case-by-case basis. These adjustments can be made to help applicants experiencing exceptional circumstances, such as dramatic changes in their incomes since filing their tax returns.

When Does the Student Aid Index Go into Effect?

The changes to the financial aid application process do not go into effect right away. Most of the changes—including the replacement of the EFC with the SAI—will begin July 1, 2023.

Until that time, students and their families will continue to use the current FAFSA and EFC for financial aid purposes.

7 Other Financial Aid Changes Coming

Along with replacing the EFC with the SAI, there are other changes to the financial aid and FAFSA processes. They include:

1. Certain Requirements Repealed

Currently, to be eligible for federal financial aid, students cannot be convicted of drug-related offenses, and male students must register with the Selective Service System. The FAFSA Simplification Act expands federal financial aid eligibility by repealing these requirements.

2. Shorter FAFSA

The current FAFSA has 108 questions. Under the new rules, the FAFSA will have a maximum of 36 questions.

3. Cost of Attendance Disclosure Requirements Expanded

Schools only have to list certain expenses within their cost of attendance. The FAFSA Simplification Act expands the list of required expenses that schools have to disclose on their websites and other materials. Under the new rules, colleges and universities must calculate tuition and fees in their cost of attendance, and the following allowances for:

• Books and course materials
• Transportation expenses
• Miscellaneous personal care expenses
• Living expenses, such as room and board
• Dependent care
• Students enrolled in courses of study offered by correspondence
• Students with disabilities
• Students enrolled in cooperative education programs
• Covering loan disbursement fees for federal loan borrowers
• Students in programs that require professional licensing or certification

4. Income Protections Raised

Under the current system, a certain percentage of income is not considered when determining how much you can pay toward college. The new law raises the income protection allowance by 20%. Parent income protections are increased to $23,330 for two-person families with one dependent.

5. Ends Time-Based Limit on Subsidized Loans

Currently, students can only receive direct subsidized loans for up to 150% of the published length of their programs. For example, if they’re enrolled in a four-year degree program, they can only use direct subsidized loans for six years of attendance. After that, they are ineligible for additional subsidized loans.

The new rules repeal the time-based limit on subsidized loans, giving low-income students greater access to financial aid.

6. Pell Grant Eligibility Expanded

Under the FAFSA Simplification Act, more students will be able to take advantage of Pell Grants, federal grants designed for low-income students.

It restores Pell Grant eligibility for the following groups:

• Students who are incarcerated.
• Students who were unable to complete their programs due to the school closing, who were falsely certified as eligible for federal financial aid.
• Those whose loans were discharged through the borrower defense to repayment program.