FAFSA SAI vs EFC: Key Differences You Should Know

Thanks to a few new changes made to the Free Application for Federal Student Aid (FAFSA), it’s easier than ever to apply to free federal financial aid. One of the biggest updates involves the formula used to calculate students’ financial need, the Student Aid Index (SAI).

The formula revamp comes courtesy of the FAFSA Simplification Act, a piece of legislation Congress passed in 2021 as a part of the Consolidated Appropriations Act written to expand the pool of students eligible for aid (yay!). While the December 31, 2023 launch came with its share of technical hurdles, this new aid calculation model is here to stay.

Instead of measuring financial need based on your Expected Family Contribution (EFC), the new FAFSA form will rely on a new measurement: the Student Aid Index (SAI). Using the SAI should make more students eligible for grants, federal student loans, and other forms of aid. But, what’s the difference between the FAFSA SAI vs EFC? And how will the change affect you? Here’s what you need to know.

What is the Student Aid Index (SAI)?

The Student Aid Index (SAI) is a measure of a student’s ability to pay for college. Colleges will use SAI to determine how much federal financial aid a student is eligible to receive. The SAI also frequently determines eligibility for need-based state and institutional financial aid. It does not imply any obligation for a family to pay anything for their student’s college education. 

The SAI is calculated based on information provided on the Free Application for Federal Student Aid (FAFSA) form, taking into account factors like student income, family income, assets, and household size.

Before Student Aid Index, Expected Family Contribution (EFC) was the metric used to calculate a student’s financial aid eligibility. But as part of the FAFSA Simplification Act, SAI replaced EFC as a simpler, more accurate determination of financial need.

Why the change from EFC to SAI?

The biggest reason the federal government decided to switch from EFC to SAI is because the EFC was confusing to many students.

The term “Expected Family Contribution” confused families because it sounded like an amount that families were required to pay toward college. In reality, the EFC was never meant to be a family’s out of pocket estimate for college expenses. The EFC was an index that colleges used to objectively determine student financial need, and eligibility for need-based federal, state, and institutional aid.

Ultimately, the term caused frustration, as many families would budget their college savings based on their EFC and then feel shocked when the college their student was accepted to left them with a much larger financial gap.

So, in the pursuit to build a better FAFSA, the Department of Education moved to the SAI, or Student Aid Index, beginning for the 2024-25 FAFSA application.

How might this affect a family?

In many ways, the SAI is just a new name for EFC, but there are a few key differences students should be aware of. For most families, the changes to the actual formula of the SAI should mean they have increased financial aid eligibility, but there are some families that may see decreased eligibility.

For instance, a family that will have multiple children in college at the same time may see decreased eligibility for financial aid. Unlike EFC, the SAI calculation doesn’t consider how many concurrently enrolled college students are in a family. On the other hand, students who are or who have single parents will see their eligibility for the Pell Grant expanded. This is because the AGI threshold for students of single parents to receive the max Pell Grant was raised to 225% of the federal poverty level for their household size.

All this to say: it’s more important than ever to understand the purpose of the FAFSA and how the SAI is calculated.

Key differences between EFC and SAI

So, what exactly is the difference between EFC and SAI? Here are a few of the primary ways in which they differ. 

1. Income and assets are simplified. The EFC considers your family’s income and assets, your income and assets, your family size, and the number of family members who are currently in college. The SAI, on the other hand, only considers household size and family and student income and assets. 

2. There’s a wider range of financial need representation. The minimum EFC you could be granted was $0, which made it challenging for colleges to determine which students demonstrated exceptional financial need. Now, your SAI can be as low as -$1,500. This should increase accessibility to post-secondary education, as colleges and universities have a better understanding of students who need assistance. For students with a negative SAI, this could result in them being awarded more financial aid. 

3. Tax information is more accurate. The SAI attempts to remove all questions that can not use data directly reported from the IRS. This is done on via the IRS Direct Data Exchange (DDX) on the FAFSA. As a result, it may be more accurate than the EFC, which relied more on self-reported data. It also relieves families of the responsibility to carefully look up and report all their own financial data. Additionally, this requirement to utilize the DDX will mean that most families will spend far less time on the FAFSA.

4. Untaxed income won’t need to be reported. Many forms of untaxed income that can’t be verified via income tax returns won’t need to be reported on the FAFSA starting in the 2024-25 school year. This could further lower some families’ SAI. Additionally, certain items previously classified as income (like child support) have been reclassified as an asset. 

5. SAI comes with a greater income protection allowance than EFC did, especially for single parents. With EFC, a higher percentage of parent income was considered available for college costs. The SAI lowers that for many families. This more accurately reflects how much money a family has to cover their student’s higher education expenses.

6. Some assets will now be considered that weren’t before. The SAI will no longer provide a state or local income tax allowance, and it will no longer exclude the net worth of a small business and/or a family farm. This change may lead to a family having a higher SAI than the EFC they would have received. 

7. 529’s affect your aid offer differently. The SAI will no longer consider an Educational Savings Account that is held by the parent or the student but not in the name of the student filing the FAFSA. This means your sibling’s 529 plan won’t be considered for your SAI. Additionally, a 529 plan held by a grandparent, aunt, uncle, or other third party will not be considered on your FAFSA, and any qualified distributions from that 529 plan will not be considered student income. 

8. The SAI formula places more emphasis on assets than the EFC did. Previously, the EFC was primarily determined by parent and student income, which will still be a factor in the SAI formula. The difference is that the SAI places greater emphasis on indicators of generational wealth like real estate, stocks, bonds, investments, trusts, etc.

9. The Parent Contributor is a bit different. In the case of divorced or separated parents, the EFC considered the parent that the student lived with the majority of the time. The SAI now considers the parent who provides the greater financial support to the student. This could mean that a different parent is now contributing to the student’s FAFSA, which may cause a change in a student’s expected college contribution.

How does this affect you? 

The Student Aid Index (SAI) affects whether or not you’re eligible for grants, work-study programs, federal student loans, and other forms of financial assistance. If you’re a graduate student, professional student, or the parent of a dependent student, the SAI will determine your eligibility for Direct Plus Loans from the 2024/25 academic year onward. 

If you’ve filled out the FAFSA before with EFC, you may feel daunted by the prospect of getting to know a whole new form. Fortunately, the new FAFSA form was designed to be simpler and more streamlined, and it should take less time to fill out. You’ll find that some of the tougher questions — like those about drug convictions and Selective Service — have been removed. The form will also be much shorter.

Will financial need be calculated differently?

Though EFC and SAI are slightly different, they’ll still be used the same way when it comes to calculating financial need. Previously, the federal government defined a student’s financial need with the following formula: 

Cost of Attendance - EFC = Financial Need 

Now, the formula remains the same, just with SAI used in place of EFC: 

Cost of Attendance - SAI = Financial Need 

The Department of Education has standardized and increased regulation around the broader definition of cost of attendance. This is important to understand, as it is a key component in the financial need formula. In addition to tuition, books, and supplies, COA now must include: 

  • Personal expenses, if a student is enrolled at least half-time 
  • A housing allowance, even for students living at home with their parents
  • The actual cost of federal loan fees (private student loan fees are not included.)
  • A food allowance based on three meals per day 
  • An allowance to purchase or rent a computer, regardless of a student’s enrollment time commitment
  • A transportation allowance

As a result, the cost of attendance used in your financial need calculation may be higher — resulting in a higher demonstrated financial need. That translates to more aid. 

(Note: Keep in mind that transportation, room, board, and other allowances are set by student financial aid administrators. As such, they are estimates to capture the average experience of students, and the estimates will differ from school to school.) 

Will I qualify for more aid?

It’s important to note – the process of determining how much aid you will receive involves two steps:

  • Step one is filing the FAFSA, and while it doesn’t determine the amount of financial aid you receive, it does determine your SAI. 
  • Step two is the college determining how much they will offer you. Each college you are accepted to will calculate your financial need at their college. 

You will then receive their financial aid award letters, and you will want to compare them using a tool like Going Merry College Cost Insights. 

Most colleges do not promise to cover 100% of a student’s demonstrated financial need, and many colleges are limited by the amount of funding they receive. That said, given the expanded funding, increased eligibility, and the few recent changes to the way cost of attendance is calculated, many students will likely qualify for more need-based financial aid with the new SAI.

That’s because it is projected that the majority of families will see their SAI is lower than what their EFC would have been. Also, while the EFC bottomed out at $0, the minimum possible SAI is -$1,500. So, with a -$1,500 SAI, and a college’s cost of attendance of $25,000 your financial need calculation could look like:

$25,000 – -$1,500 = $26,500 in financial need

This demonstrates that you have exceptional financial need, and the college may include more institutional grants and scholarships in your financial aid award.

As for the Pell Grant, again, more students having a lower SAI should mean that more students are eligible for a Pell Grant. If a student receives an SAI of -$1,500 – $0, they will be eligible to receive a Maximum Pell Grant, and if their AGI falls below the Minimum Pell Grant AGI for their family size, they would be eligible to receive some funding from the Pell Grant.

Other changes to the 2024-25 FAFSA

The new SAI, in conjunction with other changes, could have a significant effect on how much financial assistance you qualify for. Here are a few of the other relevant updates:

  • Family size definitions have been adjusted. The new definitions are more in line with how income is reported on tax returns.
  • Subsidized loans are more widely available. Before, students could only receive federal subsidized loans for a maximum of 150% of the time their program was projected to take. (So, for most students, six years.) Now, this limit has been repealed.
  • Pell Grant eligibility has been expanded. According to Department of Education projections, about 1.5 million more students will now qualify for Pell Grant aid, which can significantly reduce college costs and doesn’t come with the burden of repayment.
  • Some families won’t need to report assets. Families with income under a certain threshold won’t need to report assets on their FAFSA, further lowering their SAI. 

Given the expanded COA definitions, new SAI formula, updated Pell Grant eligibility guidelines, and subsidized loan changes, more students will likely receive a more robust financial aid package than they were eligible for before. 

Pay less for college with Going Merry 

The new FAFSA guidelines may take some getting used to, but many students will find that the changes streamline the federal financial aid process. They should also open up more opportunities for funding assistance, especially for students who are the first or only members of their family to go to college. 

It’s important to remember that, even with the changes, not all students will be awarded up to their school’s full cost of attendance. As before, most families will have to continue piecing together grants, loans, and scholarships to cover the cost of college. Fortunately, that process doesn’t have to be complicated. 

Going Merry offers a number of resources to help you along your funding journey. Compare colleges, learn how to get the most financial aid possible, and get personalized scholarship matches delivered to you. Find out how much you could save. Sign up for free today.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

Allyson Edwards
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