How the new student aid index (SAI) affects college financial aid

Exit EFC, enter SAI. The newly revised Free Application for Federal Student Aid (FAFSA) no longer calculates an Expected Family Contribution—a.k.a., EFC. Instead, a new factor called the Student Aid Index, or SAI, now influences how much federal need-based financial aid an applicant receives.

The change is a result of the FAFSA Simplification Act, passed by Congress in 2021. Of all the act's impacts, the introduction of the SAI may be the most significant.

Typically, the FAFSA is released annually on Oct. 1 for the school year that starts the following fall and is required if you want to request federal need-based financial aid. This year, however, the application will be delayed until December as all the FAFSA changes are implemented on the form itself.

To prepare for completing the updated FAFSA, learn more about the SAI and what the changes may mean for you.

The shift from EFC to SAI was made, in part, to more accurately describe the figure's function. Despite its name, the EFC wasn't meant to express how much a family would pay toward a student's college education. Instead, the SAI was created to reframe how the figure is used as a guidepost to determine how much aid a student is eligible to receive.

The information you input on the FAFSA about you and your family’s financial profile will determine your SAI. The index will equal the sum of your parents’ available income, your income and assets.

A school determines a student's financial need by subtracting the SAI and outside financial assistance from the cost of attending that college. A lower SAI indicates a higher financial need. And greater need results in eligibility for more federal financial aid—from sources that could include grants, subsidized loans and work-study programs.

The SAI's name isn't all that's new. Like the EFC before it, the SAI reflects a family's income, assets and household size. But some factors that determine the SAI differ from those used to calculate the EFC. Here's a breakdown:

Previously, the EFC could go down if an applicant had siblings attending college. Now, the number of family members in college doesn't affect the SAI. For some families, this change may be offset, at least in part, by the increased income protection allowance (IPA).

The IPA is an amount subtracted from parent and/or student income before calculating the SAI. The IPA is rising significantly with the introduction of the new FAFSA. IPA amounts depend on the number of people in a household—but generally, a parent's IPA is now about 20% higher than it was in previous years' EFC calculations.

The calculation that produces the SAI can result in a negative number as low as -$1,500. Previously, the EFC couldn't drop below zero. Allowing the SAI to be a negative value helps identify the neediest students. And it may enable some to receive financial assistance beyond the cost of attendance that can cover other college-related expenses.

A new formula now determines eligibility for Pell Grants. It's simpler than it used to be, factoring in the SAI, along with adjusted gross income (AGI). Some students who wouldn't qualify for a Pell Grant based solely on AGI now might be eligible for an award based on their SAI.

Unlike the EFC, which could be reduced based on the applicant's state and local tax payments, the SAI isn't affected by how much a family pays in state and local taxes.

Generally, the new SAI formula is projected to result in increased aid for most families. But the impacts may not be the same for everyone.

Families—especially middle- and high-income households—with more than one child in college may see a net loss in the total aid they receive since the SAI doesn't factor in a multiple-student discount. People in high-tax states may also see some negative ramifications since state and local tax payments don't lead to SAI reductions.

Low-income families—especially those with the greatest financial need—may see the most benefit due to factors that allow the SAI to be a negative dollar amount. Such a result could help increase the amount of aid some students receive, which might help make college a feasible possibility for them.

Determining how the new SAI formula affects you is a complex calculation and may influence your other financial decisions, such as college savings and other investments. You don't have the crunch the numbers alone. Contact a Thrivent financial advisor for guidance on saving and financing for your higher education goals.