Investor's wiki
en English
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy

Student Aid Index (SAI) Is the Recalculated Expected Family Contribution (EFC)

Student Aid Index (SAI) Is the Recalculated Expected Family Contribution (EFC)
Personal FinanceFamily FinancesSaving for College

At the point when the Consolidated Appropriations Act of 2021 — the bill that delivered the second round of economic stimulus payments during the COVID-19 pandemic — passed the U.S. Senate on Dec. 27, 2021, one of the less popular provisions was the FAFSA Simplification Act, which brought hotly anticipated changes to the Free Application for Federal Student Aid (FAFSA), the form utilized by students to present the financial information that colleges, states, and other grant suppliers use to determine financial aid packages.

As well as smoothing out the FAFSA application from 108 inquiries to 36 inquiries, huge changes were made to an important number in the requirements examination section of the form — the Expected Family Contribution (EFC) — which was recalculated and renamed as Student Aid Index (SAI). The name change explains that the SAI figure is a qualification index for student aid — not a determination of what a candidate will pay. The recalculation recognizes candidates with the best need.

As different provisions of the FAFSA Simplification Act are carried out prior to the 2024 cutoff time, here is an outline of the main changes in the reexamined Student Aid Index (SAI) to keep as a primary concern for college planning.

Student Aid Index (SAI) versus Expected Family Contribution (EFC)

Albeit the FAFSA Simplification Act didn't capture many headlines during the pandemic, the entry of this bill was the biggest correction of Title IV of the Higher Education Act of 1965 (HEA) — which approves financial assistance programs for postsecondary education — in over 50 years. When completely executed, there will be various strategies as well as various measures of a candidate's ability to pay for post-optional education.

According to the perspective of students and families facing prohibitive tuition, the main contemplations are the changes to how financial aid suppliers work out the candidate's ability to pay for college — particularly the changes to the factors in the formula to ascertain need, i.e., the new Student Aid Index (SAI), which will supplant the legacy Expected Family Contribution (EFC).

July 1, 2024

is the date of the FAFSA Simplification Rollout. At the point when the FAFSA Simplification Act became public law, the U.S. Department of Education arranged a phased implementation to allow time to carry out every one of the changes to the methodology.

Reasoning for Name Change from EFC to SAI

Albeit the name change from Expected Family Contribution (EFC) to Student Aid Index (SAI) could give off an impression of being a minor detail with regards to the major update of federal student aid in 2021, the U.S. Department of Education chose to switch the name for an amazing explanation: accurate terminology will assist the whole cycle. For quite a long time, Expected Family Contribution (EFC) was widely confused as the total amount a student would be expected to pay, so the term was condemned as a misnomer that misdirected candidates and their families about the true cost of college. The subsequent confusion slowed down an all around troublesome application process and frequently overturned financial planning for college.

What the SAI/EFC Amount Means

Albeit both the new SAI and the old EFC are factors in a formula to work out a candidate's ability to pay, the dollar amount created is just an estimate of the amount the student could manage. As tuition keeps on heightening, numerous students will pay fundamentally more than the SAI/EFC amount that their FAFSA form creates — and the term Student Aid Index (SAI) mirrors that the amount is something like a guideline.

The SAI Equation: Factors Removed and Factors Changed

The simplified FAFSA has decreased the overall number of factors — and made changes to certain factors — in the formula to compute the SAI amount. Here are a portion of the factors that were viewed as in the old EFC yet won't be remembered for the SAI calculation — and a portion of the changes to the factors that remain:

Elimination of Family Members Currently Enrolled in College

Both the SAI and the EFC value are determined by responding to comparative inquiries on the FAFSA form about family income, assets, and the size of the family — however one EFC part that won't be carried over to the SAI is the number of family individuals presently enrolled in college. The EFC thought about that number, which gave an advantage to families with several students in college, however the SAI will never again factor in that headcount.

Elimination of Allowance for State and Local Taxes

The SAI calculation will dispense with the EFC allowance for state and neighborhood taxes.

Allowance of Negative SAI Amounts

Not at all like the EFC, which didn't compute amounts under zero, the simplified FAFSA allows the SAI to be a negative number as low as - $1,500. By separating greater levels of need, the allowance for negative SAI numbers empowers the targeting of aid to the neediest students.

Changes in accordance with Income Protection Allowance (IPA)

While computing the SAI, the simplified FAFSA will increase the Income Protection Allowance (IPA) that shields a certain amount of parental income from inclusion in the calculation of total income. In any case, as referenced over, the SAI calculation will never again increase the IPA for extra family individuals enrolled in college simultaneously.

How the Student Aid Index (SAI) Is Used

When the FAFSA Simplification Act is completely executed, the Student Aid Index (SAI) value (like the EFC) will be a part in one more equation that incorporates two extra factors: Cost of Attendance (COA) (what tuition and different costs will be) and Other Financial Assistance (OFA) (what the student will receive from different sources).

SAI/EFC to Calculate Financial Need

A candidate's qualification for needs-based financial aid is determined by subtracting both the Student Aid Index (SAI) and Other Financial Assistance (OFA) from the Cost of Attendance (COA). The difference between the COA and the SAI plus the OFA will be the candidate's financial need, as follows: Need = Cost of Attendance (COA) - Student Aid Index (SAI) - Other Financial Assistance (OFA).

Why the SAI/EFI Matters

The significance of the SAI/EFC value, of course, is that the lower the amount, the higher the financial need and the greater the qualification for federal financial aid programs, like Pell Grants, Federal Perkins Loans, and Stafford Loans, and Federal Work-Study Programs.

Student Aid Report (SAR)

When a candidate presents this data on the Free Application for Federal Student Aid (FAFSA), a student aid report (SAR) with the official SAI/EFC value will be shipped off the student and their family as well as any schools listed on the FAFSA and any federal/state assistance programs and other grant sources. Each program and each financial aid office will prepare a financial aid package, incorporating a letter with the total amount of financial aid that the candidate is eligible for, including awards and loans.

Features

  • Student Aid Index (SAI) is the new name of Expected Family Contribution (EFC) — an important factor in the requirements examination calculation on the Free Application for Federal Student Aid (FAFSA), the form utilized by colleges, states, and other grant suppliers to determine financial aid packages.
  • The name was changed to Student Aid Index (SAI) to explain what the SAI figure is and what it isn't. It is a qualification index for student aid; it's anything but a determination of the total amount that a candidate will pay.
  • The Student Aid Index (SAI) will likewise reflect massive changes to the factors utilized in the equation to work out need for financial aid, including the elimination of the number of family individuals in college and the allowance of negative SAI numbers as low as - $1,500.

FAQ

Why Was the Name Changed From EFC to SAI?

The name was changed from Expected Family Contribution (EFC) to Student Aid Index (SAI) on the grounds that EFC was widely confounded as a determination of the total amount that a candidate would be expected to pay — and SAI explains that it is just a qualification index for student aid.

Why Is the Student Aid Index (SAI) Important?

The significance of the Student Aid Index (SAI) value is that the lower the amount, the higher the financial need and the greater the qualification for federal financial aid programs.

When Will the Student Aid Index (SAI) Be Launched?

The new calculations behind the Student Aid Index (SAI) will be active on the FAFSA application no later than July 1, 2024, the cutoff time for all provisions of the FAFSA Simplification Act to be carried out.