Understanding the Student Aid Index (SAI): What it Means for Financial Aid

The 2024-25 FAFSA introduces the new Student Aid Index (SAI), which replaces the Expected Family Contribution (EFC) as a key factor in determining your financial aid eligibility. The SAI measures your financial situation, and colleges use this number to decide how much financial aid you can receive each academic year.

What is the Student Aid Index (SAI)?

The Student Aid Index (SAI) is a number that helps schools assess how much financial aid you are eligible for. The SAI was introduced through the FAFSA Simplification Act as part of an effort to streamline the financial aid process. It replaces the Expected Family Contribution (EFC), shifting the focus from what your family is expected to pay to a more comprehensive view of your financial situation.

The financial aid office at your school uses your SAI to create your aid package. The formula accounts for both your financial resources and those of your parents (or spouse, if applicable), then subtracts what's needed for basic living expenses. What's left is used to help determine your eligibility for financial aid. SAI values can range from -1,500 to 999,999, with a lower SAI indicating greater financial need.

How is the SAI calculated?

Your Student Aid Index (SAI) is calculated using the information you provide on the FAFSA. Some of your tax data may be retrieved directly from the IRS if you authorize the transfer of this information. Otherwise, you'll have to enter your tax information manually.

The SAI formula considers several factors, including:

• Your parents' income: Certain credits and allowances, such as U.S. income taxes and protected income, may reduce your parents' total annual income. Basic living expenses are also deducted.
• Your parents' assets: These include savings, investments, real estate (excluding your primary home), and business assets.
• Spouse income and assets: If you're married, you'll report your spouse's income and assets instead of your parents' on the FAFSA.
• Student income: This includes your earnings, minus income offsets and tax allowances.
• Student assets: These cover cash, savings, checking accounts, certificates of deposit, and investment properties. Like parent assets, the value of your primary residence is excluded.
• Your family's size: While your family's size is considered, the number of family members in college is not.

How does the SAI affect financial aid eligibility?

Your school's financial aid office uses your Student Aid Index (SAI) to determine how much need-based aid you qualify for. They start by subtracting your SAI from the school's cost of attendance (COA), which includes expenses like tuition, fees, room and board, books, and transportation.

For example, if the COA is $15,000 and your SAI is $10,000, your financial need would be $5,000. You could then qualify for up to $5,000 in need-based aid, which may include:

• Federal grants
• Federal Direct Subsidized Loans
• Federal work-study program funds

After calculating your need-based aid, the school looks at non-need-based aid options. This is done by subtracting any financial aid you've already received from the total cost of attendance.

Continuing the example, if you've already been awarded $5,000 in need-based aid and earned a $3,000 private scholarship, you'd still be eligible for up to $7,000 in non-need-based aid to cover the remaining COA of $15,000. Non-need-based aid can include federal Direct Unsubsidized Loans, grad PLUS loans, and parent PLUS loans.

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EFC vs. SAI: What changes to expect

Starting with the 2024-25 FAFSA, the Student Aid Index (SAI) replaces the Expected Family Contribution (EFC). Here are the key changes and how they might affect your financial aid eligibility:

• Number of children in college: Under the EFC system, parents could factor in how many children were in college, which often resulted in more financial aid for families with multiple students in school. The SAI no longer accounts for the number of family members in college. This means families with more than one child in college may now qualify for less financial aid than they would have under the EFC formula.
• Negative scores: With EFC, the lowest possible number was 0, regardless of financial need. The SAI, however, can go as low as -1,500, which allows for a more accurate reflection of extreme financial need and could increase aid eligibility for students from very low-income families.
• Simplified application process: The SAI requires less information to be manually entered on the FAFSA, as much of the financial data is imported directly from the IRS. This streamlines the application process for families, making it easier and faster to complete.
• Small business assets: EFC allowed families to exclude small business assets when calculating their net worth. Under the SAI, however, families must now include the adjusted value of these assets. For small business owners, this change could lead to lower eligibility for financial aid, as their businesses are factored into their financial profile.

While the shift from EFC to SAI may not seem significant for new applicants, the changes can have a noticeable impact on families with multiple children in college or those who own small businesses. Some may find themselves eligible for less aid, while others, especially those with high financial need, could benefit from the more detailed SAI calculation.