Here's a detailed comparison of EFC and SAI, highlighting the key differences and what they mean for students and families navigating the college funding process.
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This change, effective for the 2024 academic year, marks a significant shift in how financial need is assessed. This blog post provides a detailed comparison of EFC and SAI, highlighting the key differences and what they mean for students and families navigating the college funding process.
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The EFC calculated financial need by considering family income, assets, family size, and the number of family members in college. This process required detailed financial information, including untaxed income and assets. The SAI simplifies this by focusing primarily on household size and family and student income and assets. By eliminating the need to report certain untaxed income, the SAI streamlines the application process, making it less cumbersome for families.
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Under the EFC system, the minimum EFC could be $0, which sometimes made it challenging for colleges to determine exceptional financial need. In contrast, the SAI can now be as low as -$1,500. This new range allows colleges to better identify students with higher financial needs and potentially offer more financial aid to those who need it the most.
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The EFC relied on self-reported data, which could lead to discrepancies and required additional verification. The SAI, however, utilizes the IRS Direct Data Exchange (DDX) for more accurate tax information. This change reduces the need for families to manually enter financial data, simplifying the application process and minimizing the risk of errors.
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The EFC required the reporting of various forms of untaxed income, complicating the application process. The SAI removes the need to report many forms of untaxed income that cannot be verified via tax returns and reclassifies certain items previously considered income, such as child support, as assets instead. This change simplifies reporting requirements and could potentially lower the SAI for some families.
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The EFC considered a higher percentage of parent income available for college costs. The SAI improves upon this by providing a greater income protection allowance, particularly benefiting single parents. This adjustment more accurately reflects the resources available for covering college expenses.
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Under the EFC system, the net worth of a small business or family farm was excluded from asset calculations, and a state or local income tax allowance was provided. The SAI, however, no longer includes a tax allowance and incorporates the net worth of small businesses and family farms in asset calculations. This change may result in a higher SAI for some families.
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The EFC included 529 plans in financial aid calculations. The SAI alters this by not considering 529 plans owned by grandparents, aunts, uncles, or other third parties, and does not count distributions from these plans as student income. This change could reduce the impact on aid eligibility for families with 529 plans.
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While the EFC focused primarily on income, the SAI places greater emphasis on assets such as real estate, stocks, bonds, investments, and trusts. This shift provides a more comprehensive view of a family’s financial situation and may affect financial aid calculations differently.
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The EFC determined the parent contributor based on the parent with whom the student lived the majority of the time in cases of divorced or separated parents. The SAI now considers the parent who provides the greater financial support to the student, which may lead to different financial aid outcomes based on the custodial parent’s financial situation.
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The transition from EFC to SAI represents a significant shift in financial aid calculations, aiming to provide a more accurate and equitable assessment of a family’s ability to contribute to college costs. Understanding these differences will help students and families navigate the financial aid process more effectively and potentially maximize their aid eligibility.
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