Addressing the Impact of the New FAFSA Changes on Returning Students

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With the ’24 recruitment cycle in full motion, schools across the U.S. are anxiously waiting to see not only how the impending FAFSA changes will disrupt new student enrollment but even more immediately how these changes will affect continuing students. These impacts will not be felt by every institution equally.  

This is a pivotal moment.  No news there.   

In many ways, addressing returning students is even more challenging than recruiting next year’s class on a shortened timeline. There are 3x as many returning students as first-year students. And even though the impact of the new FAFSA calculations may not result in less aid for most students, these calculations may nevertheless result in diminished institutional revenue if formerly Pell or state grant grant-eligible families become ineligible.  

Below are our recommendations for what institutions can do to best serve returning students.  

Identify Who Will Be Most Affected Among Returning Students 

Every institution will not be affected equally, and that is because the impact of the new FAFSA changes will produce winners and losers among students, too. Schools that enroll siblings, students from farm families, or students from homes supported by small businesses will see a disproportionate impact. A great but regional private college in rural Minnesota, for example, will experience maximum impact. A highly selective national university in an urban center, not so much. 

Practically, for both current and prospective families, it’s important that you be aware that what families will see when they apply for financial aid and especially for some specific populations: Pell-eligible students, middle-income/middle-class students, students from families with multiple college-age children, and students whose families may own small businesses or farms.  

Pell-Eligible Students

Pell Grant expansions will increase the eligibility for many low-income families as well as the amount of financial support available. This is generally viewed as a positive for most schools, yet this means that current Pell-eligible families may naturally assume expanded Pell Grants will mean their aid package will be greater this year.  Maybe. 

But even with expanded eligibility and increased federal funding, colleges leveraging their own resources across a larger eligible population may find it harder to support middle-income students, some of whom will be assessed as or “taxed” more highly.  

As an added institutional challenge following expanded Pell access, schools should assess if they use Pell eligibility to determine other resources for student success such as housing vouchers, programming, tutoring, etc. Those schools should start planning for how to manage the increased demand for these resources if Pell eligibility is the measure of access.  

Middle-Income/Middle-Class Students 

Middle-class and middle-income students should also be on every school’s radar as they may see their own Pell eligibility go down as the new Student Aid Index (SAI) may determine that a family has a greater ability to pay. Whether they can or will pay is another story, particularly as rising housing and other cost of living expenses combined with record inflation continue to squeeze the middle class. Calculating the propensity of willingness to pay—the price elasticity of demand—will remain an analytic/modeling necessity in an environment in which the federal needs assessment neither predicts nor defines what families pay beyond determining Pell and subsidized loan eligibility.  

Small Business and Farm Families 

Students whose families own small businesses or farms will also face challenges with the new SAI analysis formula, which factors those assets toward expected contribution. This is a unique challenge for farmers because farmland assets and are extremely illiquid, are often the only source of cash flow for those families, usually once a year (and a bad farming season is always possible).   

Plan Your Communications Accordingly 

Institutions should expect that returning students—even as total aid stays constant—will wonder why a new Pell Grant shouldn’t lower their cost of attendance. That dissonance will extend to any family determined to be able to shoulder a more significant contribution, especially if schools fostered an understanding that a family’s award would remain constant for four years.  So, determine in advance your institutional values and stance and then communicate, communicate, communicate. You have a great opportunity to plant your flag on the island of “The Good and Just,” in the face of these challenges. But think seriously about the tradeoffs you face. To my mind, the kind of school that enrolls multiple kids from a family has delivered what it promised such that a family is eager to invest further.  That’s a major achievement. Protect that market strength in your institutional methodology for assessing need/determining aid for such families.  

The burden of effectively communicating institutional policy and impact resulting from these changes will fall upon the institution. Schools should plan their communications strategy early for returning students. The policy development work as well as the communications rationale for your policy needs to be shared across campus too, not just within the financial aid office.   

You May Have to Make Difficult Decisions, Use Your Mission as a Guide  

Every school will be forced to make some difficult decisions regarding the size of what aid package to award to whom. In these moments, it’s important to use your institution’s mission to guide your decision-making.  

What’s your mission? What does your school stand for? Whom does your school serve? What do you aspire to contribute to society as an institution?  


At its core, the FAFSA application is a mechanism for determining and allocating Pell Grants and federal loan eligibility. Yes, the new SAI may determine that a family has more capacity than they were determined to have the year before, but that doesn’t mean they are actually able or willing to pay more. 

Beyond federal eligibility and rationing, and institutional compliance, don’t make the mistake of thinking that the SAI changes pricing reality. 

This is where MARKETview is a difference maker for our partners. Recruit in a more targeted/mission-centric fashion; know more about students far earlier, and use that to shape your applicant pool.   

Then, build an aid strategy to meet them as they earn admission.  

Interested in learning more? Schedule a demo with us.  

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