Lawmakers wanted the form to be shorter and easier, with the IRS helping the Education Department automatically fill out some of the form’s toughest financial questions. Check!
Congress wanted to expand the number of lower-income students who qualify for a federal Pell Grant, a form of aid that does not need to be repaid. Check!
And lawmakers told the Education Department to use a new, more generous formula to protect more of a family’s income from being used to determine financial aid eligibility. They also told the department to adjust its math for inflation.
Let’s call this one partially checked … because the department didn’t do that last bit, adjusting for inflation — a failure first reported by The Washington Post.
That’s a problem because protecting more of a student’s or family’s income allows them to qualify for more financial aid. And failing to adjust this “income protection allowance” for inflation, especially given the past couple years of rampant inflation, will make it look as though students and families have more income at their disposal than they really do. And that will mean they qualify for less student aid.
“Because salaries go up every year and expenses go up every year with inflation, you need to make sure that that’s taken into account,” says Bryce McKibben, senior director of policy and advocacy at the Hope Center at Temple University. McKibben also helped craft the FAFSA update legislation as a congressional staffer.
“If you don’t adjust for inflation, that means more of your income is being calculated to apply toward financial aid. You’re being asked to pay more for college when you haven’t actually made more in real terms.”
Without this inflation adjustment, according to McKibben, a single parent with two children who is trying to go to college would have more than $10,000 of income considered in the student aid math that should instead, he says, be protected.
Without adjusting families’ incomes for inflation, McKibben warns, hundreds of thousands of students could either get less Pell Grant aid than they otherwise would have – or not qualify for Pell at all. The lack of an inflation adjustment will also impact a student’s ability to qualify for other federal aid, including work-study, as well as financial aid offered by states and schools.
“It is critical the Department comply with the law, especially given the significant inflation that has taken place since the legislation was passed,” wrote the heads of the National Association of Student Financial Aid Administrators, or NASFAA, in an October letter to the department.
The problem now is that all of the potential remedies come with a host of complications.
The potential paths to a fix
The path of least resistance — albeit for the department, not for students — would be to simply ignore the failure and allow colleges and universities to make aid offers this year knowing that many students won’t be getting the full help they’re entitled to. In December, The Washington Post reported that the department would be doing just that — not making the change imminently “because of timing and data constraints but will make updates for the 2025-2026 aid cycle.”
That position may be changing.
The department now appears to be leaning toward making the inflation adjustment sooner rather than later. That’s according to two sources with access to internal deliberations, who requested anonymity because they were not authorized to speak publicly.
This path would pose a Herculean challenge for the department. Students would get the aid levels Congress had intended in the 2024-25 school year, but the change would either further delay aid offers from schools to families or potentially force schools to revise and adjust those offers (increasing aid for students) after the fact.
The Education Department would not confirm or deny that it has decided to move forward with the inflation adjustment this year. A spokesperson told NPR that the department is still assessing its options.
“Doing it now would certainly be good for a good number of students and families,” says Justin Draeger, president and CEO of NASFAA. “The downside is that it introduces several new complexities into an already disjointed rollout.“
Even without this inflation adjustment, schools have been complaining of a compressed timeline, with the department saying it will not be sending them any FAFSA data — which schools need to make financial aid offers — until late January.
In previous years, Draeger says, students’ data was forwarded on to their schools of choice within just a few days of completing the FAFSA, beginning in October.
That means by the time schools can respond to the first round of students who fill out the FAFSA, they will already be nearly four months behind the normal financial aid schedule. And the longer students and families have to wait to know what a given college will cost them, the longer colleges will have to wait for students and families to make that life-altering decision.