Other than statutory and regulatory requirements included in the document, the contents of this guidance do not have the force and effect of law and are not meant to bind the public. This guidance is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

Questions on this topic are divided into the following categories:

• Student Aid Index (SAI)
• Awarding Other Financial Assistance (OFA)
• Pell Grant Calculation (PEL)

You may refer additional questions to the Department using the Contact Customer Support form in FSA’s Partner Connect Help Center. To submit a question, please enter your name, email address, topic, and question. When submitting a question related to DCL GEN-23-11, please select the topic "FSA Ask-A-FED/Policy."

Student Aid Index (SAI)

SAI-Q1: Can an institution adjust the SAI of an applicant to below –1500 using professional judgment?

SAI-A1: No. An institution may use professional judgment to adjust FAFSA data elements, but the Department’s Federal Processing System (FPS) will never assign an SAI of less than –1500. [Guidance issued 08/04/2023]

SAI-Q2: Certain income items have been excluded from the FAFSA form. Can institutions add those items back in by professional judgment?

SAI-A2: Institutions have broad flexibility in exercising professional judgment (PJ). However, institutions may not request additional information or require additional forms beyond the FAFSA form unless the Department or the school selects the student for verification, or the student has requested either a review of their dependency status or special circumstances adjustment. [Guidance issued 08/04/2023]

SAI-Q3: Now that the number of family members in college is not considered in the need analysis, may financial aid administrators (FAAs) use their PJ authority to account for the cost of other family members who are enrolled in college?

SAI-A3: Yes, the law permits FAAs to exercise PJ to adjust the elements in the cost of attendance or the values of data used on the FAFSA form to calculate the SAI (e.g., AGI, taxes paid) when special circumstances exist. The Simplification Act revised the HEA to include any family members enrolled in postsecondary education in the list of circumstances that an FAA might consider when deciding whether to use PJ. FAAs are also reminded to indicate they are using their PJ authority by setting the FAA Adjustment flag in the FAFSA Partner Portal (formerly FAA Access) or via Electronic Data Exchange (EDE) if the values of data used on the FAFSA form are adjusted to consider additional family members enrolled in postsecondary education.

For example, John and his sister Jane are both enrolled in postsecondary education but at different schools. John lives at home and attends a nearby community college, while Jane lives on campus at an out-of-state university, which required that their parents take out a substantial parent PLUS loan to cover her costs. Because of this and other documented financial changes, the FAA at John’s school decides to use PJ to reduce the parents’ income to the extent that John’s costs will be entirely covered by need-based aid, including a subsidized Direct Loan. [Guidance issued 08/04/2023]

SAI-Q4: How should applicants and their families report the net value of a farm on which their principal place of residence also sits?

SAI-A4: Applicants should determine the total net value of all farm assets and subtract the net value of their principal residence to determine the final value of their farm assets. The principal residence may include the family’s home, as well as structures and land adjacent to the home that are not being used, stored, or sold for farming or other commercial activities. Property values are generally assessed at a rate that considers the use of the property and the value of the land. Applicants and their families may refer to their property tax assessments from municipal, county, or state governments to help determine and separate the value of their principal residence from other property. Debts owed against the principal residence—such as a mortgage—should also be subtracted from the assessed value of the residence to determine the net value. [Guidance issued 08/04/2023]

SAI-Q5: Are there changes to how foreign income is treated on the FAFSA?

SAI-A5: Starting with the 2024-25 FAFSA, U.S. citizens and permanent residents who had foreign income exempt from taxation (i.e., a foreign earned income exclusion) will be required to manually report the untaxed exclusion amount on their FAFSA form. [See SAI-Q6 for additional instructions] For any person who filed a foreign tax return, there is no change to how to treat and convert amounts to U.S. dollars on the FAFSA. [Guidance issued 08/04/2023]

SAI-Q6: What is “foreign income exempt from federal taxation” and how are institutions to handle it?

SAI-A6: “Foreign income exempt from federal taxation” refers to the amount of the foreign earned income exclusion claimed by U.S. citizens and permanent residents on their U.S. Federal Tax Return. This amount currently appears on line 8d of Schedule 1 (Form 1040). Because this data will not come automatically from the IRS with other FTI, an applicant must manually enter it on the FAFSA form. Beginning with the 2024-25 Award Year, it will count as untaxed income in the SAI calculation but will not be included in the eligibility calculation for the maximum Pell Grant award.

FAAs must review eligibility for applicants (and their spouse or parent) who reported receiving a foreign earned income exclusion and are eligible for the maximum Pell Grant award. If an ISIR contains both a Maximum Pell indicator flag and a valid value in the “Foreign Earned Income Exclusion” data field, we will flag the ISIR for the FAA to review. The FAA will determine—via manual or estimated SAI calculation—if adding the exempted foreign income to the adjusted gross income (AGI) would make the student ineligible to receive the maximum Pell Grant award. If that would occur, the FAA must determine whether it is appropriate to use PJ to account for the foreign income in determining the student’s eligibility for the maximum Pell Grant. If the FAA decides that it is appropriate, the FAA may move the foreign earned income amount from untaxed income to AGI or request additional documentation of the foreign income prior to performing the adjustment. [Guidance issued 08/04/2023]

SAI-Q7: There are situations where the FTI does not accurately reflect an individual’s situation such as when an applicant was married and filed jointly two years ago but has since divorced and no longer has a spouse. Are such applicants required to manually provide income and tax information on the FAFSA form?

SAI-A7: Yes. There are circumstances when an applicant’s FTI does not accurately represent the applicant’s financial situation, including cases where an individual’s marital status has changed since filing taxes two years prior. In these circumstances, the applicant and/or one of their FAFSA contributors may need to enter data on the FAFSA form manually. [Guidance issued 08/04/2023]

SAI-Q8: When an applicant self-reports a family size on their FAFSA form that is different from the family size received from the IRS, is this considered conflicting information that the school must resolve?

SAI-A8: No. The existence of both a family size field calculated from FTI and a self-reported family size field on the ISIR is not, by itself, considered conflicting information. In situations where family size from the IRS and family size self-reported by a contributor on the FAFSA form differ, the self-reported family size will be used for both the SAI and Pell Grant eligibility calculations. If a contributor does not self-report family size when presented with the option to do so, then the FTI family size will be used. It should be noted that, in any instance of an update or correction to ISIR data, no FTI field can be changed. Schools are directed to change income and tax fields using non-FTI data fields that will allow for manual entry that will essentially “override” FTI.

However, family size is still subject to verification. Therefore, if an applicant is selected for verification, the school must verify the family size used if the applicant self-reported it. In addition, if the school has reason to believe the self-reported family size is not correct, the school must treat this as conflicting information and take appropriate steps to resolve the issue. [Guidance issued 08/04/2023]

SAI-Q9: Will the untaxed IRA and/or pension distribution amounts received as FTI directly from the IRS distinguish between reportable untaxed amounts and rollover amounts?

SAI-A9: No. Contributors with untaxed IRA and/or pension distribution amounts reported on their federal tax return will still need to provide the amount of any rollovers included in that untaxed amount on the FAFSA form. The rollover amount will be subtracted from the total untaxed IRA and/or pension distribution amount in the SAI calculation. [Guidance issued 08/04/2023]

SAI-Q10: Under FAFSA Simplification, if a dependent student’s parents are divorced or separated, the one who provides the greater portion of the student's financial support will be the parent on the FAFSA form. In this scenario, how will child support be factored in when determining which parent provides greater financial support?

SAI-A10: When making this determination, any child support that one parent pays to the other for the student counts as financial support by the parent who pays. Of course, mandated child support is just one factor; all other financial support should also be considered when determining which parent’s information will be included on the student’s FAFSA form.

Regarding how child support is reported, child support paid no longer appears on the FAFSA. Child support received is now reported as an asset rather than untaxed income. The person who received the support—whether that is a parent of a dependent student or an independent student receiving it for a child—reports in the related question on the application the total amount of support from the last complete calendar year. [Guidance issued 03/28/2024]

Awarding Other Financial Assistance (OFA)

OFA-Q1: Can I use a negative SAI to increase a student’s financial need to increase the amount of need-based aid the student can receive?

OFA-A1: No. If a student has a negative SAI, the school must convert the negative SAI to a 0 SAI to calculate the student’s financial need, which will not increase the amount of federal student aid that the student would otherwise receive. However, the negative SAI can be used as a determining factor when selecting the neediest students for Federal Supplemental Educational Opportunity Grants; see DCL GEN-24-05 for more information. [Guidance issued 08/04/2023; revised 04/16/24]

OFA-Q2: Does a negative SAI impact non-need-based aid calculations?

OFA-A2: No. As with calculations currently using an EFC, SAIs are not factored into non-need-based calculations. Eligibility for non-need-based aid (e.g., TEACH Grants or Direct Unsubsidized Loans) will use the following formula: COA – OFA = eligibility for non-need-based aid. Therefore, a negative SAI will not increase the overall amount of non-need-based aid a student can receive. [Guidance issued 08/04/2023]

OFA-Q3: Do employer tuition reimbursement and tuition and fee waivers still count as OFA?

OFA-A3: Yes. Aside from the addition of payments under part E of title IV of the Social Security Act to or on behalf of foster youth or emergency financial assistance provided to students for unexpected expenses within the student’s COA, our guidance about what constitutes OFA (formerly EFA) has not changed. For an in-depth discussion about what is and is not considered OFA (currently labeled EFA), please review the Federal Student Aid Handbook, Volume 3. [Guidance issued 08/04/2023]

OFA-Q4: Under the FAFSA Simplification Act, special combat pay was removed as an excludable item under OFA. Does that mean combat pay must now be included as OFA?

OFA-A4: No. Special combat pay is considered income, not financial aid. The FAFSA Simplification Act also removed special combat pay from excludable income, so combat pay will now be factored into the SAI calculation as income (AGI) where applicable. [Guidance issued 08/04/2023]

OFA-Q5: Under the FAFSA Simplification Act, emergency financial assistance is excluded from consideration as OFA when awarding Title IV funds. What constitutes emergency financial assistance to a student, and how should a school document it?

OFA-A5: Emergency financial assistance includes any payment of grant or loan aid to a student for unexpected expenses that are included in one of the components of COA, as defined under HEA Sec. 472. For example, payments can support any unexpected expense for food; housing; course materials or equipment; or transportation (e.g., between campus and home for a death or family emergency). Institutions determine whether an unexpected expense is associated with a COA component.

Prior to providing emergency financial assistance to a student, an institution should document the student’s request for assistance, including the unexpected expense that prompted the request. The institution should retain such documentation in the student’s file for the normal record retention period. [Guidance issued 08/04/2023]

OFA-Q6: Since there is no alternate SAI calculation for periods other than nine months, does that mean the COA in the need calculation will always be nine months?

OFA-A6: No. The change in the law that limits a school’s ability to use alternate SAIs for periods other than nine months did not change or alter COA protocols or requirements. Pell COA will still use full-time, full academic year costs for all required components and the COA for all other Title IV programs will still be based on costs and components associated with the student’s actual period of enrollment. [Guidance issued 08/04/2023]

OFA-Q7: What impact will outside scholarships have on Pell awards for the 2024-25 award year? Is it still okay for a student to have aid above their COA if their only Title IV aid is the Pell Grant?

OFA-A7: Current guidance on this topic can be found in the 2023-24 FSA Handbook, and it is not changing under the FAFSA Simplification Act. It states that Pell Grants are considered the first source of aid for a student, and packaging Title IV funds begins with Pell Grant eligibility. Pell Grant awards in 2024-25 will be determined by using the appropriate Pell Grant formula, enrollment intensity, COA, and SAI. A correctly determined Pell Grant is never adjusted to account for other forms of aid. When awarding aid from the other Title IV programs, you must ensure that the student’s need or COA is not exceeded. Also, a Pell grant by itself cannot exceed the COA.

If necessary, you must also adjust non-federal aid awards (e.g., institutional aid or private education loans) to ensure that the student’s financial need is not exceeded. In some cases, a student who receives a Pell Grant may receive a scholarship or other aid that you can’t adjust and that is large enough (in combination with the Pell Grant) to exceed the student’s COA. In this case, the student is still eligible for a Pell Grant based on the appropriate Pell Grant formula. However, you can’t award any Title IV funds other than the Pell Grant.

For instance, the National Collegiate Athletic Association’s (NCAA's) rules for athletic aid sometimes permit a school to award athletic aid that covers a student’s full COA. You must still pay the full Pell Grant to the student, but the student may not receive any other Title IV funds. [Guidance issued 08/04/2023]

OFA-Q8: Does the use of enrollment intensity for the Pell Grant program mean that we have to calculate TEACH Grants differently?

OFA-A8: No, the use of enrollment intensity applies only to the calculation of Pell Grant awards. TEACH Grants will continue to be calculated using enrollment status according to the regulations under 34 CFR 686.21. [Guidance issued 08/04/2023]

Pell Grant Calculation (PEL)

PEL-Q1: Our school’s academic calendar includes a crossover payment period that begins before July 1, 2024. We treat crossover payment periods as headers. Are we expected to use the new method for calculating Pell Grants for this payment period?

PEL-A1: Yes. Any Pell Grant disbursement for a payment period within the 2024-25 award year must use the new process for calculating the Scheduled Award and disbursement amounts. [Guidance issued 08/04/2023]

PEL-Q2: Are we required to recalculate the student’s Pell Grant award if there is a change in SAI or enrollment intensity?

PEL-A2: Yes. Under 34 CFR § 690.80, an institution must recalculate a Pell Grant if there is a change in SAI or enrollment intensity. However, the FAFSA Simplification Act changed the recalculation process by providing that the Pell Grant award must be based on the actual number of credits the student starts (enrollment intensity) instead of enrollment status.

The institution must recalculate a Pell Grant award for the entire award year if the student's SAI changes and that change impacts the amount of a Pell award the student can receive at any time during the award year. The change may result from the correction of a clerical or arithmetic error under § 690.14 or a correction based on information required as a result of verification under 34 CFR part 668, subpart E.

If the student's enrollment intensity changes from one academic term to another within the same award year, the institution must recalculate the Pell Grant award for the new payment period taking into account any changes in the COA. If a student received Pell Grant funds for more credits than were attended, the school must recalculate the student’s Pell Grant award (mandatory Pell Grant recalculation) at the end of the payment period.

Using the example from the “Enrollment Intensity Adjustments for Pell Grant Awards” section in GEN-23-11, if full-time enrollment is 12 or more credit hours, and the student received a Pell Grant award for 7 credit hours, the enrollment intensity would be (7 ÷ 12) × 100% = 58%. However, if the student only began attendance in 5 credit hours, then the student can only be paid a Pell Grant award for 5 credit hours and the Pell Grant must be recalculated for an enrollment intensity based on 5 credit hours - (5 ÷ 12) x 100% = 42%. [Guidance issued 08/04/2023]

PEL-Q3: How does a school calculate the enrollment intensity of a student who is enrolled in both correspondence and regular coursework?

PEL-A3: You must count in the enrollment intensity the amount of a student’s correspondence coursework up to the amount of the student’s regular coursework. For example, a student enrolled in 4 credits of regular coursework would have 4 credits of correspondence work in their enrollment intensity. In other words, the student would have an enrollment of 8 ÷ 12 x 100% = 67%. [Guidance issued 08/04/2023]

PEL-Q4: The regulations in 34 CFR part 690 refer in places to “half-time enrollment.” How do we account for this with enrollment intensity?

PEL-A4: We consider any regulatory reference to “half-time enrollment” status to mean 50% enrollment intensity. For example, under § 690.6(c)(4), an otherwise eligible student who has a baccalaureate degree and is enrolled in a postbaccalaureate program is eligible to receive a Pell Grant for the period of time necessary to complete the program if the student is enrolled as at least a half-time student. Following the implementation of the changes relating to enrollment intensity, this provision would apply to any student enrolled with 50% enrollment intensity. [Guidance issued 08/04/2023]

PEL-Q5: Did the FAFSA Simplification Act change the process by which initial calculations are made?

PEL-A5: No. An initial calculation is the first calculation made on or after the date the school has received a Department-produced SAI, such as the student’s initial FAFSA Submission Summary or ISIR with an official SAI, and that uses the enrollment intensity at the time of the initial calculation. If you’ve estimated the student’s eligibility before receiving a FAFSA Submission Summary or ISIR for the student, you must confirm prior estimated eligibility or determine the student’s eligibility at the time the FAFSA Submission Summary or ISIR is received.

For purposes of an initial calculation, schools may estimate a student’s intended enrollment using either a specific number of credits or a general status. For example, if a student expressed their intention to enroll “full time,” the school could translate “full time” to 100% enrollment intensity. [Guidance issued 08/04/2023]

PEL-Q6: How will a school report eligibility for Pell Grants under the Special Rule in HEA Section 401(c)? Will schools distinguish between Special Rule eligibility and legacy eligibility for Iraq and Afghanistan Service Grants (IASG) and Children of Fallen Heroes (CFH) Awards?

PEL-A6: Schools will report Special Rule AND legacy eligibility for IASG and CFH Awards to the Department via the new FAFSA Partner Portal. Students who meet Special Rule eligibility will be reported as simply eligible. There will be a separate value for students who meet the requirements for legacy eligibility.

Students who were eligible for and received IASG funds OR received Pell Grant funds based on IASG or CFH eligibility criteria for the 2023-24 award year but are not eligible for Pell Grant funds under the Special Rule beginning with the 2024-25 award year are eligible to receive Pell Grant funds based on prior IASG or CFH eligibility criteria. Students remain eligible if they receive at least one disbursement of funds from the IASG or CFH programs during the award year. [Guidance issued 08/04/2023]

PEL-Q7: When determining eligibility for Maximum or Minimum Pell Grants, which poverty guidelines apply to students who live in a U.S. territory or foreign country?

PEL-A7: Schools should use the poverty guidelines for the 48 contiguous states and Washington, D.C., for students who reside in a U.S. territory or foreign country or whose state of legal residence is unknown. [Guidance issued 08/04/2023]