Impact Advisors Group | College Planning

Student Aid Index (SAI) Explained

Have you heard the term Student Aid Index on TV or social media and wondered what exactly it is, and how does it affect your child and family? Planning for your child’s financial aid can be an overwhelming sea of new terms and calculations. Let’s dive into and simplify a seemingly complicated journey. 

I am here to tell you that you’re really going to want to know and understand Student Aid Index to help plan for your child’s education.t is an important concept to understand because it is the first piece of the puzzle when you start to think about college affordability for your family.

What Is The Student Aid Index (SAI)?

Student Aid Index (SAI) is a term used in the Free Application for Federal Student Aid (FAFSA), and simply is a calculation (based on “taxed and untaxed income, assets, and benefits like unemployment or Social Security”) to determine the annual minimum amount that the college thinks you can afford to pay for one year of college. 

When you submit the FAFSA you are sharing financial data for both the student and the parent(s) as well as some demographic and other family information. This information is put into a formula that calculates your SAI. In fact, after you hit submit, the confirmation page that follows tells you exactly what your SAI is. (So, print this page for your records!)

I want to emphasize that this is not the amount you will have to pay. Your responsibility according to the college could be more than this and often is. I also want to emphasize that this is for one year of college, not all four years. You will be required to submit the FAFSA each year. A new SAI will be calculated for each year your child is in college.

How the FAFSA SAI and Financial Need are Calculated

When I work with parents, I create three different SAI estimates as part of the financial planning work I do. Through the years, working with hundreds of families, I have never had a parent who agrees with their SAI estimates. I always get the question, “This is for all four years, right?” 

Then that question is followed up with “how did the FAFSA get this number anyway?” There are some hidden or seemingly unreachable income amounts calculated into the SAI equation. This includes parent income and non-retirement assets and student income and non-retirement assets. It also includes the values of businesses and/or family farms in some cases. There is also other financial data that may be included (e.g., pre-tax retirement contributions).

Now we determine how financial need is calculated. Colleges use your SAI in the equation:

Cost of Attendance – SAI = Financial Need.

But is there anything you can do if you feel your SAI is too high? Yes! You can try to appeal or look at alternative financial aid options (like scholarships) as well. Learn more: When Your Student Aid Index is Too High

An SAI Example

So, for example, if a college has a cost of attendance of $60,000 and you have an SAI of $30,000, then your financial need would be $30,000. This is an important number to the college because this is how they establish if your family has need-based eligibility. 

Then the college will attempt to meet some or all of that need with Federal, state, and endowment funds and different types of loans. Hopefully, most of this need will be met so there is less money out of your pocket. Colleges vary in the percentage of financial need they meet.

Reminder: The only way your SAI gets calculated or you are eligible for financial aid is by submitting the FAFSA. I strongly recommend you submit the FAFSA your student’s incoming year and every year following to receive proper grants and other financial aid options..

Learn more: Applying for Financial Aid: FAFSA and CSS Profile

Looking Ahead

In December 2020, Congress passed the Coronavirus Relief bill. The FAFSA Simplification Act was embedded in this bill. There are many changes on the horizon for the FAFSA. One of them is a terminology change.

Learn more about FAFSA changes: FAFSA Changes 2023-24: What You Need To Know

It’s important to start looking at this first piece of the puzzle around college affordability when your child is in their sophomore year in high school, so you can ahead of this. Colleges are discounting their sticker prices to allow more students access to their educational offers. One of the tools they use is need-based aid. It’s important to understand as a family if need-based could be a part of your college funding strategy, and the only way to do that is by submitting the FAFSA and receiving your SAI. This calculation most likely vary from college to college.

I encourage you to take this first step when your student starts applying for colleges. And, as always, remember to enjoy this journey and beginning of a new chapter!

Have some additional questions about the EFC and applying for the FAFSA? Schedule time for a free consultation today!

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