Student Aid Index (SAI): What it is, How it Works, How it's Used

What Is the Student Aid Index (SAI)?

When the Consolidated Appropriations Act of 2021—the bill that delivered the second round of economic stimulus payments during the COVID-19 pandemic—passed the U.S. Senate on Dec. 27, 2021, one of the lesser-known provisions was the FAFSA Simplification Act, which brought long-awaited changes to the Free Application for Federal Student Aid (FAFSA), the form used by students to submit the financial information that colleges, states, and other scholarship providers use to determine financial aid packages.

In addition to streamlining the FAFSA application from 108 questions to 36 questions, significant changes were made to an important number in the needs-analysis section of the form—the Expected Family Contribution (EFC)—which was recalculated and renamed as Student Aid Index (SAI). The name change clarifies that the SAI figure is an eligibility index for student aid—not a determination of what an applicant will pay. The recalculation identifies applicants with the greatest need.

As various provisions of the FAFSA Simplification Act are rolled out prior to the 2024 deadline, here is an overview of the most significant changes in the revised Student Aid Index (SAI) to keep in mind for college planning.

Student Aid Index (SAI) vs. Expected Family Contribution (EFC)

Although the FAFSA Simplification Act did not capture many headlines during the pandemic, the passage of this bill was the largest revision of Title IV of the Higher Education Act of 1965 (HEA)—which authorizes financial assistance programs for postsecondary education—in more than 50 years. When fully implemented, there will be different methodologies as well as different measures of an applicant’s ability to pay for post-secondary education.

From the perspective of students and families facing prohibitive tuition, the most important considerations are the changes to how financial aid providers calculate the applicant’s ability to pay for college—especially the changes to the factors in the formula to calculate need, i.e., the new Student Aid Index (SAI), which will replace the legacy Expected Family Contribution (EFC).

Rationale for Name Change From EFC to SAI

Although the name change from Expected Family Contribution (EFC) to Student Aid Index (SAI) might appear to be a minor detail in the context of the major overhaul of federal student aid in 2021, the U.S. Department of Education decided to switch the name for an excellent reason: accurate terminology will expedite the entire process. For decades, Expected Family Contribution (EFC) was widely misinterpreted as the total amount a student would be expected to pay, so the term was criticized as a misnomer that misled applicants and their families about the true cost of college. The subsequent confusion slowed down an already difficult application process and often upended financial planning for college.

What the SAI/EFC Amount Means

Although both the new SAI and the old EFC are factors in a formula to calculate an applicant’s ability to pay, the dollar amount generated is only an estimate of the amount the student could afford. As tuition continues to escalate, many students will pay significantly more than the SAI/EFC amount that the FAFSA form generates—and the term Student Aid Index (SAI) reflects that the amount is no more than a guideline.

The SAI Equation: Factors Removed and Factors Changed

The simplified FAFSA has reduced the overall number of factors—and made changes to certain factors—in the formula to calculate the SAI amount. Here are some of the factors that were considered in the old EFC but will not be included in the SAI calculation—and some of the changes to the factors that remain:

Elimination of Family Members Currently Enrolled in College

Both the SAI and the EFC values are determined by answering similar questions on the FAFSA form about family income, assets, and the size of the household—but one EFC component that will not be carried over to the SAI is the number of family members currently enrolled in college. The EFC considered that number, which gave an advantage to families with several students in college, but the SAI will no longer factor in that headcount.

Elimination of Allowance for State and Local Taxes

The SAI calculation will eliminate the EFC allowance for state and local taxes.

Allowance of Negative SAI Amounts

Unlike the EFC, which did not calculate amounts less than zero, the simplified FAFSA allows the SAI to be a negative number as low as -$1,500. By differentiating greater levels of need, the allowance for negative SAI numbers enables the targeting of aid to the neediest students.

Adjustments to Income Protection Allowance (IPA)

When calculating the SAI, the simplified FAFSA will increase the Income Protection Allowance (IPA) that shelters a certain amount of parental income from inclusion in the calculation of total income. However, as mentioned above, the SAI calculation will no longer increase the IPA for additional family members enrolled in college at the same time as the applicant.

How the Student Aid Index (SAI) Is Used

Once the FAFSA Simplification Act is fully implemented, the Student Aid Index (SAI) value (like the EFC) will be a component in another equation that includes two additional factors: Cost of Attendance (COA) (what tuition and other costs will be) and Other Financial Assistance (OFA) (what the student will receive from other sources).

SAI/EFC to Calculate Financial Need

An applicant’s eligibility for needs-based financial aid is determined by subtracting both the Student Aid Index (SAI) and Other Financial Assistance (OFA) from the Cost of Attendance (COA). The difference between the COA and the SAI plus the OFA will be the applicant’s financial need, as follows: Need = Cost of Attendance (COA) - Student Aid Index (SAI) - Other Financial Assistance (OFA).

Why the SAI/EFI Matters

The significance of the SAI/EFC value, of course, is that the lower the amount, the higher the financial need and the greater the eligibility for federal financial aid programs, such as Pell Grants, Federal Perkins Loans, Stafford Loans, and Federal Work-Study Programs.

Student Aid Report (SAR)

Once an applicant submits all this data on the Free Application for Federal Student Aid (FAFSA), a student aid report (SAR) with the official SAI/EFC value will be sent to the student and their family as well as any schools listed on the FAFSA, any federal/state assistance programs, and any other scholarship sources. Each program and each school will prepare a financial aid package with a letter stating the total amount of financial aid that the applicant is eligible for, including grants and loans.