The student financial aid process is complex and stressful. With so many options and requirements to consider, it’s easy to feel lost in a sea of financial forms and jargon. But fear not because in this ultimate PayForED guide, we will help you sail through the student aid index and unlock the full potential of your financial aid.
Our guide is designed to demystify the FAFSA application process and offer tips on maximizing your financial aid position. As the Department of Ed (DOE) rolls out the FAFSA Simplification process, many students, parents, and financial aid professionals will need to understand these changes and the impact it has on each family’s ability to pay for college.
Understanding the Student Aid Index (SAI)
The Student Aid Index is the new term resulting from FAFSA Simplification. It replaces the EFC or Expected Family Contribution term. The SAI number is the cornerstone of need-based financial aid.
The SAI is a number generated by completing the FAFSA form. The college financial office uses that number to determine how much need-based financial aid you qualify for at their college. There are specific rules that the Department of Ed put in place each year that determine the federal aid a student qualifies for that upcoming year.
It is also used by some of the states for their aid programs. Many colleges use the SAI to determine how much scholarship they can deploy from their funds. Some colleges have a secondary process that is more detailed and is normally higher than the SAI.
The SAI number is displayed as an estimate when the FAFSA is submitted. The formal SAI is found on a report after the FAFSA is processed. This report is called the FAFSA Submission Summary or FSS. The FSS is a new term replacing the Student Aid Report or SAR.
Here are how the colleges use the SAI in calculating your need.
Cost Of Attendance – SAI = Student’s Financial Need
Each student’s need is unique, and each financial aid package is somewhat unique from the college financial aid office. Just like each college’s costs are different, so will the award package an admitted student will receive.
IRS Data Integration into SAI Calculation
One of the biggest changes in the SAI process for 2025-26 is the IRS data integration. Under FAFSA Simplification, the IRS data will be directly imported into the FAFSA. The users will need to Opt-in to the IRS data import. If the user does not opt-in, the FAFSA information will not be sent to the college. This will include both the students and the parents.
The new process replaces the IRS Data Retrieval Tool (DRT). Under the new integration, different items will be used to verify your information using your FSA ID as you log on. It is important to keep your contact information up to date on the StudentAid.gov site.
The tax information used for the 2025-26 FAFSA will be tax year 2023. FAFSA uses a timing process called Prior Prior. This timing method minimized the stress of completing your current year’s taxes quickly for FAFSA submission. This process started in 2015. If you have not filed your taxes yet, then it takes 4 – 8 weeks to become available for integration, depending on the filing method.
How is the Student Aid Index Calculated
Once a person completes their FAFSA, the system will generate a single number as your SAI. For proper planning, students will need to understand how that number was generated. A calculator like the College Cost Analyzer shows parents and students the details of the calculation.
The SAI number actually has four specific parts of the calculation that can be managed. Some strategies can improve a student’s financial aid position depending on the input and results. These strategies will depend on the SAI and the colleges on the student list.
The SAI has four parts: Parent Income, Parent Assets, Student Income, and Student Assets. These four quadrants are used for the typical dependent student. The parent’s information is normally not required for graduate students to determine their SAI.
Here is a sample of the PayForED SAI analysis report. The better systems will generate these numbers and possible charts to explain their four quadrants. The chart shows that the student’s SAI is $57,678. Understanding the parent’s and student’s portions is critical for proper planning. The FAFSA process does not provide this information.
SAI Calculation of the Parent’s Income
The first component of the SAI is the parent’s income, which will normally be the largest number of their SAI for most applicants. It is based on the family’s structure, the number of dependents, adjusted gross income, and state of residence.
The parent income section of the calculation is progressive. As the family’s Adjusted Gross Income increases, a higher percentage of the multiplier will apply to the income contribution number. This method will result in the SAI increasing more quickly.
SAI Calculation of the Parent’s Assets
For the parents’ asset calculation, non-retirement assets are all included. Due to FAFSA Simplification, small family farms and businesses will also be included in the calculation. Your primary residence home equity and retirement account values are excluded as a counted asset.
An asset allowance amount is based on the tax filing status and the age of the oldest FAFSA-filing parent. The asset amount that exceeds the allowance amount will be multiplied by 5.64 percent to arrive at the parent asset calculated amount.
SAI Calculation of the Student’s Income
For dependent student income, the rules are straightforward. Since dependent students are included on another person’s tax return, their income allowances are limited. Amounts over the allowances are weighted at 50 percent.
SAI Calculation of the Student’s Asset
There are no allowances for the student asset section, and assets are weighted at 20 percent. Therefore, many people think getting assets out of the student’s name is a good idea. People compare the student’s percentage of 20 percent to the parents’ percentage of 5.64 percent and disregard the cost of attendance as part of their decision. This asset-moving strategy is a common error.
It would be best if you were careful when liquidating student assets. The first issue is the tax consequence of liquidating assets. For dependent college students up to the age of twenty-four, if there is a taxable gain from the sale of assets, the “Kiddie Tax” rules will apply. For the student, the first $1,250 of unearned income will be tax-free; the next $1,250 is taxed at the child’s marginal rate, and any amount over that will be taxed using the parent’s marginal income rate.
Do your research, as this limit changes periodically based on the tax code. Depending on the amount of gain, a very high tax rate could be charged due to the parent’s income level.
The next issue is ownership of the account or asset. If the primary social security number on the account is the student, then the asset or account is legally their money. Legally, this money must be spent on the student’s behalf. A parent would need documentation to properly liquidate a Uniform Gift to Minor Account (UGMA account), which is the type of account issued for most children under eighteen.
SAI Calculation Changes for 2025-26 School year
The FAFSA Simplification process made significant changes to the EFC calculation, which is now the SAI. Here are the changes that impacted the SAI calculation by quadrant.
Overall SAI Changes
- 2025-26 FAFSA again not available until sometime in December
- In college, multi-child discount eliminated
- FAFSA submission required the use of the IRS data exchange via the IRS opt-in process. Non-compliance will result in FAFSA not being submitted.
- Major terminology changes and acronyms
Parent Income SAI Changes
- W2 contributions to retirement plans are no longer added back as income, yet retirement contributions like an IRA are included since they reside on the 1040 tax form
- Increase in Income Protection allowance but lost allowance for state residency.
- Child support is now reported as an asset and not income.
Parent Assets SAI Changes
- The small family business and farm value are now included as a reported asset.
- Child support received is reported as an asset.
Student Income SAI Changes
- The following year, reporting of non-parent 529 distribution is no longer reported as student income.
- Increased income allowance
Student Assets SAI Changes
- No changes
Tax Information that will be imported to the SAI
With the new IRS data integration, only certain fields will be imported into the FAFSA. The problem with the process is it is a blind submission. The user cannot see the data that was imported into the FAFSA.
We are recommending that people consider using a SAI calculator to estimate your SAI under the new rules. This is especially true for first fillers since you may be surprised by your SAI number after the calculation. Our SAI tool is called the College Cost Analyzer.
You will need to know two terms: Federal Tax Information (FTI), which is the 1040 tax information. The second common term is Direct Data Exchange (FADDX) which is the process that replaced the DRT solution.
The following data is sent to the Department of Education from the IRS are considered FTI, starting with the award year 2024-25 data:
- Tax Year (ex. Award year 2024-25 is based on 2022 tax year information from the IRS)
- Tax Filing Status
- Adjust Gross Income (AGI)
- Number of Exemptions and Number of Dependents
- Income Earned from Work
- Taxes Paid
- Educational Credits
- Untaxed IRA distributions
- IRA deductible and payments
- Tax-exempt interest
- Untaxed pension amounts
- Schedule C net profit/loss
- Indicators for Schedules A, B, D, E, F, H
- IRS response code
The integration will also include an IRS response code. The code will indicate the status of the tax filer/ FTI with the IRS, to include one of the following:
- Tax filer and FTI provided to FTIM
- Not found at the IRS
- Found and a non-filer
- Found, but the IRS was not able to provide information
SAI can determine the types of financial aid
The student aid index is a crucial component of the financial aid process. It is a formula used to determine your eligibility for various types of financial assistance. Students who qualify for need-based financial aid will see the type of aid in their financial award once they are accepted to the college.
As an example, a need-based student may receive Direct Federal loans in their financial award. There could be two types: Subsidized and Unsubsidized loans. A student who did not qualify for need-based financial aid will only see an Unsubsidized Direct Federal loan.
Other terms like grant and work student could also appear on the need-based student award. It is important for students and parents to understand the types of scholarships on their award.
A merit scholarship is not dependent on need and normally is given for four years. Some colleges will list a scholarship on the award, but it is need-based. Need-based scholarships are not guaranteed yearly, so the student must verify the scholarship type before committing to a college. This way, you can properly project your total cost and debt of attending that college.
What is SAI Summary
Once you have completed the FAFSA and submitted your financial aid applications, you will receive your Student Aid Index or SAI. It will be formally available on the FAFSA submission Summary (FSS) report. The FSS replaced the Student Aid Report (SAR).
Interpreting your SAI score can help you understand the financial aid level you will likely receive. You need to remember that having a lower SAI may impact your admission chances. A family’s ability to pay is a consideration in the application process that is often not explained to families.
Here’s how to interpret your SAI score:
- Low SAI score: A low SAI score indicates a higher level of financial need. This means you are likely to be eligible for more need-based aid, such as grants and subsidized loans.
- High SAI score: A high SAI score indicates a lower level of financial need. You may still be eligible for some forms of aid, but they may be more focused on merit-based scholarships or unsubsidized loans.
- EFC term: The SAI score replaced the EFC, and this is the first year in use. These are interchangeable, especially for people who have been using the EFC term for decades.
Understanding your SAI score can provide insight into the types and amounts of financial aid you are likely to receive. It can also help you plan your educational expenses accordingly.
If you find this complicated and need professional help, visit the PayForED Find the Advisor website. These financial professionals are trained in the proper ways to navigate financial aid and ways to pay for the college process.
