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The Free Application for Federal Student Aid (FAFSA) is a form that incoming and returning college students (and their parents) need to fill out to be considered for federal financial aid. The FAFSA helps students qualify for federal grants and loans, such as the Pell Grant and Federal Direct Subsidized Loans. States and colleges also use the FAFSA to determine eligibility for grants and scholarships.

Unfortunately, the FAFSA is known for being a long, tedious, and complex form to fill out. To help ease confusion — and encourage more families to fill out the form — the Department of Education rolled out a new streamlined and simplified FAFSA for the 2024-25 school year on New Year’s Eve, 2023 (a delay from the usual October 1).

The simplified FAFSA also ushers in a new formula to determine who will qualify for aid and how much they’ll receive. Here’s what you need to know about the FAFSA changes, plus other updates to financial aid.

Why Is the FAFSA Changing?

The Department of Education has long fielded concerns about the complexity and length of the FAFSA. As a result, Congress passed legislation in 2020 — called the FAFSA Simplification Act (FSA) — to make the FAFSA easier for students and their families to complete. The act not only overhauls the FAFSA form, dramatically reducing the number of questions, but also changes the methodologies and formulas used for determining federal student aid eligibility.

The new provisions were designed to be implemented in the 2023-24 school year but, due to delays, the Department of Education has been using a phased approach, with only a few of the new rules appearing on the October 1, 2022, FAFSA. The remaining provisions are set to go into effect for the 2024-25 award year. The new form became available on New Year’s Eve, 2023.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

2024-2025 FAFSA Updates

The FAFSA updates include a shorter, simpler-to-fill-out form, along with changes in how your financial aid is calculated. Below, we break it all down.

Shorter Form/Fewer Questions

A major FAFSA change is that the form itself will shrink from an intimidating 108 questions to no more than 36 questions (though some will have multiple parts). The actual number of questions you’ll need to answer (which could be less than 36) will depend on your financial situation. The new form also makes it easier to import income data from your tax records.

The Department of Education is hoping that a shorter, simpler form will encourage more students and their families to fill out a FAFSA and increase access to financial aid.

Questions About Selective Service and Drug Convictions Dropped

The new FAFSA eliminates any questions about whether a student has had any drug-related convictions. A drug conviction will no longer prevent students from receiving Pell Grants.

In addition, the Selective Service registration — which required male students under 26 to enroll in the draft — was removed as part of the FAFSA Simplification Act. This was taken off the FAFSA in 2021. Students are no longer required to register for Selective Service to receive federal aid.

Other Demographic Questions Added

The Department of Education also added a new demographic survey to the signature and submission portion of the FAFSA. Students will fill in certain demographic information, such as their gender, race, and ethnicity before submitting the form. These questions are solely for research purposes (to create statistics on who is and is not applying) and are not factored into aid decisions. While you must fill out the demographic survey, you are allowed to decline the answers.

EFC Becomes SAI

The new FAFSA renames the current Expected Family Contribution (EFC) to the Student Aid Index (SAI). The EFC is a number that colleges use to determine a family’s financial need relative to other applicants. The name, however, caused confusion, since the EFC doesn’t actually represent the amount a family will have to contribute (or pay) for college. You could end up spending more, or less, than your EFC.

Besides the name change, there are a few differences in how EFC/SAI will be calculated. Here are some notable updates:

•  EFC factored in the number of family members in college but SAI does not. Families with more than one child in college no longer have an advantage in receiving aid.

•  The lowest EFC an applicant could receive was $0. The SAI can go as low as -$1,500, making it easier to more accurately determine an applicant’s financial need.

•  SAI will increase the Income Protection Allowance (IPA) that shelters a certain amount of parental income from inclusion in the calculation of total income.

Recommended: 31 Facts About FAFSA for Parents

Getting a Pell Grant Becomes Easier

The FAFSA Simplification Act increases the number of students eligible for a Pell Grant. The maximum awards will now go to all families who fall below the income thresholds for tax filing, or who have adjusted gross incomes below 225% (single) or 175% (married) of the poverty line. In addition, the Act restores Pell Grant eligibility to incarcerated students.

Students will also be able to estimate their eligibility for the grant before they complete the FAFSA.

How Will the FAFSA Changes Affect Students?

The new FAFSA will save time and headaches for all applicants. For many students and their families, the FAFSA changes will also mean more aid. For some, however, the changes will mean less help from the government.

Many families, especially low-income families, will likely get more aid, due to more generous formulas. For example, the IPA will increase by 20% for parents, up to about $2,400 (35%) for most students, and up to about $6,500 (60%) for students who are single parents.

In addition, more families will be eligible for the Pell Grants. Previously, families with incomes higher than $60,000 were generally ineligible for a Pell Grant. Now, students from families earning between $60,000 and $70,000 will likely receive some Pell Grant funding.

On the downside, the number of kids a family has in college will no longer be factored into the formula for the parent allowance. Indeed, families with multiple children in college at the same time may find that they will get less financial aid than they are used to.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

When Does the 2024-2025 FAFSA Become Available?

The FAFSA traditionally opens on October 1 for the following academic year. This year, due to the FAFSA updates taking longer than expected, the Department of Education’s Office of Federal Student Aid released the new simplified FAFSA on New Year’s Eve, 2023 for the 2024-2025 academic year.

Even if you’ve filled out the FAFSA in the past, you need to submit the new simplified FAFSA. That’s because you need to complete a FAFSA every year to unlock federal student loans, grants, work-study, and even some private scholarships.

Once you submit the new FAFSA, you’ll receive your FAFSA Submission Summary, which details the information you included on the application and your SAI.

Cash vs. Private Student Loans: Which One Is Better?

Whatever cash you or your family members can save for college will benefit you in the long run, since it will mean borrowing less and paying less in interest. Therefore, cash is king when it comes to paying for college.

However, if you don’t have enough cash for college, you’re far from alone — and you still have plenty of funding options. By filling out the FAFSA, you may be able to access federal aid, including grants, scholarships, work-study, federal subsidized loans (no interest charged while you are in school), and federal unsubsidized loans (interest accrues while you are in school).

If you still have gaps in funding, you may be able to fill them by getting a private student loan. These loans are available through banks, credit unions, and online lenders. Each lender sets its own interest rate and you can often choose to go with a fixed or variable rate. Unlike federal loans, qualification is not need-based. However, you will need to undergo a credit check and students often need a cosigner.

If a student (or their cosigner) has excellent credit, it may actually be possible to get a private student loan with a lower interest rate than a federal loan, particularly if you’re looking at federal PLUS loans for parents or graduate students, which carry higher rates than federal loans for undergraduate students.

Just keep in mind that private student loans may not offer the same protections, such as income-based repayment plans, that automatically come with federal student loans.


💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

The Takeaway

When the new simplified FAFSA became available at the end of 2023, it included a lot of changes, including fewer questions and a switch from EFC to SAI (which will serve the same purpose). Some changes also took place behind the scenes, including updates to the formulas used to calculate aid eligibility. More students qualify for Pell grants, but families with multiple children in college may see their award go down.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Photo credit: iStock/skynesher

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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From snagging that first real job to starting a family (congrats all around), life is full of important rites of passage. These events are meaningful, for sure, and they can also impact the path of your personal finances.

As you take control of your money, it can be wise to think about and plan for these key transitions. That way, you can be better prepared for how they may alter your financial health.

In this guide, you’ll learn about seven major milestones plus advice on navigating these life events successfully so you can build wealth today and tomorrow.

1. Your First Job

You’ve finished your education (for now, at least) and are starting your first job. This is where your financial journey really begins. And, since you are likely earning more money than you ever have, it’s important to have a plan for how you will use that money wisely.

If your employer offers a 401(k) for retirement, you may want to consider having at least some money taken out of each paycheck each cycle and put into this fund.

Once you get your first paycheck, you can see exactly how much money you are taking home (after all deductions, including retirement, and taxes are taken out). This can be a perfect moment to make a simple budget. This will help you get the most out of your salary and build some financial stability.

•   This involves listing all of your essential monthly expenses. You can think of these as the “needs” in life, such as housing, food, and minimum payments on debts or loans.

•   Then subtract them from your monthly take-home pay to see how much you have left over to play with (the “wants” in life) and, of course, to save.

•   Saving can be crucial, so it’s wise to determine an amount you can set aside each month into a separate savings account. It’s perfectly fine to start small. Even putting a little bit of money aside each month will start to add up over time.

•   This savings account can help you build an emergency fund (generally three to six months’ worth of living expenses). Having financial back-up can help to ensure that if you should have a large, unexpected expense, you could cover it without having to rely on high interest credit cards.

•   Once you have a comfortable emergency fund, you may then want to start working on other savings for other goals, such as buying a car or other major item you are hoping to buy in the next few months or years.

If you are looking for guidance on how to establish a budget that works for you, consider the 50/30/20 budget rule. This guideline says that, of your take-home pay, you should allocate 50% towards “needs,” 30% towards “wants,” and 20% to savings.

2. Paying Off Student Loans

Student loan payments can be a drag on your monthly budget, especially if you are trying to save toward other financial goals, like buying a home or paying for your kids’ college education.

One of the best ways to pay off student loans is to pay more than the minimum each month. The more you pay toward your loans, the less interest you’ll owe — and the quicker the balance will disappear.

There’s typically no penalty for paying student loans early or paying more than the minimum. However, there is a caveat with prepayment: Student loan servicers, which collect your bill, may apply the extra amount to the next month’s payment.

The problem with that is that it advances your due date, but it won’t help you pay off student loans faster. That’s why it can be a good idea to tell your servicer (whether online, by phone or by mail) to apply overpayments to your current balance, and to keep next month’s due date as planned.

Another option you may want to look into refinancing your student loans. This could help you pay off student loans sooner without making extra payments.

Refinancing replaces multiple student loans with a single private loan, ideally at a lower interest rate. To speed up repayment, it can be a good idea to choose a new loan term that’s less than what’s left on your current loans.

Keep in mind, however, when you refinance a federal student loan into a private loan, however, you may lose the benefits and protections that come with a federal loan, like deferment and public service-based loan forgiveness.

3. Buying a Car

Buying your first car can be an exciting experience. And, you might want to rush to the nearest dealer and purchase a shiny, new model right away.

However, saving up for a vehicle before you buy minimizes the amount you have to borrow to buy a car and can save you a substantial amount in interest.

To get a sense of how much you need to save for a down payment, you can research some car makes and models that might suit you and get a sense of prices for both new and used cars.

You can then zero in on a price range you can afford and calculate the down payment. Deciding between a new vs. used car? A good rule of thumb is to put 20% down on a new vehicle and 10% down on a used one.

Making a higher down payment helps you qualify for a loan, and it can earn you a lower interest rate and result in more affordable monthly payments.

Once you know how much to save, the next step is to find a good place to start saving. Good options include: a money market account, online savings account, or checking and savings account.

These accounts can enable you to earn more interest than a standard checking account but allow you to access the money when you are ready to buy that car.

4. Buying a Home

For many people, buying a home is the biggest purchase they will ever make. So, it’s important to prepare for it.

A great first step is to figure out how much house you can afford to buy. You can come up with a target price range based on the area you want to live in, details about the type of home you want, and how much you’re comfortable spending on a monthly mortgage payment.

This exercise will help you understand how much you need to save and roughly how long it will take you to save enough.

Mortgage lenders and online mortgage calculators can also help you decide the absolute maximum you can afford to spend on your house.

One common rule of thumb is that your home payment (including loan payment, property taxes and homeowners insurance) should take up no more than a third of gross pay (your monthly paycheck amount before taxes and deductions are taken out). However, this can vary depending on the cost of housing in your area.

Once you have a target home price, you can start saving for a down payment. Many mortgage lenders prefer you to make an upfront deposit of up to 20% of your home’s cost. However, there are mortgages available for those who put down significantly less (even zero).

If you are saving for a down payment, you can think about when you want to buy a home and then work backwards to determine how much you need to save each month to reach this goal.

As with car savings, a good place to save for a home is a high-interest savings account, such as a money market account, online savings account, or checking and savings account.

5. Changing Jobs

At some point during your career, you may change jobs. Generally, this can be a smart financial and professional move, but changing jobs is still something you’ll want to plan for financially. Some tips to help your money work harder for you:

•   You’ll likely be eligible for a new set of employee benefits, including health insurance. However, it will probably be up to you to ensure that you have health coverage during the transition. To avoid any gaps, it’s a good idea to ask your new employer how soon you will be able to qualify for healthcare.

•   You may also want to create a plan for transferring your 401(k) and health savings account (HSA) to your new accounts. Rolling them over is generally a simple process, but you may want to contact your previous employer for guidance.

•   An FSA vs. an HSA can require a different approach. If you have a flexible spending account (FSA), you may need to submit all eligible expenses for reimbursement under your old program before you leave your current job. It can be a good idea to check with your company’s HR department to find out whether or not you have a grace period for submission.

Since you may be earning a higher salary, you may also want to re-examine your budget, and perhaps do some tweaking, such as funneling a bit more money into your retirement fund and/or savings account each month.

6. Saving For Your Kids’ College

Next to buying a home, child education expenses are among the biggest you may have in your lifetime. Just like retirement: it’s never too early to start saving for college. But even if you put it off, you can still help cover most or all of those college costs with wise saving and investing.

While predicting how much college will be for a kindergartener may be difficult, it gets a little easier the older your kids get. However, you can find current college costs and predictors for future college tuition costs online and use that as a benchmark for your savings.

One great place to start building education savings is in a 529 college savings plan. These are savings plans, usually sponsored by state governments, that encourage saving for future education costs.

They are often tax-friendly, in that many states will let you deduct your contribution from your state income tax. Even better, when you withdraw the money for college, the money will not be federally taxed.

That means, any growth (or money in the account that you didn’t put in) is not taxed, which can be a significant advantage over traditional investment accounts.

You can put money into your own state’s 529, or any other state’s plan. Whatever you choose, consider making monthly contributions automatic, so that your bank transfers the money right into the 529 on the same day each month.

One way to ease saving for college is to use smaller life transitions to help fund your education savings plan. When your child no longer needs daycare or preschool, for example, you could funnel what you were paying for that into your account.

7. Retirement

Retirement may seem far away, but it can come up faster than you expect and, if you’re unprepared, you may struggle financially. Saving for retirement early can provide peace of mind later.

And, the earlier you start saving for retirement, the less you’ll actually have to put away, thanks to the magic compounding interest (which means the interest you earn on your investments also earns interest).

While it can seem impossible to predict how much money you’ll need once you retire, some financial experts recommend this rule of thumb: Aim to save at least 15% of your pretax income each year from age 25 onward. If you start later, you would want to up those percentages.

Fortunately you can get Uncle Sam to help. By contributing to tax-advantaged savings accounts like traditional 401(k)s and individual retirement accounts (IRAs), your contributions are made before tax, reducing your current taxable income.

That means you get a tax break the year you contribute. Plus, that money can grow tax-free until you withdraw it in retirement, when it will be taxed as ordinary income (and at retirement time, you may be in a lower tax bracket).

With Roth 401(k)s and IRAs, your contributions are after tax, but you can withdraw the money tax-free in retirement (assuming certain conditions are met).

If you are contributing to 401(k) at work and your employer offers matching funds, you may want to increase your automatic contributions at least to that level. This is effectively “free” money.

The Takeaway

Throughout your life you will likely experience some significant events and milestones that can have a major impact on your financial well-being.

The better prepared you are for these transitions, the less stressful and more enjoyable they can be.

If you’re looking for a simple way to start saving for your financial goals, like buying a car or a home, you may want to consider opening an account that charges low or no fees and pays higher than average interest.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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