What Is the Student Aid Index (SAI) and How Is It Calculated?

You must understand what the Student Aid Index and its impact on your federal aid.
 
The SAI is an eligibility index number calculated using your FAFSA information. The information summarizes your family’s overall financial situation (income and assets). Your school uses it as a standardized measure to determine financial aid eligibility.
 
The SAI replaced Expected Family Contribution (EFC) starting with the 2024-2025 aid cycle. This was in line with the federal government’s FAFSA simplification initiative. The calculation method has changed, but aiding in eligibility assessment remains its purpose.
 
The SAI values fall within a wide range.
• The figures demonstrate the highest need (-1,500) and the lowest need (999,999). 
• The higher the number, the lesser the demonstrated need.
 
The SAI is NOT the amount you’ll pay for your college education. Instead, it’s a number used to determine your financial aid eligibility.

You should also understand the basic need formula.

A standardized formula for SAI was developed based on federal guidelines:
Financial aid = Cost of Attendance (COA) – Student Aid Index (SAI)

Your COA includes approved expenses like:
• Tuition and fees
• Room and board
• Books and technology
 
Your calculated financial need comes from subtracting your SAI from your COA. The figure represents the maximum amount of need-based aid you may receive.

Your school uses the financial need amount to create your aid package. The aid package usually combines federal, state, and institutional aid, even private aid.

You may or may not be aware of the common misconceptions.

• Many families and students mistook EFC as the dollar amount they’d pay out-of-pocket.
• The EFC-to-SAI name change was designed to clarify it as a reference index. EFC and SAI are neither contributions nor obligations on your part.

Your actual costs (i.e., out of pocket) depend on: 
• Your school’s  financial aid policies
• Your total aid package

The EFC-to-SAI shift introduced key changes in financial aid eligibility determination. Here are the key differences between EFC and SAI calculations.
 
Negative Numbers Allowed in the SAI
 
• Under the EFC system, $0 was the lowest possible value. This applies even to students with extreme demonstrated financial need.
• The SAI broadened the scale with -$1,500 as the lowest possible value.
• Schools identified students with the greatest financial need, thanks to negative SAI.
• Students with an SAI of $0 and below automatically qualify for the maximum Pell Grant.
 
Number of Students in College Eliminated
 
• Under the EFC system, parent contributions were divided simultaneously among siblings in college. However, the AI formula removed the factor.
• With SAI, it does NOT decrease for additional siblings enrolled in college. If your family has multiple students in college, you may receive less aid under the SAI system.
 
Small Business and Farm Assets Now Count
 
EFC excluded the value of:
• Small family-owned businesses with fewer than 100 employees
• Family farms

Under SAI, these assets are included in determining your family’s financial capacity.
• An exception to the rule is a business that qualifies for an adjusted net worth calculation.
• This limits the assessments of an asset’s value.
 
Grandparent 529 Plans No Longer Reported
 
• With EFC, distributions from grandparent-owned 529 plans were considered untaxed student income.
• Under SAI, you can now remove these plans from your FAFSA (i.e., no reporting required). You won’t be penalized for your grandparents’ aid for your college education.
 
Child Support Treatment Changed
 
Under EFC, child support was considered untaxed income. With SAI, it’s treated as an asset instead. In general, it means less impact on your aid eligibility because:
• assets have a lower assessment rate than income.
• you are likely to receive more need-based aid because of it.

The US Department of Education uses three SAI formulas based on dependency status.

• Formula A applies to students who are considered their parents’ dependents.
◦◦ Most first-time and traditional undergraduate students are covered in it.
• Formula B: covers independent students without dependents other than their spouse. 
• Formula C: applies to independent students with dependents other than their spouse.

Formula A Calculation (Dependent Students)

• In Formula A, both your parents’ contributions and your contribution are accounted for.
◦◦ Your final SAI is the sum of both contributions, as follows:
SAI = Parent Contribution + Student Contribution from Income + Student Contribution from Assets
Let’s break down these three distinct components.
 
Parent Contribution

• Total income = Adjusted Gross Income (AGI) + specific untaxed income
Examples:
◦◦ child support
◦◦ tax-exempt interest
◦◦ untaxed portions of pensions/retirement accounts
• Total income is deducted by income allowances
Examples:
◦◦ taxes paid
◦◦ payroll taxes
◦◦ income protection allowance
◦◦ employment expense allowance
• Total income – income allowances = available income
◦◦ This represents income that your parents can reasonably use for your college costs.
• Contributions from assets (net worth × 12% after asset protection allowance) are added.
◦◦ Available income is assessed at progressive rates instead of a flat percentage.
◦◦ Presently, it’s from 22% to 47% with higher income levels assessed at higher rates.

Student Contribution from Income

• Total income includes:
◦◦ wages
◦◦ reportable earnings (tips, interest, and dividend income)
• Then, total income is deducted by the income protection allowance  ($11,770 for 2026-2027).
• Allowances for federal, state, and payroll taxes paid are then deducted. 
• The remaining student income is multiplied by the flat 50% assessment rate.

Student Contribution from Assets

• Your total net worth is assessed at a flat 20% (i.e., net worth x 20%).
• If you’re a dependent student, there’s no asset protection allowance.

The SAI calculation starts with AGI, as reported on your federal tax return. Then, certain non-taxable income sources and income exclusions are added.

The result is a more complete picture of your financial resources.

What Income Counts

Under federal student aid rules, the following items are considered income:
• Adjusted Gross Income (AGI) from tax return (total taxable income after IRS adjustments)
• Tax-exempt interest income from municipal bonds and federal government savings bonds.
• Untaxed IRA/pension distributions unless they are rolled over into another eligible account.
• Foreign income exclusion or income earned abroad but excluded from US taxation.
• Deductible retirement contributions, such as SEP, SIMPLE, and Keogh.

What Reduces Your Counted Income

Income deductions for SAI purposes are as follows:
• Income Protection Allowance (IPA) accounts for essential living costs.
• For dependent students, it’s $11,770 for the 2026-2027 academic year.
• For parents, it varies depending on family size (a family of 4, it’s about $44,880). 
• The IPA covers basic living expenses, including housing, utilities, food, and transportation.

Taxes Paid are deducted since these aren’t available for education costs:
• Federal income taxes paid
• Payroll taxes (Social Security, Medicare)

Employment Expense Allowance accounts for work-related costs.
• Costs of maintaining employment among working parents (childcare, commuting). 

What’s NOT Counted:

These types of income are excluded from SAI computation:
• Contributions to employer retirement plans (401k, 403b)
• College grants and scholarships received
• Federal Work-Study earnings
• Education tax credits claimed (AOC or LLC)

Prior-Prior Year Rule:
• Under the rule, your 2024 tax information is used for your 2026-27 FAFSA.
• Your income situation is “locked in” even before you apply for financial aid.
• However, your school can still use its discretion in case of major income changes.

Aside from income, assets also affect your SAI.

Assets That Count

These items are treated as assets:
• Cash, savings, and checking accounts (immediately accessible for education costs)
• Money market funds and CDs (accessible financial resources)
• Investments, such as stocks, bonds, and mutual funds (increase overall net worth)
• Real estate excluding primary home (investment asset)
• Net worth of family-owned businesses and farms (available financial resources)
• Parent-owned and reported 529 plans (subject to the parent asset assessment rate)
• Child support received

Assets NOT Counted

In contrast, these aren’t treated as assets:
• Primary residence equity
• Retirement accounts, including 401k, IRA, and pension (not readily available for education costs)
• Life insurance cash value (general inaccessibility)
• Personal possessions like cars and furniture (necessary for daily living)
• Grandparent-owned 529 plans (avoid penalizing students for education-related gifts)

Assessment Rates

The asset assessment rate differs for parents and students:
• Parent assets are assessed at12% of net worth (after asset protection allowance)
• Dependent student assets have a higher assessment rate of 20% of net worth (no protection allowance)
• Independent student with dependents assets have a 7% of net worth assessment rate

Asset Protection Allowance

• The amount varies depending on the age of the older parent
◦◦ i.e., The older parent receives a larger amount than the younger parent
• The allowance shields part of a parent’s assets
◦◦ i.e, Parents don’t have to use up all their savings for college.
• The result is more parent wealth counting toward SAI.

Who’s Exempt from Reporting Assets

The following groups aren’t required to report assets.
• Students qualifying for the maximum Pell Grant
• Parents and students who:
◦◦ have AGI under $60,000
◦◦ don’t file Schedule A, B, D, E, F, or H (with limited Schedule C)
• Recipients of means-tested federal benefits (SNAP, SSI, and TANF)

Your SAI is also influenced by your FAFSA contributors.

What is a Contributor?

A contributor is a person who must: 
• Provide personal and financial information on your FAFSA
• Fill out their respective portion on your FAFSA completely and accurately
• Have their own FSA ID for their electronic signature and submission

Who Are the Contributors?
Your contributors differ depending on your dependency status.

If you’re a dependent student, your contributors are:
• Yourself (always) since you report your assets and income in your FAFSA
• Your parent who provides the most financial support for your education and daily expenses
• Your parent’s spouse, if remarried, even if said spouse didn’t file taxes jointly

If you’re an independent student, your contributors are:
• Yourself (always), regardless of your age and family situation
• Your spouse, if you’re married, and even if you didn’t file taxes jointly

Critical Consent Requirement
• In critical consent, each contributor authorizes the sharing of their FAFSA financial information.
◦◦ This is critical because no consent means no SAI calculation.
• All your contributors MUST provide their express consent for IRS data retrieval and transfer.
• If one of your contributors didn’t provide their consent, your SAI calculation won’t proceed.
• Without an SAI, you won’t be eligible for ANY federal student aid.

Divorced/Separated Parents
• Report the financial information of the parent who provides the most financial support
• Do so regardless of your parents’ custody arrangements (NOT based on who you live with)
• Include your stepparent’s information if the parent who provides the most financial support remarried

Parents Without SSN
• Can still create their FSA ID using alternative identification methods
• Can fill out and submit FAFSA online
• Must still provide their critical consent

Your next step is to know SAI’s impact on the financial aid you may receive. 

SAI and Pell Grant Eligibility

There are three main paths to qualify for Pell Grants:

1. Maximum Pell Grant
• If your SAI is ≤ $0, you’ll qualify for the maximum Pell Grant.
• For 2025-2026, the maximum is $7,395.
• Non-tax filers with an SAI of -$1,500 automatically receive it.
• Students whose AGI meets federal poverty guideline thresholds receive it, too.
 
2. Calculated Pell Grant
• In a calculated Pell Grant, your SAI falls between $1 and the upper threshold.
• The formula is: Formula: Maximum Pell Grant – Your SAI = Your Pell Grant
• Let’s say you have an SAI of $3,000. Your Pell Grant is $4,395 ($7,395-$3,000).
 
3. Minimum Pell Grant
The minimum is $740 for 2025-2026.
 
If you have a higher SAI and meet income thresholds, you may receive the minimum amount. Your eligibility for the minimum Pell Grant is based on your AGI relative to poverty guidelines.

SAI and Other Federal Aid

• Federal Work-Study is a need-based program that prioritizes students with lower SAIs.
• FSEOG Grants are small need-based grants ($100-$4,000) awarded on a first-come, first-served basis. • Students with the lowest SAIs have high priority status.
• Subsidized Loans require students to demonstrate need (COA – SAI).
• Unsubsidized Loans are available regardless of SAI and need.

Institutional Aid

• Financial aid offered by schools reduces your out-of-pocket costs. 
• Many schools use SAI for their own need-based scholarships and grants.
• Some schools, such as Harvard, Princeton, and Yale, meet 100% of demonstrated need.
• Many private schools also use the CSS Profile in addition to FAFSA.

What SAI Doesn’t Affect

• Your SAI won’t affect these types of financial aid:
◦◦ Merit-based scholarships
◦◦ Unsubsidized federal loans
◦◦ Private scholarships
◦◦ Parent PLUS loans

Now you understand SAI. You know its formulas, components, and impact. With the information, you can adopt these strategies to lower your SAI.

Income Strategies

• Maximize your contributions to tax-deferred retirement accounts (401k, 403b). 
• Shift bonuses, stock sales, and capital gains to a different year (i.e., tax year used).
• Make regular contributions to traditional IRA or deductible retirement accounts.
• Remember that FAFSA uses the prior-prior year income rule.

Asset Strategies

• Decrease your outstanding debts before filing your FAFSA.
◦◦ This reduces the cash/savings you must report.
• Make legitimate and necessary major purchases before filing your FAFSA.
◦◦ Large expenses decrease your liquid assets and, thus, reported net worth.
• Transfer your student savings into parent-owned 529 plans.
◦◦ Your assets are assessed at the lower parent asset assessment rate (12%).
◦◦ Your SAI decreases, but your savings remain.
• Consider making Roth IRA contributions.
◦◦ Your contributions to retirement accounts aren’t counted as student assets. 
• Use your savings for legitimate expenses (educational and living expenses) before the FAFSA date.

Family Structure Considerations

• You should know which parent must report if you have divorced parents.
◦◦ Again, it’s the parent who provides the most financial support.
• Your grandparent’s contributions to your college education via 529s are excluded.
• Any child support received is now reported as an asset, not income.

What NOT to Do

• Don’t commit fraud, such as hiding assets or underreporting income.
• Don’t make temporary asset transfers to friends or relatives.
• Don’t assume that a lower SAI means more aid guaranteed.

When SAI is Too High

• Apply for more merit-based scholarships.
• Compare the net prices between as many schools as you can.
• Start at a community college and then transfer to a four-year university.
• Explore schools that meet 100% of demonstrated need.
• If your special circumstances warrant it, file a professional judgment appeal.

Before Filing—Estimate Your SAI

• Use the Federal Student Aid Estimator at studentaid.gov/aid-estimator.
• You must input your income, assets, and household information in the required fields.
• Once you provide your financial information, you’ll see an unofficial estimate.
• You’ll get an idea of your potential federal aid eligibility.
• You can use your estimated SAI for college planning purposes.
• This is useful when comparing colleges, creating a budget, and identifying affordable schools. 

Using Your SAI

• Your SAI should be evaluated against the COA of schools you’re interested in.
◦◦ This way, you can estimate the amount of need-based aid you might receive in each school.
◦◦ You’ll also be able to determine your out-of-pocket costs and set a realistic budget.
• Remember that your SAI is only a starting point.
◦◦ It’s neither your final bill nor your out-of-pocket costs.
◦◦ Instead, it’s only an index to determine your financial aid eligibility.
• Each school creates its own financial aid package.
◦◦ Your school uses your SAI and other personal information (e.g., special circumstances) to do so.
◦◦ The school’s financial resources and aid policies also influence your aid package.

If Your SAI Seems Wrong

• Review all your FAFSA answers for errors.
◦◦ Double-check each entry to ensure complete and accurate inputs.
◦◦ Pay special attention to your financial information.
• Also, check that the correct tax year information was used.
◦◦ The PPY tax data should match the year required for FAFSA purposes.
◦◦ If you use the wrong tax year, it can have a significant impact on your SAI.
• Contact your financial aid office about your special circumstances.
◦◦ Example: significant changes in income or assets due to severe medical issues
◦◦ Your school may have a professional judgment appeal process for SAI adjustments.