What is the Simplified Needs Test?

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Mark Kantrowitz

By Mark Kantrowitz

May 9, 2020

The Free Application for Federal Student Aid (FAFSA) includes two simplified financial aid formulas in addition to the full federal need analysis methodology, the Simplified Needs Test and Automatic Zero EFC. Each of these formulas combines an income threshold with a set of other eligibility criteria. The Simplified Needs Test causes assets to be ignored on the FAFSA for eligible applicants.

Dependent students are eligible for the simplified needs test if the annual income of the student’s parents is less than $50,000 and any of the following criteria apply:

  • Means-tested federal benefits. Anyone in the parents’ household received certain federal means-tested benefits during either of the last two years (the prior year and the prior-prior year).
  • Type of tax return. The dependent student’s parents filed IRS Form 1040 but were not required to file Schedule 1, with certain exceptions, or they were not required to file a federal income tax return.
  • Dislocated worker status. Either of the dependent student’s parents is a dislocated worker or displaced homemaker.

Income is based on the adjusted gross income (AGI) or, if the dependent student’s parents are not required to file an income tax return, their total income earned from work.

Independent students are also eligible for the simplified needs test using similar rules, substituting the independent student and the independent student’s spouse (if married) for the dependent student’s parents.

An applicant who qualifies for the simplified needs test may nevertheless still be required to report assets on the FAFSA if they live in a state that requires asset information to determine eligibility for state grant programs. The asset information will be used only to determine eligibility for state grant programs. It will not be used to determine eligibility for federal student aid. The states include Colorado, Georgia, Hawaii, Illinois, Minnesota, New Jersey, New Mexico, Ohio, Oklahoma, South Carolina, Vermont, Washington, Washington D.C., Wisconsin and Wyoming.

A good place to start:

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