The Department of Education recently revamped the Free Application for Federal Student Aid (FAFSA) in order to make it easier to submit, and therefore, make student aid more accessible. They say, “The Better FAFSA is simplified, redesigned, and streamlined. It is faster and easier to fill out, with most students and families completing it in less than 15 minutes.”
With its rocky rollout, I’m not sure if their claims are true, but what matters is that the FAFSA is completely different, especially for pastors. As soon as it came out, I started getting people asking me, “Does the new FAFSA include the clergy housing allowance as income?”
What Is The FAFSA?
If you’re new to this, let me give you a little bit of background. The FAFSA is the form that college students use to apply for government student aid, such as grants, loans, or work study programs. In addition to federal aid, many states and colleges use the FAFSA to award student aid as well. The general rule is that if you want any help at all with school, fill out the FAFSA.
Since a lot of student aid is needs-based, the FAFSA collects financial information. The student has to provide information from their own personal tax returns. If under the age of 24, then the parents’ financial information must be included as well. That information is used to calculate the Student Aid Index (SAI), which was formerly known as the Expected Family Contribution (EFC). The SIA in turn affects how much aid a student can get.
Changes To The New FAFSA
This is the new FAFSA form. On the old FAFSA, there was a place to enter your taxable income and then later a place to enter untaxed income, which includes the housing allowance. If you look through the new form, you won’t see anywhere to add untaxed income.
However, that wasn’t enough to convince me that the housing allowance isn’t included in the FAFSA anymore. You see, there is a new feature where the IRS automatically provides information to the Department of Education when you file the FAFSA. To know for sure if the housing allowance is included, you need to know what information the IRS provides.
Does The Clergy Housing Allowance Count As Income For The FAFSA?
This article lists the information that the IRS is allowed to provide. Good news, nothing on this list includes the clergy housing allowance! That means the clergy housing allowance is not included as income on the FAFSA anymore.
To be even more sure, I checked in with the pastors in the Pastor’s Wallet Facebook Community. Those who had submitted the FAFSA this year confirmed that it’s true. The housing allowance no longer counts towards income on the FAFSA. Now, not only do you get to save on income taxes with the housing allowance, but your kids are likely to be eligible for more student aid as well!
