Can Schools Use a Negative Student Aid Index When Awarding FSEOG?

This AskRegs Knowledgebase Q&A was updated on April 10, 2024 to include updated guidance published by the U.S. Department of Education (ED) in GEN-24-05.

Yes. In Dear Colleague Letter GEN-24-05, the U.S. Department of Education (ED) states "Effective with the 2024-25 award year, in identifying students with exceptional need, as required under the award selection procedures for FSEOG, institutions may, but are not required to, treat all negative SAIs (down to –1500) as equal to an SAI of zero in their selection criteria. Alternatively, institutions may elect to use negative SAIs to further distinguish among their neediest students. In applying their award selection procedures, institutions must take a consistent approach to negative SAIs."

ED states that allowing institutions to treat all negative SAIs as equal to an EFC of zero is consistent with the treatment of  treated automatic maximum Pell Grant determinations. Under the Simplification Act [see HEA Sec. 401(b)(1)(A)], automatic maximum Pell Grants are awarded when the student or parents (as applicable), 

• are not required to file a U.S. tax return which results in a negative 1,500 SAI; or
• have adjusted gross income that falls within specific poverty line thresholds, resulting in a zero SAI unless the calculated SAI is negative (down to negative 1,500).

This permits institutions to award FSEOG funds to students within this range of SAIs similarly, or they may use negative SAIs to further distinguish between the neediest students. ED believes this approach will help ensure consistency between institutional selection of FSEOG recipients and policies for awarding and packaging Title IV funds and allow institutions the flexibility to ensure continued eligibility for students who are current recipients of FSEOG funding.

Schools are reminded that although a negative SAI may be used in selection procedures for FSEOG, any negative SAI should be converted to and treated as zero when awarding and packaging need-based Title IV aid [Pell Grant, FSEOG, Federal Work-Study (FWS), and Direct Subsidized Loan programs]. Note that a negative SAI converted to zero will also not increase a student’s eligibility for non-need-based aid. See Dear Colleague Letter (GEN-23-11) which states:

“An applicant may receive a negative SAI as low as -1,500. When packaging students for need-based Title IV aid (Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and Direct Subsidized Loan programs), convert any negative SAIs to a 0 SAI for awarding purposes. For example, consider an applicant with a $15,000 COA, a -500 SAI, and a $7,395 Federal Pell Grant. When calculating remaining need for other need-based programs, the school will change the -500 to 0 in the need-based calculation referenced above. The student’s remaining need will be $7,605 ($15,000 – 0 – $7,395 = $7,605).

Note that a negative SAI converted to 0 will also not increase a student’s eligibility for non-need-based aid.”

Note that Section 413C of the Higher Education Act of 1965 (HEA), as amended [20 USC 1070b-2(c)] still says this (bolded for emphasis), which did not change under the FAFSA Simplification Act:

"(c) Selection of individuals and determination of amount of awards

(1) From among individuals who are eligible for supplemental grants for each fiscal year, the institution shall, in accordance with the agreement under section 1094 of this title, and within the amount allocated to the institution for that purpose for that year under section 1070b–3 of this title, select individuals who are to be awarded such grants and determine, in accordance with section 1070b–1 of this title, the amounts to be paid to them.

(2)(A) In carrying out paragraph (1) of this subsection, each institution of higher education shall, in the agreement made under section 1094 of this title, assure that the selection procedures-
(i) will be designed to award supplemental grants under this subpart, first, to students with exceptional need, and
(ii) will give a priority for supplemental grants under this subpart to students who receive Pell Grants and meet the requirements of section 1091 of this title."

NASFAA understands this to mean that a negative SAI could be used by the school to more accurately target FSEOG within the existing selection groups. A student with a negative SAI could be considered to be needier than a student with a zero SAI. The school could use the negative SAI when moving through their eligible applicant pool to select the neediest FSEOG recipients and to make FSEOG awards. That is especially true for those students whose SAIs are all clustered at or below zero. The school could even make larger award amounts to negative SAI students than to zero SAI students or other eligible students if that is their policy. All of this is true as long as the school still uses a zero SAI when packaging that FSEOG amount with other Title IV aid overall (i.e., the negative SAI does not increase the student's overall financial need for need-based Title IV funds).

Be sure to remember that schools may not package a student with a negative SAI over the cost of attendance (COA). See AskRegs Q&A, Will We Be Able To Package Above the COA If There Is a Negative Student Aid Index?

School's Decision to Make: You should follow ED's guidance and "make a good faith effort to interpret the law." As such, NASFAA will not be making this decision on behalf of schools.

Policies and Procedures: The school should include how FSEOG selection groups are established as part of its written policies and procedures. Be sure to check out NASFAA’s Policies & Procedures (P&P) Builder, which guides you step-by-step through the creation of a centralized, accessible policies and procedures manual.