By Steven J. McDowell, FAAC®, Associate Vice President of Financial Aid Services & Title IV Compliance at Connecticut State Community College, graduate of AACRAO’s SEM Endorsement Program, and NASFAA-Certified Financial Aid Administrator
Have you ever wondered about the origin story of financial aid, or how the Free Application for Federal Student Aid evolved into the application we know today? From the G.I. Bill to the “Better FAFSA,” federal financial aid and its application have gone through decades of change. Here is a streamlined look at the key milestones that have shaped the FAFSA and the broader student aid system, bringing it to where it stands today.
Laying the Foundation in the 1940s to 1960s
Federal financial aid started with the 1944 G.I. Bill, signed by President Franklin D. Roosevelt. It was designed to assist World War II veterans in accessing funds for college, housing, and unemployment.
In 1953, Director of the Harvard University Financial Aid Center John Monro presented a paper to the April 1953 Symposium of the College Board describing “a reliable, careful system for measuring and comparing” the need of aid applicants using two basic considerations: expenses and student resources. This led to the creation of the College Scholarship Service by the College Board in 1954, establishing the CSS as a central information system for scholarship applicants.
Then came the 1958 National Defense Education Act under President Dwight D. Eisenhower, pushed through Congress after the launch of Sputnik. This defense-oriented education bill introduced low-cost federal student loans and reinforced the need for a centralized system to assess financial need for federal higher education funds.
In 1960, the Parents’ Confidential Statement was implemented as a pay service for families by CSS, where colleges received centrally processed forms with an Expected Family Contribution.
Expanding Access: 1960s to 1980s
In 1965, President Lyndon B. Johnson’s Higher Education Act created Title IV, or the section of the Act that established the federal student aid programs. The 1972 reauthorization introduced the Basic Educational Opportunity Grant (later renamed the Pell Grant in 1980), however, with a separate application and need analysis methodology from the PCS.
Under a College Board initiative in 1974, the National Task Force on Student Aid Problems sought to simplify the three existing financial aid forms available to families:
PCS from CSS
BEOG from the federal government
Family Financial Statement from ACT
This led to the launch of the College Board Financial Aid Form in 1976, which was then used by the federal government in 1977 to collect BEOG data. Ultimately, the task force created a “Uniform Methodology” to help institutions distribute financial aid more consistently under a single form.
The 1986 HEA Amendments established the “Congressional Methodology,” codifying the need analysis formula into law, therefore requiring an act of Congress to enact any formula changes. The formula contained conditional criteria for determining a student’s dependency status and other special circumstances.
Birth of the FAFSA in 1992
The 1992 HEA Amendments combined the Pell Grant formula and Congressional Methodology to create the “Federal Methodology,” giving rise to the official FAFSA to determine eligibility for federal student aid funds.
The existence of the Federal Methodology created a separate need for a supplemental method of collecting financial information from families for the distribution of institutional financial aid. This led to the CSS/Financial Aid PROFILE (later, the CSS Profile) to determine institutional aid eligibility using “Institutional Methodology.”
To improve accessibility, FAFSA on the Web launched in 1997, enabling applicants to complete the form online with built-in skip logic to streamline the experience. The online application sought to reduce data entry errors from paper applications and provide for colleges to receive applications more quickly. While the Paper FAFSA still exists today, its use is extremely limited. For context, a July 30, 2024, Electronic Announcement indicated that approximately 34,000 paper FAFSAs had been received for the 2024-2025 FAFSA cycle. As of June 30, 2024, 23.4 million total FAFSAs had been completed in the same cycle.
Calls for Simplification in the 2000s through the 2010s
In the mid-2000s, two key constituencies were established to make recommendations to both Congress and the U.S. Department of Education on prevalent higher education issues:
Legislation during this time largely focused more on affordability than form simplification, including:
2007: College Cost Reduction and Access Act
2008: Ensuring Continuing Access to Student Loans Act
2010: Health Care and Education Reconciliation Act
In 2009, however, development began on the FAFSA Data Retrieval Tool. Launched in 2012, this tool allowed applicants to transfer tax data from the IRS directly into their FAFSA.
In 2015, the Obama Administration permitted the use of prior-prior year tax data, letting students use tax info from two years earlier and opening the FAFSA cycle on October 1 instead of January 1 (although statutorily at the time, the FAFSA had to be available by January 1 each year).
The “Better FAFSA” of the 2020s
Several legislative acts in 2020 and 2021, including the FAFSA Simplification Act and FUTURE Act, set the stage for a significant overhaul to simplify the FAFSA form. Key changes included:
Reducing questions from 108 to 36
Replacing the EFC with the Student Aid Index
Expanding Pell Grant eligibility
Requiring direct data transfers between the Internal Revenue Service and the U.S. Department of Education
However, the 2024-2025 FAFSA rollout was rocky. Instead of the expected October 1, 2023, release, the application went live at the very end of December 2023, albeit in a very limited capacity. Widespread processing delays followed, as colleges weren’t able to receive any FAFSAs from the U.S. Department of Education until the spring of 2024, which meant that students and families were also subject to delays.
This led to significant congressional scrutiny and the FAFSA Deadline Act of 2024, which officially moved the FAFSA release date to October 1. The Act also requires the Secretary of Education to notify Congress of any future delays and their impact on families.
Course Corrections and Improvements in 2024-2025
To manage the fallout from 2024-2025, the Department of Education temporarily brought in Jeremy Singer, President of the College Board, to support the launch of the 2025-2026 FAFSA, which went live on November 21, 2024. This version addressed a variety of technical glitches and improved IRS data exchange functionality.
In February 2025, ED announced the 2026-2027 FAFSA would launch on October 1, 2025, and opened a draft version for public comment, which closed on April 7, 2025.
Current Concerns in 2025
Amid these changes, recent Executive Orders led to staffing cuts within the U.S. Department of Education, raising concerns about the agency’s ability to manage aid programs. While a letter from Acting Under Secretary James Bergeron on March 14, 2025, claimed that core positions working directly with the FAFSA were untouched, regional offices supporting schools were impacted.
As a result, schools may face delays when seeking ED approvals for Title IV programs, affecting their ability to offer federal aid in a timely manner.