The cost of college is a significant concern for parents, and next year will bring important changes to the federal tuition-assistance process. The Free Application for Federal Student Assistance (Fafsa) is undergoing a series of reforms that will impact how families seek federal funding for their children’s education.
One notable change is the elimination of the sibling discount, which is additional aid provided by the government to eligible families with multiple children attending college simultaneously. Vincent Birardi, an advisor at Halbert Hargrove, acknowledges that this change is substantial for families with two or more children in college at the same time. Birardi suggests that advisors discuss adjusting planning strategies with their clients to address the potential shortfall.
In addition to removing the sibling discount, the reforms aim to streamline the application process. This includes reducing the number of questions on the Fafsa form by automatically importing data from IRS records. These improvements seek to simplify the process for families.
Effective from July next year for the 2024-25 school year, the new application rules will replace the Expected Family Contribution formula with the Student Aid Index (SAI). This change seeks to eliminate the confusion that many families faced when determining the support they would receive for education expenses.
While these changes may lead to families bearing more of the cost for sending multiple children to college at once, there are strategies to consider. Birardi advises making additional contributions to 529 college savings plans if you have precollege children less than four years apart in age. This way, you can absorb the anticipated higher tuition costs.
Overall, the reforms to the Fafsa process intend to simplify and improve how families access federal funding for college. By implementing these changes, the government aims to provide better support and clarity to families navigating the financial aspects of higher education.
Changes to FAFSA Could Affect Financial Aid for College Students
The Education Department has announced changes to the Free Application for Federal Student Aid (FAFSA) that could have a significant impact on families seeking financial assistance for college. Under the new system, the way a family’s contribution is calculated will change, potentially affecting the amount of federal aid they receive.
Previously, the family’s Expected Family Contribution (EFC) was divided based on the number of children attending college simultaneously. This resulted in a lower EFC per student and allowed for greater federal aid. However, the new approach by the Education Department marks a philosophical shift towards a different methodology.
According to experts, this change means that parents with two or more children in college at the same time will no longer receive any additional benefits. The previous focus on cash flow over wealth is being altered, and families will no longer receive aid based on the overlapping of their children’s enrollment in college.
While income is still a significant factor in determining need-based college aid, there is no specific income limit for submitting a FAFSA. It is worth noting that some federal assistance does not rely solely on financial need, and certain schools may require students to complete the FAFSA to be eligible for any type of aid.
Financial advisors should inform their clients about these changes, even those who are considered wealthier. In addition to the negative impacts, there are some positive adjustments within the new FAFSA rules. For example, income protection allowances have been increased across the board, which means that a portion of income will not be counted when processing FAFSA applications.
While the changes may have potential downsides, they also create opportunities for families with modest incomes to qualify for financial aid more easily. The evolving landscape of FAFSA means that families should stay informed and seek guidance when navigating the application process.