How Multiple Kids in College Affects Financial Aid | Paying for College

Massive changes are coming to the Free Application for Federal Student Aid, or FAFSA, one of which will affect households with multiple family members in college at the same time.

The current FAFSA calculates an expected family contribution, or EFC, which determines students’ eligibility for federal financial aid. If a household has multiple family members in college at the same time – indicated by a question on the FAFSA – that number would be divided between each of those enrolled.

For example, a student may be given an EFC of $10,000. But if there was another sibling or family member enrolled in college living in the same household, each of their EFCs would be reduced to $5,000.

“A lower contribution would expand the student’s eligibility for financial aid,” says Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators. “It doesn’t always mean that the student will actually receive additional financial aid. A lot depends on the numbers and whether the student is Pell-eligible or not. But it does lower the student’s family contribution, which may end up leading to increased financial aid eligibility.”

However, under the new formula, known as the Student Aid Index, that division is no longer going to happen.

MorraLee Keller, senior director of strategic programming at the National College Attainment Network, says this might change students’ eligibility for federal and state grants. “And if it reduces their financial need,” she says, “it may cause an adjustment in the amount of institutional aid that a student could be awarded.”

According to a 2023 report from the Brookings Institute, “for the almost 900,000 students with one sibling in college who will maintain their eligibility, they stand to lose almost $3,000 each in institutional grant aid, totaling $2.5 billion. Another 157,000 will lose all eligibility that could have provided up to $7,900 in aid each, totaling $1.2 billion.”

Those patterns are similar for students with two siblings in college.

However, the report found that more students will benefit from greater Pell Grant eligibility under the new FAFSA, which in 2023 will open Dec. 31, nearly three months later than usual.

Some states and institutions may still choose to consider multiple household members enrolled in college at the same time as part of their financial aid package, as that question will remain on the FAFSA, McCarthy says.

“There are some families for whom the bulk of their financial aid package comes from their state or their institution, so not everybody will bear the brunt of the impact,” McCarthy says. “Even if you are an affected family, it may not ultimately be making a significant impact or an impact at all in terms of the financial aid package. That’s one thing to keep in mind, that it doesn’t automatically have an impact on all dollars, all affected families, all sources of aid.”

There’s an assumption that families have been “saving for the expense of college since the day they came home from the delivery room, and obviously that’s oftentimes not the case,” says Brock Jolly, founder and financial advisor at The College Funding Coach, a company that offers college financial planning assistance.

“We’ve got schools now that are over $90,000 per year and families are really struggling with how to not only save and plan for college, but also how to balance that with the desire to one day actually be able to retire,” he says. “How do you spread those dollars? You’ve got limited resources that you need to spread as much as possible and do multiple things with the same dollars. And that’s a challenge.”

Given the price tag of attending college, most families are not paying for those expenses out of their current income only, McCarthy says. In fact, parents’ income and savings made up 40% of the overall funding sources for college, according to the “How America Pays for College” 2023 Sallie Mae report. The remaining college costs are covered by scholarships and grants, borrowing, and student income and savings.

“Saving for college is much more of a long-term financial commitment, so it matters a lot less than it used to if you were paying the bills at the same time because you are no longer paying that out of your current income,” McCarthy says. “Because of that, it makes a lot less sense to give any financial benefit to a family who has children who are spaced close together and are enrolled at the same time, versus a family who has the same number of children, but might be spaced further apart so that they are not enrolled at the same time.”

She adds that “in both cases, each of those families are financing two college educations. So why should one family who has students who are closer in age be given financial benefits over families that are more spread out?”

Like in any normal year, financial aid experts recommend students fill out the FAFSA as soon as it opens.

“There’s a lot of resources out there that explain the changes to the FAFSA, and there are going to be changes to the FAFSA,” says Scott Del Rossi, vice president of college and career success at College Possible, a nonprofit that promotes college access. “So for any student that is already enrolled in college and completed the FAFSA, it’s really important to look at and understand those changes.”

In addition to filing early, those with siblings in college next year – especially returning students – should be proactive and reach out to their institution to ask about financial aid resources and see what they might be doing to fill any holes if their aid is affected, experts say.

However, if colleges don’t make up for those potential lost dollars, students may need to consider more affordable alternatives, such as attending community college or going to school closer to home, Keller says.

“I hope those are the drastic steps, and I hope it doesn’t force a lot of students to have to change institutions,” she says. “But if the resources are not there, students may have to enroll at places where they can have adequate funds to cover the cost.”

Students can also look for outside scholarships, such as through a local church, a parent’s employer or a nonprofit.

“Those are a little harder to find once you are in college than if you are a high school senior, but looking for other outside resources could be a way to help offset the loss of any of those federal or state dollars,” Keller says.

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