By: Kenneth Corbin, Barrons featuring Vincent Birardi, CFP®, AIF®, Wealth Advisor at Halbert Hargrove
The cost of college looms large for parents, and next year will bring some significant changes to the federal tuition-assistance process that is a big part of the funding calculus for many families.
A host of reforms to the Free Application for Federal Student Assistance, or Fafsa, will alter the mechanism for seeking federal funding, including eliminating the so-called sibling discount, the additional aid the government offers to eligible families with more than one child in college at the same time.
The changes generally aim to streamline the application process, including provisions to dramatically reduce the number of questions on the Fafsa form by automatically importing data from IRS records.
Still, there’s no escaping the elimination of the so-called sibling discount, according to Vincent Birardi, an advisor at Halbert Hargrove who calls the changes “fairly significant to families that have two or more children in college at the same time,” and suggests advisors talk to clients about adjusting their planning strategies to address the potential shortfall.
“It’s very likely that families will need to bear more of the cost for sending multiple children to college at the same time,” Birardi says. “If you have precollege children that are less than four years apart in age then you should consider making additional contributions to 529 college savings plans to absorb the higher expected tuition costs.”
The new application rules, which take effect next July for the 2024-25 school year, replace the current formula for determining need, known as the Expected Family Contribution, with what the Education Department is calling the Student Aid Index (SAI).
“The complexity of the Fafsa process left many families unsure of what, if any, support they would receive in paying for education,” says James Rabasca, senior tax specialist at Summit Financial. “The new rules are intended to simplify the process.”