The powers that be in Washington, DC have been very busy. After a year of many pandemic-induced changes, Congress and bureaucrats have decided to add more change to the college funding landscape. The rules on how financial aid is calculated and awarded are changing. Parents and advisors are now seeing storm clouds forming that will impact college funding for all but the richest.
The reason for these changes? To simplify the often confusing college funding and financial aid process. Yet, what lies ahead may be a nightmare for many families. If you’re applying to a school that currently uses the FAFSA financial aid form, the federal methodology used for calculating that all important Expected Family Contribution (EFC) is changing. Read on.
The biggest and most concerning change that will impact the 2023-2024 college year and the finances of families with college-bound students is this: There will no longer be consideration given to parents with more than one student in college at the same time.
Under current rules, the Expected Family Contribution (EFC) is basically divided among those students who will be in college at the same time. So, the EFC is half as much for the second student, or, if there are three in college at the same time, the federal methodology contribution divides the EFC by three.
But for 2023-2024, the reduction in EFC based on number of children in college at the same time is being eliminated!
The impact on college affordability for all but the wealthiest families may be truly devastating. It’s common for families with multiple children to have two or more children in college at the same time at some point.
It is also very possible that the CSS Profile, the financial aid form that uses the more intrusive “institutional methodology,” is likely to be adopted and used by more colleges, not just the more selective private schools.
The CSS Profile is much more intrusive and digs deeper into a family’s financial situation. And the information required by the CSS Profile can be used subjectively by the colleges unlike the federal methodology of the FAFSA. As an example, this may mean that home equity can be assessed at a higher rate as a resource to help pay college costs.
The bottom line for college funding is that despite whatever merits there may be in the changes that will go into effect in 2023-2024 school year, this change to how EFC under its new name (Student Aid Index or SAI) is calculated will make college LESS affordable for many families with college-bound children.
This will make college financial planning more necessary and urgent than ever before for many. And it will be more important to start earlier and not wait until high school senior year.
College financial planning is directly related to retirement planning and this change for “simplification” may end up dramatically impacting the retirement prospects of many families.
If there ever was a time to get ready to save ON and not just FOR college costs, it is NOW!
Even though storm clouds for college funding are approaching, there is still hope IF you take time now to plan ahead and heed the warnings.
Call a qualified college financial planning professional now to help navigate a safer path.
