Making Sense of the "Sibling Discount" Loss in Financial Aid

The U.S. Department of Education recently released the 2024-25 FAFSA, which included several changes to the application itself as well as modifications to the formula used to determine financial aid eligibility. One of the formula adjustments has received a significant amount of attention as of late: the loss of the "sibling discount." Previously, students with a sibling attending college received a break in the federal financial aid formula, which resulted in an increase in the students' eligibility for aid. That feature was removed with the 2024-25 FAFSA, and families noticed.

What exactly happened?

The federal financial aid formula calculates and assigns one key number to every family called the Student Aid Index (SAI), previously known as the Expected Family Contribution (EFC). The number measures a family's financial strength, and in a way, is supposed to indicate the minimum amount that the family should contribute toward college costs. Families want a low SAI, because it means higher eligibility for federal financial aid. The old formula cut this number in half for any student who had a sibling attending college at the same time. Now, it doesn't.

Why did this happen?

This change was made to reduce the number of variables used to calculate Pell Grant eligibility and make it easier for families to determine their eligibility based on family size and income only. As well, the change does create a more equitable system. In the past, families who had children further apart (4 years or more), did not receive the same benefit as those who had children in college at the same time, even though they both had to pay for the college education of two children. The philosophy of financial aid is about general affordability over time, not cash flow for one year, and this change is in line with that thinking. As well, families who received the "sibling discount" for two children in college and then lost it when one graduated were often surprised when their financial aid was reduced. This will no longer occur.

How is aid affected?

With the change in formula, some students may end up with lower eligibility for financial aid and a reduction in their total amount of aid, which means they may need to cover a larger percentage of college costs than they did in the previous year, even though their family's income and assets didn't change.

The good news

On a positive note, there were other changes in the financial aid formula that provide more benefits to all families, including an increase in the amount of family income protected (thereby reducing the amount of income expected to be available to pay for college costs). Due to these changes, some families will end up with the same amount of aid eligibility, even with the loss of the "sibling discount." In addition, many colleges are stepping up to do what they can to reduce any negative impact on currently enrolled students.

What are colleges doing?

Colleges understand the plight of families, and many are taking action to minimize the impact of this change on students by keeping their financial aid offers as close as possible to previous years for students who still have a sibling in college and have had no other significant changes to their family's financial data. This would only be directed toward current students, not for new students entering college in 2024-25 or after. However not all schools will be able to make up for the loss of aid, especially if a student lost eligibility for federal or state funds.

What should families do?

Families who received financial aid last year based on two children in college, and will continue to have two or more children enrolled, should contact their school's financial aid office to ask about their policy regarding this change in the financial aid formula. The answer will vary from school to school. The upside to all of this change is that, in a few years, this modification to the financial aid formula will simply become the norm for everyone, as is the case when any significant change occurs in the financial aid world.

If you're a family with questions about the new 2024-25 FAFSA and would like to speak with someone, MEFA's College Planning Team members are happy to chat. Reach out to us at (800) 449-MEFA (6332) or collegeplanning@mefa.org.