Did the Stimulus Package Just Raise the Cost of College for Millions of American Families?

Written by: Jack Wang, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

For millions of families across the United States, it's an important question. In the 5,000 or so pages of the second stimulus package were a number of provisions related to financial aid and FAFSA simplification; the FAFSA is the financial aid form that parents fill out to get financial aid.

As part of that simplification process, there were several combined or deleted questions and many technical changes that will have a small impact. Expansion of the Pell grant, which is geared toward low-income families, is also included.

There was another provision in there that really took me by surprise. I was really shocked and haven’t seen any mentions of this in the news. I think it's the biggest thing that changed:

How families with multiple children attending college simultaneously are treated for financial aid, specifically their Expected Family Contribution (EFC).

Note: The legislation also changed the term EFC to SAI, or Student Aid Index, though what the number represents is unchanged. In this article, I’ll use EFC and SAI interchangeably.

In the past, a family’s EFC would be divided by the number of children in college. That figure would be divided by the number of children in college, and the resulting EFC figure would be assigned to each child. For example, for a family with an EFC of $50,000 with 2 children in college, each child would be assigned an EFC of $25,000.

Then, each student could qualify for more financial need-based aid, though, theoretically, the family may still be responsible for paying $50,000 per year combined.

Starting with the 2023-2024 academic year, EFC will no longer be divided by the number of children in college simultaneously.

With our hypothetical family with 2 kids in college, each student’s EFC would stay at $50,000, and therefore less likely to receive need-based aid. More importantly, from the family's perspective, this means that the family might need to pay $100k per year.

Who does this really impact?

Well, obviously, families with multiple children who will overlap in college. It’s a little less obvious from a financial standpoint because there are so many variables, including the college attended (or applied to).

The most expensive college in the country is around $80k. Assuming no merit scholarships, what income would you need to still be able to qualify for some financial aid?

Working backward, a family could have an Adjusted Gross Income of around $300k to have an EFC of around $80k. Many variables, such as family size and amount of savings, can impact this figure.

While not everyone attends the most expensive colleges in the US, the implication is clear - this could impact a significant number of families. According to IRS data for 2017, a $300k annual income is in the top 5% of income and roughly 6% of all taxpayers as presented by the Tax Foundation. Alternatively, over 94% of all US taxpayers have income below $300k, though no data on how many of these families have multiple children.

To be clear, families that attend a college at a cost less than the EFC would not be affected. Since the cost is lo