Parents with two children in college this year will get a shock when they see their federal financial awards and learn that even if their income and assets remained the same, they are expected to pay twice as much in tuition, thanks to a new law that just went into effect.
The “sibling discount” is dead due to a 2020 law drafted by then-Sen. Lamar Alexander (R-TN) and Sen. Patty Murray (D-WA).
For dependent students, college students whose parents help with tuition, the Education Department calculates the parents’ ability to pay college tuition based on their income and savings and then covers the remainder with federal student aid.
Until this year, a family deemed able to afford $25,000 in tuition was expected to pay $25,000 in total. Under the new system, a family that can afford $25,000 would be expected to pay $25,000 per student in college.
It makes no sense to calculate the ability to pay and then say, “Now, pay two or three times that much.” Nobody in Congress or the Education Department has come forward to explain this new one-child policy, but financial aid professionals have defended it.
The National Association of Student Financial Aid Administrators declined to answer my questions when I reached out last week but instead pointed me to an essay written by the association’s lobbying staff.
In the essay, the lobbyists argue it is “more equitable” to ignore how many children a family has in college when determining financial need.
Their first argument is that the goal of Alexander and Murray’s bill was “creating simple lookup tables for families to be able to estimate Pell Grant eligibility” and that “retaining the question about the number in college would have made an easy, simple lookup table unworkable.”
Would a police officer and a schoolteacher with two children in college next year be likely to say, “We are suddenly expected to pay 80% of our income in tuition, but at least there is a simple lookup table for Pell Grant eligibility!”
The lobbyists also argue it is unfair to provide more aid to parents paying two or three tuitions because that “creates horizontal inequities between those families and others with children spaced further apart.”
This reasoning falls apart upon even a cursory examination.
Having a lot of costs at once, followed by lower costs later, is actually more financially stressful than having steady costs. And asking a family to pay twice or thrice what you have calculated they can afford is absurd.
The lobbyists’ response to that: “From an equitability standpoint, we must consider that paying for college is not an annual expense. Families finance a postsecondary education by drawing on past earnings (savings), current earnings, and future earnings (loans).”
This is a deeply flawed argument. First, the “savings” part ignores how this new formula works. The new system double-counts family savings for families with two children in college: If you have $25,000 in savings, the new formula estimates that you can use $18,000 of that savings for one child and some magical $18,000 of that savings for the second child.
And there is no “equity” in telling parents of twins, “Oh, you can just borrow half the aid you previously would have gotten and pay it off down the line.” This is especially perverse in these days when PLUS loans have interest rates north of 8%.
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Consider hypothetical parents of twins with $100,000 in income and $25,000 in savings. That family with twins would pay an extra $30,000 per year compared to the family with one child. If the parents borrowed that $120,000 on a PLUS loan, it would cost them $50,000 in interest. Meanwhile, the family with widely spaced births would not have to borrow at all because they would be paying out of the savings and earnings they have.
The financial aid advisers are the only people who have come out to defend this one-child policy for financial aid — and their argument makes no sense.