Maximize college aid with new FAFSA strategies

2024-2025 FAFSA changes explained: How recent formula updates impact college costs

The college financial aid process has never been simple, but recent changes to the Free Application for Federal Student Aid (FAFSA) have made understanding college affordability more important than ever. For families navigating college planning, the FAFSA plays a central role in determining eligibility for federal, state, and institutional aid. Beginning with the 2024-2025 award year, a redesigned FAFSA formula was introduced, bringing significant changes that continue to affect the amount families are expected to pay.

Some of these changes expand access to aid for low- and moderate-income families. Others, such as the elimination of the sibling discount, may significantly increase costs for families with more than one child in college simultaneously. Understanding how these updates work and how colleges may respond is crucial for making informed, affordable college decisions.

In this guide, we break down what’s changing, who is most affected, and what families should do now to plan strategically.

Key takeaways at a glance

• Completing the FAFSA is key: even families who don’t expect to qualify for need-based aid may miss out on merit scholarships and federal loans if they skip it.
• The new Student Aid Index (SAI) replaces the Expected Family Contribution (EFC) and eliminates the sibling discount for families with multiple students in college.
• Expanded income protections and simplified reporting increase Pell Grant eligibility for many low- and moderate-income families.
• FAFSA changes may benefit some families while creating new challenges for others, particularly those with complex financial or household situations.
• Early, proactive college affordability planning is more important than ever as colleges adjust to the new aid rules.

Why proactive college affordability planning matters

Many families begin the college search focused on academic fit, campus culture, or prestige. Unfortunately, cost sometimes makes choices at the top of their list unrealistic. This often leads to unnecessary stress, last-minute compromises, or increased student debt.

According to data from the National Center for Education Statistics, nearly 40% of student loan borrowers in recent years did not complete their degrees, with financial challenges cited as a leading reason. This underscores the importance of addressing affordability early in the college planning process.

Every college is required to offer a net price calculator on its website. These tools estimate what a family is likely to pay after accounting for grants and scholarships, providing a far more accurate picture than the sticker price alone. For example, while private nonprofit colleges reported an average tuition of above $39,000 in 2023-2024, the average first-year student paid closer to $15,000-$20,000 after accounting for financial aid.

Running net price estimates for each school on your list helps families:

• Build a balanced college list that is financially realistic
• Avoid declining offers due to unexpected costs
• Compare aid packages more effectively
• Reduce reliance on student loans

Affordability planning should also account for long-term outcomes. Tools like the U.S. Department of Education’s College Scorecard allow families to compare typical debt levels and post-graduation earnings by school and major. Alternative pathways, such as starting at community college and transferring, can also provide strong academic outcomes at a significantly lower cost.

How FAFSA and other financial aid applications work together

The FAFSA is required to access federal grants, loans, and work-study programs, and most colleges also use it to award institutional aid. Even families who believe they won’t qualify for need-based aid should still submit the FAFSA.

Failing to complete the FAFSA can unintentionally disqualify students from:

• Merit-based scholarships that require FAFSA filing
• Federal Direct Unsubsidized Loans
• Emergency or special circumstance funding
• Certain state and institutional aid programs

Many private colleges also require the CSS Profile, administered by the College Board. This application collects more detailed financial information than the FAFSA, including assets such as home equity, business ownership, or farm value. Each college sets its own CSS Profile deadlines and policies, and some charge an application fee.

Understanding the distinction between need-based and merit-based aid is critical. Need-based aid depends on a family’s financial profile as calculated through the FAFSA or CSS Profile, while merit-based aid rewards academic, athletic, or extracurricular achievement. Because FAFSA data often plays a role in both, skipping the application can reduce overall aid opportunities.

Organization is key. Families should carefully track deadlines, confirm which forms each college requires, and submit applications as early as possible.

Major FAFSA changes for 2024-2025 and what they mean

The FAFSA redesign represents the most significant overhaul in decades. Here are the most significant changes families should be aware of.

FAFSA change #1: The end of the sibling discount

Under the old EFC system, families with more than one child enrolled in college at the same time benefited from a “sibling discount,” which divided the expected contribution among the students. The new SAI eliminates this adjustment entirely.

As a result, families with multiple college students may see thousands of dollars in additional expected costs per student each year. Financial aid administrators warn that this change disproportionately affects middle- and upper-middle-income families.

FAFSA change #2: Gap year strategies no longer increase aid

Some families previously coordinated their college start dates to overlap with their siblings’ enrollment and maximize financial aid eligibility. With the sibling discount removed, this strategy no longer provides a financial advantage, eliminating a common planning tool that families relied on.

FAFSA change #3: Expanded aid for low- and moderate-income families

Not all changes are negative. The new FAFSA formula increases income protection allowances and reduces questions related to small business and farm assets. These updates significantly expand Pell Grant eligibility, allowing hundreds of thousands of additional students to qualify for federal aid.

For many lower-income families, the FAFSA is now simpler and more generous than before.

Special family situations and school-specific aid policies

FAFSA rules are only part of the equation. The impact of these changes on families depends heavily on individual circumstances and institutional policies.

One major update impacts divorced or separated parents. The FAFSA is now completed by the parent who provided the most financial support in the past year, regardless of where the student lived. While this change simplifies some cases, it can create confusion in blended or shared-custody households.

Private colleges often apply their own institutional aid formulas on top of federal rules. Many require additional documentation, such as the CSS Profile, and some are developing their own approaches to offset the loss of the sibling discount. Because policies vary widely, families should contact financial aid offices directly to understand school-specific practices.

It’s also important to remember that FAFSA must be filed every year. Annual submission ensures aid eligibility reflects changes in income, household size, or financial circumstances. For first-generation families or those facing language barriers, support from counselors or financial aid professionals can be invaluable.

The value of strategic planning and professional guidance

With the FAFSA formula changing and college pricing strategies evolving, comparing net prices, not sticker prices, is more important than ever. In many cases, private colleges offer generous aid packages that make their true cost comparable to that of public universities.

Families with multiple college-bound students face new budgeting challenges under the updated rules. Without the sibling discount, careful planning and realistic expectations are essential.

Financial aid advisors can help families:

• Interpret net price estimates accurately
• Identify overlooked scholarships or tax benefits
• Optimize 529 savings and education tax credits
• Appeal financial aid decisions when circumstances warrant

Rather than relying on assumptions or outdated rules of thumb, families benefit most from personalized strategies that reflect their unique financial picture.

What should families do now?

As FAFSA rules continue to evolve, proactive planning is the best way to protect affordability. Families should:

• Start financial conversations early, even before building a college list
• Complete the FAFSA every year, regardless of expected eligibility
• Track additional requirements, such as the CSS Profile
• Understand how the loss of the sibling discount affects their budget
• Monitor school-specific financial aid policies and deadlines
• Reevaluate plans annually as family finances and rules change
• Seek expert guidance when the process becomes overwhelming

By staying informed and planning strategically, families can adapt to FAFSA changes, avoid costly mistakes, and find college options that are both academically and financially sustainable.