06/03/2025
The FAFSA application is undergoing significant changes that could impact financial planning for college-bound students, including:
🗓️ Delayed Release - The 2025-2026 FAFSA release is postponed from October 1 to December 1 due to software issues. Limited testing with select students starts on October 1.
🚫 Elimination of Multi-Child Discount - The revised FAFSA formula removes the discount for families with multiple children in college. Each child's Student Aid Index (SAI) is now calculated separately, without any discount.
💸 Changes in Financial Reporting - Contributions to workplace retirement plans like 401(k) or 403(b) are no longer counted in SAI calculations, potentially lowering reported income and improving aid eligibility. However, tax-deferred IRA contributions are still taxable.
🏦 Treatment of Sibling 529 Assets - The new FAFSA guidelines exclude sibling 529 and Coverdell accounts from being reported as the student's assets, though they remain parental assets if owned by the parent. Accounts owned by others, like grandparents, don't need to be reported, which could increase aid eligibility.
📚 CSS Profile Considerations - These FAFSA changes do not apply to other financial aid applications, like the CSS Profile, which may still consider factors like the multi-child discount and sibling 529 assets in determining aid packages.
Given these updates, it’s important to review your financial strategies to ensure they remain aligned with your goals. Staying informed and proactive can help you navigate these changes with confidence.
