Planning for Multiple Children in College at the Same Time
By Joe Messinger, CFP®
December 27, 2019
When planning families, future parents don’t think to themselves, “Gee, we better space these children out so we don’t have to send two to college at the same time!” Well, maybe some parents do, but most don’t. Plus, the decision about having multiple children is sometimes taken out of a parent’s hands, and they are gifted with twins or triplets or more. What can parents do to plan and pay for multiple children in college at the same time?
Start saving early
The more you save early on the longer your money can work for you. The magic of compounding interest can do its work with a longer playing field, but it is hard to save. Young families are faced with multiple small mouths to feed, clothe, and care for at a time when they are earning lower salaries than they will later in life. Families need to save what they can. Even small amounts can help.
Saving is hard, but parents are often thrilled to hear that financial aid is more generous when multiple children are in college at the same time. Finally, some good news!
A family may not qualify for need-based aid – or financial assistance based on a family’s demonstrated financial need – when they have only one child in college, but that may change once more than one child is in college.
Families need to understand their Expected Family Contribution or EFC. This figure is based on calculations done through FAFSA (Federal Methodology FM) or the CSS Profile (Institutional Methodology IM), depending on the college.
A family with a combined income of about $150,000 can expect an EFC of approximately $30,000. In general terms, the college will expect the family to be able to pay $30,000 per year towards the costs of college. (Filings are done annually, and the EFC will change from year-to-year.) Families can use online calculators to estimate their EFC.
The good news is this $30,000 figure is per family NOT per student. So, when a family has two children in college at the same time, they are expected to pay $15,000 per child. When a family has three children in college at the same time, they are expected to pay $10,000 per child.
That math has a huge impact on a family’s cost. A family is spending the same whether they send one or three kids to college at the same time.
The key is smart college choice
Before parents get too excited though there is one caveat. Not every college will meet 100% of a student’s demonstrated need. In fact, only a handful of colleges can pay all of a family’s need.
A student who is expected to pay $15,000 chooses a $45,000 per year college. If that college met 100% of need, the college would provide financial aid for the $30,000 difference.
Let’s say that same student chooses a college that costs less (only $25,000 per year), but only meets 15% of need. That student now will only receive $1,500 in aid. ($25,000 – $15,000 = $10,000 x 15% = $1,500) The family will be responsible for the remaining $8,500 in addition to the original $15,000 EFC.
Every college is required to include a net price calculator on their website. They aren’t perfect, but they can give you a better idea of what your financial aid package could look like. The College Board has links to many different college net price calculators.
Maybe spacing out the kids is not necessary…
…at least when it comes to college costs. Paying for everything else in multiples at the same time is something we can’t help you with. But with careful saving and careful college choice, a family with multiple children in college at the same time can actually save money.
March 19, 2021