The 'Sibling Penalty' is Out: New FAFSA Rules Kick Off 2025-2026 Aid Year

The American Family FAFSA Opportunity Act of 2025 is tackling one of the most frustrating quirks in college financial aid: the “sibling penalty.” This bill directly changes how the government calculates a family’s expected contribution (EFC), aiming to make it easier for families with multiple kids in college to qualify for aid.

The Fix for Families with Multiple Students

Before this change, if you had two or more children attending college at the same time, the financial aid formula didn't adequately spread the financial burden across those students. This often meant the second, third, or fourth child ended up qualifying for significantly less grant money than they might have otherwise. It was a huge headache for middle-class families trying to manage multiple tuition bills.

Section 2 of this Act corrects this by adjusting the financial aid calculation. The new rule states that the calculated family contribution must now be divided by the total number of family members (excluding parents) who are enrolled at least half-time in a degree or certificate program at an eligible school. Essentially, the family’s financial responsibility is now fairly split among all the children currently using the aid system. For a parent juggling two or three tuition statements, this adjustment could translate to thousands of extra dollars in grants or subsidized loans for each student, significantly lowering the out-of-pocket cost burden.

When the Change Kicks In

While the bill becomes law the moment the President signs it, the real impact won't be felt until the 2025–2026 award year, as defined under the Higher Education Act. This means that if you have a student applying for aid for the 2024-2025 school year, they’ll still be under the old rules. However, starting with the 2025-2026 FAFSA cycle, families can expect the new, fairer calculation to be used. This gives the Department of Education time to update its systems and ensures a smooth rollout for the next major aid cycle.

What This Means for Your Budget

If you’re a family where two kids are simultaneously pursuing degrees—maybe one is a freshman and the other is a junior—this change is a big deal. For example, if your family was assessed an Expected Family Contribution (EFC) of $10,000, under the new rules, that $10,000 is now divided by two, meaning each student is treated as having an EFC of $5,000. A lower EFC directly translates into a higher need for financial aid, potentially opening the door to more Pell Grants or state-level aid. The bill also makes sure that even after this division, the calculated contribution amount can never be less than zero, keeping the math simple and predictable.

This is a structural fix that benefits families who are already stretched thin covering college costs for multiple children. It’s a straight-forward, clear change to the FAFSA formula that directly addresses a long-standing complaint about fairness in the system.