Thinking About Paying for College for Our Second Child

I just started thinking about paying for college for our second child.  She is a sophomore in high school and we aren’t quite ready to start college visits yet, but I am starting to think about the types of schools she has expressed interest in.  I am participating in the test round of an online class that Lynn O’Shaughnessy of The College Solution and Michelle Kretzschmar of DIY College Rankings are working on called “How to Get the Best Deal on a College Education.”  The class is designed to benefit anyone who is worried about paying for college.

I went through the Week 1 lessons the other day.  Before I did the lessons, I wasn’t overly worried about paying for college for my second daughter.  However, she has expressed an interest in some really high priced schools where even families with high incomes are usually offered substantial financial aid.  I got to a part of the course about estimating our expected family contribution (EFC).  I was very familiar with calculating the EFC.  In fact, I had done this already for my second daughter using the FAFSA4caster and it looked fine.  According to the EFC number I had seen before, those schools with the $60,000 + per year cost would offer us some grant money and we would be able to handle the difference.  The class uses the College Board’s EFC calculator.  I highly recommend using this tool!

Our Scenario for the EFC Calculator

We have three daughters.  They are each three years apart.  This means our second daughter will be in her first year of college when our oldest is in her fourth year, and our third daughter will be in her first year of college when our second daughter is in her fourth year.

In the online class, Lynn and Michelle talked about how your EFC goes down substantially for each child when you have more than one child in college at the same time.  This means that many families, like ours, who don’t typically qualify for financial aid at most schools may qualify when they have more than one child in school at the same time.  That’s when it hit me – our EFC looked fine, even though our incomes had increased substantially this year, because I was calculating it for daughter #2’s first year in college, when her older sister would also be in college.  But what would happen in her second year?

I ran the EFC calculation again with my middle daughter being the only child in college and with only one other dependent in the household (her younger sister).  (Of course, this scenario assumes that our oldest daughter will graduate after four years, find a job and cease to be our dependent.  I hope that isn’t just wishful thinking!)

Our EFC more than doubled!  So for daughter #2’s first year of college, we would be expected to pay quite a bit less than for her second and third years.  Then, in her fourth year, when our youngest starts college, our EFC would go back down again.  What this tells me is that we should not select a school based only on the first year cost.  We will need to know what the second year cost will be to truly know if a school will be affordable.

When looking at the cost of college for a second or subsequent child, you need to keep in mind the following:

• Changes in parent income – most people will have increasing income over the years
• Changes in assets – most people will have increasing assets unless they are spending all their extra money to pay for college!
• Changing number of dependents – the fewer dependents you have, the  greater percentage of your income you will be expected to contribute towards college
• Changes in home equity – this doesn’t matter for FAFSA, but for schools using the CSS Profile, home equity figures into the equation
• Changes in number of children in college at the same time – depending on how far apart your children are spaced, your EFC could fluctuate from year to year
• Difference in student profile – each child’s high school GPA, class rank, ACT/SAT scores and extra-curriculars will play into how much merit aid they qualify for, if any
• Different college options – each child may be interested in totally different types of schools that cost more or less
• Parent age – As you get older, the FAFSA formula allows you to keep more assets from being counted against you for financial aid

Calculating our EFC for daughter #2  was a great exercise for me to do now.  Because I did it this early, I have plenty of time to set up expectations with her around how much we are willing to contribute for college, basing it primarily on the cost for her second and third years.  The discussion will be that if she wants to go somewhere that is more expensive than that amount, she will need to get a merit scholarship to cover the difference.