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If you’ve applied for federal student loans in the past, chances are you’re familiar with the Expected Family Contribution, or EFC—a number used by colleges to figure out how much financial aid students are eligible for.

Starting for the 2024-2025 school year the EFC will be replaced by the Student Aid Index or SAI. It fulfills the same basic purpose but works a little differently, which we’ll discuss in-depth below.

This change was part of the larger FAFSA® Simplification Act, which itself was part of the larger Consolidated Appropriations Act passed in December 2020. The idea is to simplify the federal aid application process by making it more straightforward for students and their families, particularly for lower-income earners. But all changes come with a bit of a learning curve, even if simplicity is the goal. Here’s some helpful information about the Student Aid Index.

Student Aid Index vs the Expected Family Contribution (EFC)

While both of these calculations perform a similar function, there are important differences in how they work—and important ramifications on how students receive financial aid.

How the EFC Currently Works

Despite its name, the Expected Family Contribution is not actually the amount of money a student’s family is expected to contribute—a point of confusion Student Aid Index is meant to clarify. (Most families end up paying significantly more than the calculated EFC when funding a college education, especially when you factor in loan interest.)

Rather, the EFC assesses the student’s family’s available financial assets, including income, savings, investments, benefits, and more, in order to determine the student’s financial need, which in turn is used to help qualify students for certain forms of student aid, including Pell Grants, Direct Subsidized Loans, and Federal Work-Study.

A very simplified version of the calculation looks like this:

Cost of college attendance – EFC = financial need

However, a college is not obligated to meet your full financial need, and they may include interest-bearing loans, which require repayment, as part of a student’s financial aid package.

Still, the EFC plays an important role in determining how much financial aid you’re eligible for and which types.

How Will the Student Aid Index Work?

The Student Aid Index will work in much the same way: the figure will be subtracted from the cost of attendance to determine how much need-based financial aid a student is eligible for. However, there are some important updates that come along the rebranding:

Pell Grant Eligibility

Pell Grant eligibility will now be determined before the FAFSA is submitted if their adjusted gross income (AGI) is less than a certain threshold determined by the poverty line. Pell Grants may still be offered to students after an application is submitted, using the SAI, if they don’t immediately qualify based on income alone.

A Wider Range of Financial Need

The SAI offers a greater range of financial need than the EFC, whose lowest amount is $0 (meaning a student demonstrably needs the full cost of college covered by aid). The lowest possible SAI, on the other hand, is -$1,500, which creates a cushion to help the lowest-income students cover adjacent college expenses that aren’t bundled into the school’s calculated cost of attendance figure.

New Rules

The SAI comes along with new rules that allow financial aid administrators to make case-by-case adjustments to students’ financial aid calculations under special circumstances, such as a major recent change in income. The bill also reduces the number of questions on the FAFSA down to a maximum of 36 (formerly 108), removes questions about drug-related convictions (which can now disqualify applicants from receiving federal aid), and more.

Recommended: FAFSA Guide

How Will the Student Aid Index Be Calculated?

The Student Aid Index will be calculated much the same as the Expected Family Contribution is calculated today, though the bill does include some updates to make the process easier.

For one thing, the bill works together with the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act to import income directly into a student’s FAFSA, simplifying the application process.

The new FAFSA will also automatically calculate whether or not a student’s assets need to be factored into the eligibility calculation, shortening the overall application and offering more students the opportunity to apply without having their assets considered.

The bill also removes the requirement that students register for the Selective Service in order to be eligible to receive need-based federal student aid.

Recommended: Getting Financial Aid When Your Parents Make Too Much

What Is a Good Student Aid Index Score?

The Student Aid Index isn’t like a test or a report card—there aren’t really “good” or “bad” scores, or “scores” at all. It just depends on your personal financial landscape.

But just like the EFC, the lower the SAI, the more need-based aid a student may be qualified for. Since need-based aid includes grants, which don’t need to be repaid, and subsidized loans, whose interest is covered by Uncle Sam while you’re attending school, a lower SAI may translate into a lower overall college price tag.

How Will the Student Aid Index Be Used?

Like the EFC before it, the SAI will be used to help colleges determine a student’s financial need based on their financial demographics. Although the school itself may have its own grant programs and other types of aid, certain forms of federal student aid such as Pell Grants and Direct Subsidized Loans are offered based on demonstrable financial need, and the SAI is a key part of the calculation used to determine that need.

In short: the SAI will be used to determine how much financial aid a student is eligible to receive.

When Will the SAI Go Into Effect?

The SAI will be implemented in the 2024-2025 academic year. In the meantime, students will still use the same, extended FAFSA to apply for federal financial aid, and will still receive an EFC.

The Takeaway

The Student Aid Index is essentially the same number as the Expected Family Contribution, but it’s been renamed as part of the FAFSA Simplification Act in order to clarify to families what exactly the number means. This act also bundles in some other important changes that will hopefully simplify the overall student loan application process and increase access to education for the lowest-income students and their families.

Submitting the FAFSA and exhausting need-based federal student loan options, which tend to be the most generous to borrowers or grantees, is an important first step when it comes to funding a college education. But there are other tools in a student’s college-funding toolbox, as well.

Students can also apply for Direct Unsubsidized Loans from the government, which often have competitive interest rates and may offer more flexibility to postpone, lower, or forgive the repayment. Additionally, federal loans for undergraduate students don’t require a credit check to qualify, while private student loans usually do.

For those pursuing private student loan funding, SoFi offers no-fee student loan options for undergraduates, graduate students, and parents with competitive interest rates—not to mention the 0.25% discount for borrowers who set up autopay.

Photo credit: iStock/SDI Productions

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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College is a major expense. Even with years of thoughtful saving and planning, the costs can add up quickly. Prepaid college plans are one option families are choosing to work out a smoother financial process for students and parents alike. These plans used to be more readily available in the past. Still, it’s worth looking at prepaid college plans, where you can get one, and whether they’re a smart financial decision.

What Are Prepaid College Tuition Plans?

If you have a student who definitely plans on going to college someday, a prepaid college tuition plan can help set them up for success. You, as a parent, guardian, or relative, can start paying for college now, long before the student actually attends. This locks in the current tuition rate. Even as tuition costs go up in subsequent years, these plans allow you to keep paying the tuition rate you initially locked in.

You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

Pros and Cons of College Prepaid Plans

Obviously, locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

Prepaid College Plans vs 529 Program

College prepaid plans and 529 college savings plans are similar. They serve the same basic function. However, when you look closer, they can be quite different. Prepaid tuition plans are a type of 529 plan, in fact, but 529 savings plans have distinct features that might sway your decision about investing in one or the other. Here are three of the biggest differences.

The National Prepaid College Plan

While many prepaid college plan options are state-run, there is also a national program called the Private College 529 Plan. Unlike other prepaid college plans, there’s no state residency requirement to join this plan. It applies to nearly 300 colleges and universities. However, they are all private institutions, not public. They span 30 states plus the District of Columbia.

The national plan offers a bit more flexibility than state plans, and you don’t need to choose a school to start saving. That decision can wait until your student is actually enrolling, in fact. As long as it’s one of the private institutions that are part of the plan, you can use your funds there.

Recommended: How to Start Saving for Your Child’s College Tuition

States With Prepaid College Plans

Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

Are Prepaid College Plans Tax Deductible?

It depends on the state and plan, but in many cases, yes! There may be stipulations, though. For example, you’ll probably have to use the funds for higher education only. However, withdrawals for educational purposes may be tax-free. Moreover, your contributions to the plan could earn you deductions.

Are Prepaid College Plans Worth It?

That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

Alternative Methods for Prepaid College Plans

Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

There is also a national option. This plan applies even in many states that don’t have their own prepaid tuition plans. It also locks in rates, but you will have to choose one of the schools covered by the plan. Luckily, there are almost 300 to choose from.

Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

The Takeaway

The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with a private student loan to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.

Photo credit: iStock/dangrytsku

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Pursuing a college degree can put you on a path to the career of your dreams. But the price tag of tuition, housing, and textbooks can be pretty steep. And if you’re a parent or caregiver, you’re faced with an added obstacle: “How can I afford child care while I’m in school?”

Fortunately, there are a bevy of options out there for adult students with children. On-campus daycares, grants, scholarships, and refinancing student loans can all help alleviate the cost of child care. You don’t have to let the challenge of going to college with kids stop you from reaching your goals.

Paying for Daycare as a Student

One of the biggest financial struggles working parents face is paying for daycare. In 2020, American households spent more than $10,000 annually for child care costs, according to Child Care Aware of America . If you’re a parent returning to college, you may have the extra burden of tuition, housing, and textbooks. You may have to scale back your job hours to accommodate your schedule. Paying for child care while tackling college costs and a possible income reduction could feel like too much.

But child care is essential for adult students. Someone has to look after your little one while you attend class. Even if your school is 100% online, you’ll need uninterrupted time to study and crank out those papers.

Let’s take a look at some avenues of financial support, so you can focus on getting your degree while caring for your family.

Tips to Help Pay for Child Care as a Student

The decision to return to college may not have been in the budget when you financially planned for a family. And with the cost of child care being more than some tuition, the prospect of going back to college with kids can be daunting. Take solace in the fact that you are not alone.

Fortunately, there are resources to help you. Many higher education institutions provide child care grants and subsidies. You can also turn to federal student aid, private student loans, and scholarships to help get you that degree and daycare for your children.

Financial Aid

Student financial aid provides funding used to cover the costs of higher education. It can come in the form of student loans, either from federal or state governments. Scholarships and grants are another fantastic way to help ease your financial anxiety.

To apply for federal financial aid, including scholarships, grants, and federal student loans, students will need to fill out the Free Application for Federal Student Aid (FAFSA®) annually. This form will determine how much financial aid you qualify for. It’s also prudent to contact your school financial aid office directly. Talk to them about how they can help you factor child care into the cost of your attendance.

Private Scholarships

Because a private college scholarship doesn’t generally need to be repaid, it can be thought of as free money awarded to pay for school. Scholarships are available from numerous organizations. They are typically based on financial need or merit — grades, test scores, or talent — and (good news!) there are also scholarships available specifically for students with dependent children .

Scholarship money does not have to be paid back, so you may be better able to focus on career and family post-graduation instead of student debt.

You can find more information on scholarships and how to use them toward child care from government resources, a college financial aid office, or a high school counselor. Be sure and pay attention to scholarship submission deadlines so you don’t miss out on funds.

Federal Student Loans and Grants

Many students seek financial aid for college through federal student loans. Federal loans typically have low, fixed interest rates and don’t require a cosigner or a credit check. You don’t have to worry about repayment until after college. These student loan funds are used for tuition, housing, computers, and textbooks, but it’s also possible to put them toward child care. Reach out to your school to ask if they can factor in child care costs to the price of attendance.

A Federal Pell Grant is awarded by the government to students from low-income households, based solely on financial need. While a Pell Grant won’t guarantee you free child care, the expense of having a child reflects directly on your income, which can consequently raise the amount of funds you may be eligible to receive. That money could help pay for daycare. Like scholarships, grants also do not usually have to be repaid.

Private Student Loans

When scholarships, federal loans, and a Pell Grant, aren’t enough, you can turn to private student loans to help cover the cost of daycare. These loans are issued by online lenders, banks, and credit unions. The lender will check your financial history and credit score to calculate the amount you qualify for. If you have limited job experience or your credit score isn’t the greatest, a cosigner can pledge responsibility for your loan.

With private student loans, you can typically borrow up to the cost of tuition and other qualified educational expenses. Unlike federal loans with strict deadlines, you can apply for a private student loan at any time during the year. Private loans could also be an option for parent student loan refinancing.

Unfortunately, private loans tend to have higher interest rates, and some may require payment while you’re still attending college. Additionally, private student loans aren’t required to offer the same benefits or protections that are available to federal student loan borrowers, things like deferment options in the event of financial issues. For this reason, they are generally borrowed only after all other financing options have been thoroughly considered. Be sure to do your homework on the pros and cons of federal vs. private student loans before committing.

Seek Out Lower Cost Daycares

Once you’ve secured some financial wiggle-room via scholarships and student federal and private loans, another step is to find affordable daycare, so you can stretch your monetary aid to the fullest.

In 2018, Congress tripled what’s called CCAMPIS — Child Care Access Means Parents in School. CCAMPIS awards funds to educational institutions to help make child care affordable for low-income students, either at accredited daycares off campus, or on-campus centers. Contact your school to see if they’ve received such funds and have child care services available.

You can also investigate not-for-profit organizations such as Child Care Aware of America, who provides tools to search for lower-cost child care care facilities near your school.

Schools with Child Care Resources

Many schools, including community colleges, have low-cost child care facilities on campus for undergrad and graduate students. These supportive centers not only offer developmental programs for your child, but are tailored to the needs of student parents, with extended hours in the evening and weekends. Spots can go fast though, so be sure and inquire about program availability as soon as possible.

Some colleges offer child care subsidies to adult students in the form of daycare grants, a taxable subsidy. Whether you have a newborn or a high schooler, you may meet the criteria for these funds, and many have no requirement for the money to be used solely for daycare. Daycare grants are purely to support student-parents to achieve their dreams of higher education.

And don’t forget to ask about work-study programs through your college—jobs offering flexible hours to earn money toward your tuition and child care expenses. You can even come up with creative ideas for a passive income stream, so you can spend more time with your kid and with your studies.

Remember, it takes a village to raise a child, and a college is a community. Most institutions have online student-parent support groups, where you can search for daycare services, nanny shares, and babysitting services. Valuable information can often be found on the school’s website or through student services.

The Takeaway

Being a parent can be stressful. Being in college and a parent? At first thought, the idea may seem overwhelming. But between federal and private student loans, grants, and scholarships, you don’t have to wait until your baby’s all grown up to get that college degree. There are loads of resources to support you, from parent groups on campus, to outside sources on how to refinance a student loan once out of college.

Go for it! A college degree can bolster your self-esteem and create new career opportunities. With a higher paying, post-college job, you can start saving for your kid’s college tuition.

FAQ

Can I use student loans to pay for child care?

Student loans can be used to cover tuition and other qualified education expenses like books, room and board, and other supplies. In some cases, child care costs may also be paid for with a student loan. However, it’s generally best to prioritize a grant or scholarship first to cover the costs of child care.

What can I spend my maintenance loan on?

Student maintenance loans are issued by the United Kingdom for students attending a U.K. university. It can be used for everyday expenses, including child care, food, rent, restaurants, and clothes.

Can I get a student loan to take care of my child?

It is possible to use private student loans toward child care. It may be an option to use federal loans too. Talk to your school about factoring child care into the cost of attendance.

Photo credit: iStock/Moyo Studio

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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