Since the dayLori Loughlinand her husband, fashion designerMossimo Giannulli, were indicted in the massive college admissions scandal, the couple has been doing their best to keep their lives as normal as possible.

But as they await their next court date, which is set for Jan. 17, what was supposed to be a quiet lull in the legal storm quickly turned to panic on Oct. 22, when the prosecution surprised them with athird federal charge.

“The entire family is in chaos right now,” a Loughlin source tells PEOPLE. “They knew this was a possibility, but they thought perhaps it was just a bargaining tool from the prosecution. Now that thecharges are official, they are realizing that there is no way to avoid a moderately long prison sentence, unless they are found not guilty in a trial.”

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Prior to the new charges, Loughlin and Giannulli both already faced charges of money laundering conspiracy, conspiracy to commit mail and wire fraud and honest services mail and wire fraud. They previously faced up to 40 years in prison and have pleaded not guilty to the charges.

“They feel like this is David versus Goliath,” says the source. “How do you go up against the federal government when the government has decided to make an example out of you? This stress is about to break them.”

John Tlumacki/The Boston Globe/Getty

Lori and Mossimo

On March 12, the U.S. attorney’s office in Massachusetts indicted Loughlin and Giannulli in the shocking nationwide scam as part of an investigation dubbed Operation Varsity Blues.Nearly 50 other parents, coaches, exam proctors and admissions counselors are accused of actions such as paying for boosted SAT scores and lying about students’ athletic skills in order to gain them acceptance to elite colleges including Yale, Georgetown, USC and Stanford.

Loughlin and Giannulli allegedly paid $500,000 to admissions consultant William Singer to falsely designate daughtersOlivia Jade Giannulli, 20, andIsabella Rose Giannulli, 21, as recruits to the USC crew team, though neither actuallyparticipated in the sport. (TheUSC Registrar has since confirmedthat “Olivia Jade GiannulliandIsabella Rose Giannulliare not currently enrolled” at the university.)

Olivia Jade and Bella Giannulli.bella giannulli/instagram

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Still, Loughlin is adamant that the allegations against her aren’t true.

The source adds, “She just wanted what was best for her daughters. And it has turned into an ongoing nightmare.”

source: people.com