How exactly does fin aid work?

Paying for College
1

<p>This will probably come off foolish but I don't exactly understand need based aid. Is it simply the COA - EFC and then the college will pay that difference? This is what I've been hearing, which sounds great because then your family is contributing what is expected and then the college pays the rest. But then at the same time, I don't see how this is possible - I doubt all kids are getting the rest of their tuition all paid for each year by the college.</p>

<p>So I know there are more details once we get into assets owned and what not, but just in general, is there a formula or guideline to know or predict how much need based aid one will receive from a school? (Or just a rule that generally explains how much need based aid is given to what families? All this FAFSA, CSS, etc. confuses me.)</p>

<p>And I'm assuming schools have different policies so if you cold just list what you know or the general details for which schools you know.</p>

2

<p>Is it simply the COA - EFC and then the college will pay that difference?</p>

<p>no, no, no…that is a serious misunderstanding for most schools. Most schools do NOT have the funds to charge some kind of “sliding scale” based on EFC.</p>

<p>In truth, most colleges have no/little money of their own to give. Most colleges can only give fed aid…which is not much…and the free fed aid is only for lowish incomes…and, again, not much money at all.</p>

<p>Only a small number of schools are “full need” schools. And, typically they don’t just use FAFSA EFC to determine what your family should pay. They often use CSS Profile.</p>

<p>FAFSA EFC is a misnomer. Colleges ONLY have to use that number to see if you qualify for any federal aid…which is not much. Certainly not enough to pay for college.</p>

<p>Colleges view the family as the primary source for college funds.</p>

3

<p>

</p>

<p>NO it’s not that simple at MOST colleges. There are some colleges (not that many) who do guarantee to meet full need (COA minus Family Contribution) but they are amongst the most competitive for admission and the first hurdle is to be in the under 10% of accepted students.</p>

<p>MOST schools do NOT guarantee to meet full need. Your FAFSA EFC should be viewed as the MINIMUM your family will be asked to pay. Most schools do not give enough aid to fill the amount that is the difference between COA and Family contribution. They just don’t. That leaves a “gap” in funding which you have to figure out how or if your family can pay.</p>

<p>

</p>

<p>There are about 3000 colleges in the U.S. with varying policies on financial aid. Most of the information you are seeking can be found on the college websites. Look there.</p>

<p>Here is a word of caution…</p>

<p>Schools that use the FAFSA only do not meet full need. The FAFSA EFC is primarily used to compute the awarding of federally funded need based aid. The max Pell grant and the max Stafford loan would be $11,000 for a freshman. To get the max Pell grant of about $5500, your EFC per FAFSA would need to be $0.</p>

<p>Those VERY generous schools that meet full need use the CSSProfile and/or their own school generated form in addition to the FAFSA. This is to determine the awarding of their own institutional money. Things like your home equity in your primary residence are considered by some of these schools. These schools use the info on the application forms using THEIR OWN varying formulas to determine your family contribution AND your need based aid.</p>

<p>NOW…need based aid is primarily based on the income and assets of your parents…and to some degree you too. </p>

<p>But all of this is not as important as talking to your parents about what THEY will spend on your college costs each year. If they say they can pay more than the EFC, you are good to go regardless. If they say they will only pay LESS, you need to consider that when you craft your list of schools…looking for either affordable options or schools where you are guaranteed merit aid.</p>

4

<p>

</p>

<p>Cost of attendance - EFC (both parent’s and students) = demonstrated need.</p>

<p>The vast majority of colleges in the US do not meet 100% demonstrated need.</p>

<p>Loans (student loans) and Parent loans (as some parents can borrow up to the full cost of attendance) is considered meeting your need.</p>

<p>Financial aid can be any or all of the following components</p>

<p>Grants- which do not have to be repaid. They can come from the federal government (PELL, SEOG), your home state (I live in NYS where they have TAP (tuition assistance program) or the institution it self. Most require that you maintain satisfactory progress toward a degree.</p>

<p>Scholarships some colleges off scholarships on the basis of merit, athletic ability, arts, or some specialized program with their school. A student getting an athletic scholar ship is most likely required to continue their sport in order to keep gettingthe money. Student who are receiving merit money may have to maintain a certain gpa (varies from school to school) in order to continue scholarship eligibility. Some scholarships must be renewed each year, others are automatically renewable.</p>

<p>There are usually 3 types of “work study”, Federal work study, employment and non-work study.</p>

<p>The Federal Work-Study Program (FWSP) is a federally funded program and was established by Congress through the Higher Education Act of 1965 to assist needy students earn money to meet educational costs. Participation in the program is determined by the student’s financial need and is awarded as part of the financial aid package. Earnings are not applied directly to the tuition bill, but are used by the student to cover costs such as books, personal items, and transportation. FWSP funds may only be used on campus with on-campus employers or with approved off-campus community service employers.</p>

<p>Employment is an alternative form of funding for student who do not qualify for work-study funds, usually for citizenship reasons. Regulation of the Employment program mirrors the FWSP in that a student must show a financial need to be eligible for such funding. Employment funds are usually not permissible for off-campus use.</p>

<p>non workstudy postions are for students who are not FWS or employment eligible. These types of jobs are usually available on campus through food services , bookstore, etc. </p>

<p>Loans</p>

<p>Stafford loans - Students could be eligible for stafford loans (subsidized or unsubsidized). With a stubsidized loan, the interest is paid by the federal government while the student is in school.</p>

<p>With the unsubsidized Stafford loan, you can defer the payments until after graduation by capitalizing the interest. This adds the interest payments to the loan balance, increasing the size and cost of the loan. All students, regardless of need, are eligible for the unsubsidized Stafford Loan.</p>

<p>Dependent Students
First-Year Undergraduate (Freshman) $3,500 (subsidized) + $2,000(unsubsidized) $5,500 total</p>

<p>Second-Year Undergraduate (Sophomore) $4,500(sub) + $2,000 (un sub) $6,500 total</p>

<p>Third-Year and Beyond Undergraduate (Junior, Senior) $5,500(sub) + $2,000 (unsub) = $7,500 total</p>

<p>Students whose parents have been denied a PLUS loan may borrow additional funds unsubsidized.</p>

<p>Perkins Loan </p>

<p>The Perkins Loan is awarded to undergraduate and graduate students with exceptional financial need. This is a campus-based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government. (The Perkins Loan is the best student loan available. It is a subsidized loan, with the interest being paid by the federal government during the in-school and 9-month grace periods. There are no origination or default fees, and the interest rate is 5%. There is a 10-year repayment period.</p>

<p>[FinAid</a> | Loans | Student Loans](<a href=“http://www.finaid.org/loans/studentloan.phtml]FinAid”>http://www.finaid.org/loans/studentloan.phtml)</p>

5

<p>

Not in most cases. </p>

<p>COA-EFC = Need. However not all schools promise to meet your full need. This often comes as a shock to people who see their EFC and think that is what they will have to pay. </p>

<p>Some schools (not many) promise to meet full need without loans, others promise to meet full need but will include loans (sometimes huge loans), many do not promise to meet full need at all.</p>

<p>Schools that promise to meet full need with no loans are usually the hardest and most competitive schools to be accepted at. They usually require additional financial information via documents like CSS or their own financial aid forms. They will use FAFSA to determine eligibility for federal aid and CSS to determine eligibility for their own institutional money.</p>

<p>However, many schools do not offer much, if any, institutional aid. If a school offers only federal aid, then they will not promise to meet full need. Federal aid is very limited so will not pay the cost of even most public schools (other than community colleges). The main federal grant, the Pell, has a maximum of $5550 a year. To get $5550 requires a 0 EFC. If the school costs $10,000 a year or $30,000 a year, the max Pell will still be $5550. Other than the Pell, Federal aid consists of student loans, WS and the SEOG. The Stafford is the main federal loan and has a maximum of $5500 for a freshman. WS, Perkins loan, and SEOG, are what is called campus based aid. This means the school receives a set and very limited amount of dollars and must determine how best to award them to their students. The school sets their own maximums (for instance my daughter’s school awards a maximum $2,000 SEOG, at my son’s school it was $100), and their own criteria for awarding them. Many schools only give SEOG to 0 EFC students, but don’t usually have enough to award it to all O EFC students.</p>

<p>You would really need to check the schools you are interested in to see what their policies are.</p>

6

<p>The FAFSA is the free application for federal student aid.</p>

<p>To apply for student financial aid from the federal government based on the information submitted by you and your parents the FAFSA determines your eligiblity to receive federal aid : pell grants, seog grants (if applicable to your school) federal work study and federal student loans (subsidized/unsubsidized stafford loans and perkins loans). The FAFSA is required by all public colleges and universities and an overwhelming number of private schools require the FAFSA (some in addition to other FA forms).</p>

<p>You can submit the FAFSA either on line</p>

<p>After you submit the FAFSA, you will receive your Student Aid Report (SAR). The SAR summarizes the information you provided on the FAFSA, and indicates the Expected Family Contribution (EFC). (If there’s an asterisk next to the EFC figure on the SAR, it means your FAFSA has been selected for verification.) </p>

<p>The EFC is the amount of money your family will be expected to contribute to your education. The EFC is subtracted from the school’s Cost of Attendance (COA), also known as the “student budget”, to arrive at your financial need: Financial Need = COA - EFC. The student budget includes tuition, fees, room and board, books and supplies, travel, and personal and incidental expenses. </p>

<p>The lower your EFC, the more financial aid you will get. The school will try to meet this need through a financial aid “package” that combines aid from federal, state, school, and private sources with loans and student employment. </p>

<p>[FinAid</a> | Financial Aid Applications | SAR and EFC](<a href=“Your Guide for College Financial Aid - Finaid”>Student Aid Report (SAR) and Expected Family Contribution (EFC) - Finaid)</p>

<p>Keep in mind that all schools do not meet 100% of your demonstrated need and some school can and do fill your demonstrated need with loans.</p>

<p>You cannot file the fafsa for 2011-2012 school year until jan.1 2011.</p>

<p>The fafsa only determines determines your eligibility for federal aid and uses a federal methodology to determine this . Most schools that give their own monies (grants/scholarshsip) to meet your demonstrated need (institutional methodology) may require additional forms (the CSS profile or their own financial aid forms) </p>

<p>There will be a big difference between the EFC numbers your get for the FAFSA which only determines your eligibility for federal aid (pell grants and loans) and the CSS profile which is what the college uses to determine how they are going to distribute their institutional funds .</p>

<p>I would recommend running your numbers on the college board’s FA calculator using both the federal and the institutional methodology.</p>

<p>Differences between the IM and FM models are</p>

<p>IM collects information on estimated academic year family income, medical expenses, elementary and secondary school tuition and unusual circumstances. FM omits these questions.</p>

<p>IM considers a fuller range of family asset information, while FM ignores assets of siblings, all assets of certain families with less than $50,000 of income, and both home and family farm equity.</p>

<p>FM defines income as the “adjusted gross income” on federal tax returns, plus various categories of untaxed income. IM includes in total income any paper depreciation, business, rental or capital losses which artificially reduce adjusted gross income.</p>

<p>FM does not assume a minimum student contribution to education; IM expects the student, as primary beneficiary of the education, to devote some time each year to earning money to pay for education.</p>

<p>FM ignores the noncustodial parent in cases of divorce or separation; IM expects parents to help pay for education, regardless of current marital status.</p>

<p>FM and IM apply different percentages to adjust the parental contribution when multiple siblings are simultaneously enrolled in college, and IM considers only siblings enrolled in undergraduate programs.</p>

<p>The IM expected family share represents a best estimate of a family’s capacity (relative to other families) to absorb, over time, the costs of education. It is not an assessment of cash on hand, a value judgment about how much a family should be able to use current income, or a measure of liquidity. The final determinations of demonstrated need and awards rest with the University and are based upon a uniform and consistent treatment of family circumstances.</p>

<p>Except in the most extraordinary circumstances, Colleges classifies incoming students as dependent upon parents for institutional aid purposes, even though some students may meet the federal definition of “independence.”</p>

<p>Students enrolling as dependent students are considered dependent throughout their undergraduate years when need for institutional scholarships is determined.</p>

<p>For institutional aid purposes a student may not “declare” independence due to attainment of legal age, internal family arrangements, marriage or family disagreements.</p>

<p>Your COA (cost of attendance) is tuition, room board, books travel expenses and some misc. expenses associated with attending college.</p>

<p>As a student, there are cumulative limit of $31,000 which you can borrow for an undergraduate education using stafford loans.</p>

7

<p>Other threads by this OP indicate interest in places like Dartmouth. Dartmouth gives NO merit aid…they give ONLY need based aid but they do guarantee to meet full need of their accepted students (Dartmouth uses the FAFSA AND Profile info to compute your family contribution). </p>

<p>So to the OP…if you were accepted at Dartmouth, your financial aid “picture” would depend largely on your parents (both of them) income and assets.</p>

<p>I will say, if you are a competitive applicant for Dartmouth admissions, you might find some schools with very generous merit aid that you might be eligible for.</p>

8

<p>Colleges that promise to meet full need do the COA - EFC = aid thing. However, most colleges do not promise to meet full need, and the colleges that do meet full need define their own definition of need. In addition, many families find that their EFC is unaffordable. Finally, colleges can claim that they met need by offering loans. </p>

<p>The FAFSA EFC is a misnomer, because it is really is more of an index for federal aid. The vast majority of college students (and their families) pay more. Colleges with the most generous financial aid policies require the CSS profile, which requires more detailed information than the FAFSA as well as the non custodial parent’s information if the student’s parents are divorced (which the FAFSA does not require). </p>

<p>Other schools use preferential packaging as well as merit and/ or need based aid in their financial aid packages. This is a good explanation: [Muhlenberg</a> College| The real deal on financial aid](<a href=“http://www.muhlenberg.edu/main/admissions/realdeal.html]Muhlenberg”>http://www.muhlenberg.edu/main/admissions/realdeal.html)</p>

9

<p>I don’t think it’s possible to emphasize this point enough:</p>

<p>The calculated “need” is based on what the college calculates (using whatever methodology) to be the difference between the cost of attendance and your family’s expected contribution. The sticky part is that your family’s expected contribution is often far, far more than your family ever expected to, or could, contribute. The most important thing I learned here a year ago was to use one of those EFC calculators online to get a ballpark estimate of my family’s expected contribution.</p>

10

<p>“…which sounds great because then your family is contributing what is expected and then the college pays the rest…”</p>

<p>Net/net: rarely happens. The bottom line is that if you are “middle class”, have not run up exhorbitant debt, have saved some funds for retirement… lived a responsible life… you are screwed. Sound a bit bitter? You would be correct. As far as college tuition assistance there is no benefit to having a responsible financial history, plan or direction. Your EFC will be 100%. And as tuition is raised year-to-year your EFC goes up. However, run up irresponsible debt, spend every penny, have no assets… well then, different story.</p>

11

<p>

Debt is not taken into account at all when the EFC is calculated. Some assets are, but unless they are substantial they are not the main driver of the EFC. For FAFSA the primary home and retirement accounts are not reportable assets. For reportable assets there is a certain amount of asset protection based on the number of parents and the age of the older parent. Assets over that have about a 5.6% impact on the EFC. The biggest factor of the EFC is income.</p>

12

<p>Debt is not taken into account but savings, stocks and tangible liquid assets are taken into account. Unless you bury all your liquid assets your EFC will be assessed based on your ability to use (dispose) those assets, regardless of intended long term use (retirement), to pay for college. </p>

<p>Read: have $300K in savings/stocks or spend it to zero, pick one… if you don’t spend it you will be required to apply it to all towards tuition requirements. If you do spend it all you have no liquid assets, therefore, your situation is entirely different. This simplistic example assumes a 5 digit income. </p>

<p>The net/net is there is no benefit to acquiring/holding/saving liquid assets when it comes to EFC. If you spend, spend, spend you are supported in the the EFC process. If you don’t spend and save/invest, you will end up liquidating based on asset availability. </p>

<p>That’s reality. Been there.</p>

13

<p>Thank you for ALL the help everyone and for clearing this up for me. I really appreciate all the helpful info. I have not done any of the calculators yet and will ask my parents to look into them very soon.</p>

<p>My parents have also been saying to me what you guys are discussing on the net/net thing. We are middle class, and this system is unfair. My parents did things right, saved funds, hard workers and now we have it rough for financial aid. I just wanted to clarify how it worked for myself on CC before getting in details with my parents. But my parents have touched on the issue that it’s unfair that we have it rough for doing the right thing, while others who didn’t save their money or didn’t work hard or spent all their money stupidly have it easy in the financial aid game.</p>

<p>So, if you don’t mind me asking, what are some of the schools that DO promise to meet 100% of need?</p>

14

<p>

</p>

<p>If the money is in the adult’s name is assessed at somewhere between 5 & 6.5% (don’t have the actual # at hand)</p>

<p>so if you had 300k in the bank, even at 6.5% your EFC would go up by 19k, leaving you with 289k in the bank.</p>

<p>To spend down 300k in hopes of getting a couple of $$ in FA is not a good move. Your EFC from income/ other assets would have to be in the neighborhood of 30k.</p>

<p>So even if you were full payers and paid the 200k towards your child’s education (as you are the first in line when it comes to paying for it, then you would still have 100k left over at the end.</p>

15

<p>

</p>

<p>OH that is poppycock. Parent assets are assessed at 5.6% of the value. So…that would be $16,800 for the first year. Just multplying that by 4 would mean $67,200 over four years. You would have $232800 left AFTER four years and that doesn’t include any interest your account accrues.</p>

16

<p>To start I would look here - the schools that have “no income limit” and “no loans” mean they meet “Need” with no loans regardless of income. They are probably your best bet. BUT - most of these schools expect a student contribution (in addition to Family Contribution) through summer work and during the school year job.</p>

<p>[Project</a> on Student Debt: Summary of Pledges: Eligibilty Guidelines and Basic Provisions](<a href=“http://projectonstudentdebt.org/Type_and_Coverage.vp.html]Project”>http://projectonstudentdebt.org/Type_and_Coverage.vp.html)</p>

<p>You can look up each schools specific policies here (page down)</p>

<p>[Project</a> on Student Debt: Financial Aid Pledges](<a href=“http://projectonstudentdebt.org/pc_institution.php]Project”>http://projectonstudentdebt.org/pc_institution.php)</p>

<p>Good luck.</p>

17

<p>No, life isn’t fair. Operating a college is very expensive, and colleges are doing the the best they can to make it affordable to the most number of students they can given limited resources. In reality, most Americans live in households earning 50k or less, and most low income students are not attending these schools with the most generous financial aid packages ([Household</a> income in the United States - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Household_income_in_the_United_States]Household”>Household income in the United States - Wikipedia)). Parents who do not save for college are gambling. There is no guarantee that their kids will a) be accepted into a school that meets full need (since the vast majority of colleges don’t) b) find the instate public Us a desirable option. Saving is the best way of hedging one’s bets (although parental income is the biggest determinant of need based aid). </p>

<p>On the bright side, colleges with the largest endowments (and the best need based financial aid) usually spend more per student than they charge. So a college with a 50k cost of attendance may very well be spending 80k per student, thus subsidizing all students by at least 30k.</p>

18

<p>Thanks very much for the link NewEngland!</p>

<p>These are many of the colleges I am actually considering, and so do all these ones under “pledges covering the total coast of attendance” mean that if I am admitted that the college will pay the difference of my EFC all four years? If so this looks great. (I know you said it’s the ones that have No Income Limits and No Loans, but most of them do!)</p>

<p>Also, not to get into too many specifics, but in the case of WashU what does the $60,000 mean under Maximum Family income. And for Northwestern, what does EFC Less than 20% of COA / No Income Limit mean?</p>

19

<p>*If the money is in the adult’s name is assessed at somewhere between 5 & 6.5% (don’t have the actual # at hand)</p>

<p>so if you had 300k in the bank, even at 6.5% your EFC would go up by 19k, leaving you with 289k in the bank.</p>

<p>*</p>

<p>Ok…that’s true for FAFSA…but what are the calculations for CSS Profile schools? I don’t think we know that. I think that’s why some families see wide swings in “family contribution” from CSS Schools. I imagine that families that have healthy assets might get “assessed” at various rates from various CSS schools. So, I’m not convince that the “about 6%” assessment holds true at CSS schools…and that’s significant since those are often the schools that claim to meet need.</p>

<p>OP…you’re asking which schools “meet need.” If your family has a good income and has a lot saved, then those schools may not help you much if they determine that your family doesn’t have much “determined need.” That’s often shocking for some families. They’ll apply to certain schools because they’ve heard that those schools are “generous with aid,” only to find out that these schools will not be generous to THEM because these families have little to no “need.”</p>

20

<p>There are a number of us on this forum who have completed both the FAFSA and Profile for their kid’s schools…including assets and home equity. I know that WE have done this (actually we did it EIGHT times). The family contribution for our kids as calculated by OUR kid’s schools was very close to the EFC computed by FAFSA. I realize this isn’t perhaps universal but it does lend at least some credence to the fact that the Profile schools also limit the amount of assets they expect to be used for college payment purposes. </p>

<p>I would like to hear from others who have completed BOTH forms as I think those folks might be in a good position to help the OP or anyone else determine how close the FAFSA and Profile are in dealing with the use of assets for paying the bills. If one has never had this comparison to make, it might be difficult to draw any conclusions about this.</p>

<p>And YES I do know that Profile schools have varying formulas for determining aid.</p>