<p>I need a general explanation of how colleges calculate financial aid awards.</p>
<p>My FAFSA EFC is 4124. I assumed that the 4124 was what the colleges expected my parents to come up with. I also understand that they believe that students should be prepared to use summer earning of 2500 or so to pay for the fall semester. </p>
<p>One of my aid awards was very heavy on loans, including 9000 in a PLUS loan for my parents.The total amount awarded was the COA minus my EFC. To be clear, the COA was almost exactly 50000. The award package totaled 45876, 9000 of which is a PLUS laon for the parents. What I don't understand is that now the parents are expected to contribute the 4124 plus the 9000 PLUS loan, for a total of 13124.</p>
<p>I e-mailed the Fin. Aid office at this institution for an explanation. The reply was that all need based packages would consist of student and parent loans and the parents had a choice whether to apply for them or not. </p>
<p>I understand that they spread the "burden" around. What I don't get is that if the expected family contribution is 4124, how do they expect them to now take on an additional 9000 loan? They will find it difficult to come up with the 4K, but 13K is out of reach for them.</p>
<p>I suppose that is just the way they "gap" and make it look like they met need. Its just frustrating.</p>
<p>Most colleges do not meet 100% of need. Many that do unfortunately give packages like the one you describe. Hopefully you’ll get better packages from other schools. Many of the well endowed schools no longer include even loans for the student.</p>
<p>The college is not expecting your parents to take out a $9000 loan. They are offering that loan as a way to meet your costs - because the school is unable to award you enough money to meet your costs. Having an EFC of $5000 doesn’t mean that is all you’ll have to pay. If the school is unable to award enough aid so that all you will have to pay is your EFC, you will need to make a decision: borrow or attend another school. Fortunately, there are plenty of good, less expensive schools to consider.</p>
<p>you are comparing apples to oranges, but it is something you need to consider.</p>
<p>You (or your parents) have to come up with the difference between $50,000 COA, and the $45,876 award package, or $4,124.</p>
<p>Part of the award package is loans so you don’t have to pay for it out of current $'s. So, your out of pocket cost is $4,124. In the future (when you don’t have to pay the $4,124/yr) your parents can then direct FUTURE earnings to repaying the $9,000 loan (or $36,000 for 4 years of loans).</p>
<p>So, the economic cost to your parents is $4,124 Plus $9,000, but the actual current cost $4,124 (plus interest on the $9,000).</p>
<p>This is similar to buying a house. The house may cost $100,000, but you don’t pay for that all at once. You take a loan, and only pay $8,000/yr for the house. What is your out of pocket cost? $8,000. What is the economic cost? $100,000.</p>
<p>So, you have to make 2 decisions: 1) Can you afford $4,124/yr out of pocket cost; and 2) Is it worth $13,125/yr economic cost. BTW: This doesn’t include other loans that they are offering to you.</p>