Regardless of which families you most identify with, you probably harbor misconceptions about financial aid. One of the more common misconceptions is whether a family will qualify. Often, parents who are
eligible for aid assume they won’t be. Others who won’t qualify for aid assume that schools will toss them a bone.
So how do you nail down whether your family will be eligible for
financial aid? Ultimately, you will learn the verdict after you fill out the
Free Application for Federal Student Aid or FAFSA. Even if the
federal formula generates a grim verdict, you may still have a shot at
help if you are applying to private schools. About 250 mostly private
colleges and universities use an additional financial aid document, the
CSS/Financial Aid PROFILE. The PROFILE uses much of the same
data as the FAFSA, but it delves deeper into a family’s finances.
You’ll be taking a great risk if you wait to run the numbers until
the real deadline for graduating high school seniors. As mentioned in
Federal Versus Institutional Methodology
Plenty of online calculators can help you get a good idea of
whether you will be receiving financial aid in the future. If your child
is a sophomore or junior in high school, you should run some preliminary
numbers. If your child is just starting twelfth grade, you should
make this a priority before your child starts applying to schools.
One tool you should check out is the federal government’s
FAFSA4caster (www.fafsa4caster.ed.gov). The FAFSA4caster calculates
financial aid based only on the federal methodology. This is the
methodology used to determine whether a family is eligible for
federal money such as Pell Grants and subsidized Stafford Loans.
If you’re considering private schools, you’ll also need to play with
another calculator. Some private institutions use an institutional
methodology to determine who deserves assistance from their own
discretionary pots of money. Private schools that use the PROFILE,
which relies on the institutional methodology, are going to be nosier
about your finances.
FinAid.org, which is an exhaustively comprehensive Web site
about financial aid, is an excellent resource to plug in the institutional
numbers. When you’re at the site, click on the calculator link to find
the Expected Family Contribution Calculator.
You can find another institutional calculator at CollegeBoard.
com. At the site, type EFC calculator in the Search box.
When playing with these calculators, remember that financial
circumstances change. For example, if you are trying out the
FAFSA4caster when your daughter is in eleventh grade and months
later you lose your job, those figures will no longer be accurate. All
the results are going to be estimates until you type in the solid figures
in the second half of your child’s senior year in high school.
Getting the Results
These online tools aren’t going to flash a green light if you can
expect financial aid or a red light if you probably won’t. It’s a bit more
involved than that. The software generates an Expected Family
Contribution (EFC), which is presented as a dollar figure. This EFC
is also what you will receive when the dry runs are over, and you
complete the FAFSA and possibly the PROFILE.
The EFC represents what your family can afford to spend in one
year on your child’s college education. This dollar figure is generated
after examining the parents’ and the child’s income and assets. It does
not consider unsecured consumer debt, so it can be a fairly harsh
assessment of a family’s ability to pay.
Whether you will pocket any aid hinges greatly on the gap
between your EFC and a school’s price or, in higher ed lingo, the cost
of attendance. The combination of the EFC and the so-called cost of
attendance drives the financial aid process.
Schools define the cost of attendance differently. Some calculate
it as the cost of tuition and room and board. Some also add the costs
of books, transportation, and personal expenses. You can even find
schools that use only tuition to determine the cost of attendance. The
federal cost-of-attendance calculation is usually the one used to
determine financial need.
This cost figure is critical because schools use the difference
between a family’s EFC and the cost of attendance to determine what
a family’s financial need is. Consequently, how much assistance a
family can snag will be dramatically different if the school is modestly
priced or breathtakingly expensive.
Suppose, for instance, your EFC is $15,000, and the in-state
school your daughter wants to attend is $12,000. You’d be expected
to pick up the entire collegiate tab because the school is cheaper than
what the EFC indicates you can afford to pay. In contrast, if the
school costs $40,000, you could end up with $25,000 in financial aid.
In this scenario, you’d subtract your expected contribution of $15,000
from the $40,000 price tag.
Some families who didn’t receive financial aid when they sent an
older child to an in-state public university assume they won’t get any
money for a second or third child either no matter what school the
child attends. But that assumption can be completely wrong. Being
denied aid for a local public university that costs $8,000 doesn’t mean
the family won’t receive aid for a school that costs $40,000. What’s
more, your EFC will be lower if you have more than one child attending
college since the parent EFC contribution is divided by the
number of children in college.
After you have a ballpark EFC, you can hone your college search
to schools that could meet your need financially. If you will receive
financial aid, look for generous schools that provide more need-based
grant money than loans. If financial aid isn’t a possibility, consider
looking at in-state public institutions and/or private or out-of-state
public schools that offer merit money.
Action Plan
Use a financial aid calculator to get an idea of whether you will ultimately
receive financial aid. The verdict should influence what colleges
you look at.
Source: Using Financial Aid Tools
