This first post in our series on paying for college provides a brief overview of the basics, including how your “need” is calculated. In future posts, we will examine the financial aid process in more depth and give you pointers on how to try to get the most aid for which you are eligible.
The cost of a four-year private college education has surpassed $150,000 at many schools. Even the public Ivies—state schools with excellent reputations—can run in excess of $200,000. In spite of these facts, there are billions of dollars of financial aid available for which many families can qualify. Those who qualify for the most aid are not necessarily those with the most need; it is those who best understand the rules of the financial aid process. Financial aid is a negotiation. The financial aid officer’s job is to obtain as much money from you as possible, and your job is to make sure you get a fair deal.
Each year of college, you will be required to complete the Free Application for Federal Student Aid (FAFSA), as well as the PROFILE form for some colleges. These forms are even more detailed than your taxes and are used to determine your Expected Family Contribution (EFC), or how much income and assets they believe you and your student can afford to put toward college.
Costs you can expect from a college education include: tuition and fees, room and board, personal expenses, books, and travel. The difference between the total of these costs and your EFC is called your “need.”
No matter to what school you apply, your EFC should be roughly the same. Your need may change due to the difference in the price of each school. To help you meet your need, each school determines how badly they want to enroll your student and offers you a financial aid package consisting of the following:
- Grants and Scholarships: typically, tax-free money that doesn’t have to be paid back;
- Federal Work Study: a federally subsidized student work program; and
- Student Loans: federally subsidized government loans taken out by the student that generally have no interest until after leaving college.
The aid package you initially receive may be unacceptable or unaffordable to you. However, you may still be able to negotiate a better deal with the financial aid officer if you understand the financial aid process.
For those who wish to delve deeper into this subject, I recommend these two great resources to clients: