Filing the FAFSA is your first step in determining financial aid eligibility
Until we were in the world of financial aid, we always wondered how financial aid eligibility is determined. Believe it or not, basic financial aid eligibility is pretty straightforward. It’s the college’s packaging policies (the way the award the aid for which a student is eligible) that get complicated. That’s for another day. Let’s take a look at how your eligibility for financial aid is determined.
Colleges use the processed data from the Free Application for Federal Student Aid (FAFSA) and/or the CSS Profile to determine your eligibility for financial aid. Whether you complete the FAFSA and, if required, the Profile, the basis for determining your award is a number referred to as the Expected Family Contribution (EFC). Your EFC is determined by your household, demographic and financial data among other things.
The EFC is a measure of your family’s ability to pay for college based on student and parent income and asset information, your state of residence, household size, and number of household members in college. You can request a free copy of the EFC Formula by calling 1-800-4FED-AID and asking for the current SFA Handbook or on the Department of Education’s IFAP website.
The school you attend establishes a Cost of Attendance (COA) for the academic period for which you will be enrolled. The COA includes tuition, room and board, fees and estimated living expenses including books and supplies.
COA – EFC = Financial Need
Financial need is a official term for how much need-based financial aid you’re eligible for. Your financial need is calculated by subtracting the EFC from the COA. In order for you to receive need-based aid, your Cost of Attendance must be greater than your Expected Family Contribution.
The financial aid office at your school will use the need-based resources they have available to try to meet your Financial Need.
Here is a sample calculation:
Sally filed her FAFSA online on January 15. On February 10, she received her Student Aid Report (SAR). The EFC on her SAR is “01200″ (which means $1,200). Her school has a COA of $24,000. Using the formula above Sally figured out that her Financial Need is $16,800.
The financial aid office at Sally’s school used this information to construct a financial aid package for Sally that might look something like this:
$5,000 Institutional Grant
$9,500 Federal Stafford Loan
$1,600 Federal Work Study
$1,550 Federal Pell Grant
$1,000 Federal Supplemental Educational Opportunity Grant (SEOG)
$1,000 Federal Perkins Loan
Total aid: $19,650
That means Sally’s need for financial aid (after subtracting the EFC) is $22,800. Since the financial aid office was only able to meet $19,650 of that, she has an unmet need of $3,150. Unmet need, a common occurrence in financial aid packages, is the difference between cost of attendance and the total financial aid package. In plain language, what that means to Sally is that in addition to the EFC of $1,200, she will also have to contribute $3,150 for a total of $4,350.
The above is just an example of the kinds of aid that a student like Sally might receive. You learn more here: Types of Financial Aid