How to Estimate Your Family's Financial Aid

This blog is going to give you an overview guide to estimating your family’s financial aid.

STEP 1: Understanding the Terms

• Cost of Attendance: Cost of attendance is the estimated annual cost of attending a particular college or university. It includes tuition, room and board, books, supplies, transportation, loan fees, and miscellaneous expenses. Cost of Attendance is not just what is on the bill, but it includes indirect costs too (such as transportation and supplies) that you do not pay directly to the school.

• Expected Family Contribution: Expected family contribution (EFC) is the amount of money that a student's family is expected to contribute to college costs for one year.

• Need-Based Aid: Money awarded on the basis of demonstrated need.

• Merit-Based Aid: Money awarded on the basis of academics, athletics, or other talents.

• Demonstrated Need: The difference between the Cost of Attendance and your family’s Expected Family Contribution (COA-EFC=Need).

• Pell Grant: A Pell Grant is a federal grant awarded to students on the basis of financial need and do not need to be repaid.

• Net Price: Cost of Attendance - Grants/Scholarships/Gift Aid = Net Price.

• Scholarships: These are usually merit-based dollars that do not need to be repaid.

• FAFSA: The Free Application for Federal Student Aid (FAFSA) is the official form that families must use to apply for federal financial aid (grants/loans) to pay for college. Many schools also require the FAFSA to be filed for school-specific need-based and merit-aid.

• CSS/Financial Aid Profile: An online application administered by the College Board and used by several hundred colleges, universities, and private scholarship programs to determine the student's eligibility for need-based, non-federal financial aid.

• Federal Methodology vs. Institutional Methodology: The Federal Methodology is used by the FAFSA and federal government. The CSS Profile uses the Institutional Methodology which considers more sources of income and assets than the Federal Methodology. Examples include home equity, non-custodial parent income and expected student earnings from summer jobs. For this reason, the Estimated Family Contribution calculated by the Institutional Methodology is often higher than the EFC calculated using the Federal Methodology.

STEP 2: Determine Your Family’s Expected Family Contribution

The first place I would go is the FAFSA4Caster which estimates eligibility for federal aid in either federal loans or pell grants. Even if you do not think your family will qualify for federal funding, it is a good place to start. It asks a series of questions similar to the FAFSA and determines the types and amounts of federal aid a student might qualify for, as well as an expected family contribution. The FAFSA4Caster will also give you your family’s Expected Family Contribution (EFC). The FAFSA uses the Federal Methodology.

It is important to note that your Expected Family Contribution figure may change depending on whether an institution is using theFederal Methodology or the Institutional Methodology. Some schools only use the FAFSA (and therefore use the Federal Methodology). Many colleges, however, require that you complete the Collegeboard’s CSS/Financial Aid Profile in addition to the FAFSA. The CSS Profile uses the Institutional Methodology to calculate your Expected Family Contribution. For this reason, I advise families to also use the CollegeBoard’s EFC Calculator. Sometimes the Expected Family Contribution is higher when using the CSS Profile / Institutional Methodology because this model takes into account other sources of income such as non-custodial parent / step-parent income, home equity, and student earnings from summer jobs.

A page you should absolutely bookmark is this CollegeBoard Big Future Tools & Calculators page. 

STEP 3: Determine if you should focus on schools that give more need-based or merit-based aid.

If your Expected Family Contribution is high, you should not expect to receive a lot of need-based financial aid from schools. You should be putting schools on your list that are known for giving merit-based aid. The largest source of merit-based aid comes from the institutions themselves, so you want to make sure you are picking schools that are generous with their merit-aid. Of course, you want to make sure you qualify for the merit-aid at those schools as well, so pay attention to the criteria for those scholarships.

If your Expected Family Contribution is very low, then you want to look to schools that are known for meeting 90-100% of a student’s demonstrated financial need. Remember, demonstrated need is COA - EFC. You don’t want to look at schools that are known for only giving generous amounts of merit-aid because often times those scholarships go to families who are “full-pay” in order to entice them to enroll at the school. This can seem very counter-intuitive to many families.

Want to know whether a school gives a a lot of need-based or merit-based aid? Check out this chart by Big J Educational Consulting. The Domestic Undergraduate Need-Based and Merit Aid chart will show you which schools meet what percentage of a student’s demonstrated financial need. It will also show you what percentage of students received merit aid, and the average aid award amount as well.

Putting it all together: If Sunnyside University costs $70,000 and your Expected Family Contribution is $15,000, your Demonstrated Need is $55,000. If Sunnyside University on average meets 70% of demonstrated need, you can expect to receive $38,500 in financial need. This means that Sunnyside University will cost your family $31,500. $31,500 is the Net Price of Sunnyside University.

STEP 4: Estimate the net price for each school on your list.

You can calculate the net price using the method I demonstrated above, but it is better to use the net price calculators provided by every school. These net price calculators take into consideration whether the school uses the Federal Methodology or Institutional Methodology. By law, every school must have a net price calculator on their website. You can also search for every school's Net Price Calculator on CollegeBoard’s Tool Calculators: https://bigfuture.collegeboard.org/pay-for-college/tools-calculators (second link on the left hand side). 

The CollegeBoard has some other calculators that you may find helpful, but I would start with these three steps first to get a close estimate of what each school may cost your family. College Scorecard (https://collegescorecard.ed.gov/) is another good resource for finding more information about price, graduate rate, retention rate, average annual debt, average monthly loan payments, and average salary after graduating. 

Financial Aid applications open up on October 1, but knowing these numbers now will help you plan for the future.