Friday, December 17, 2010

The ABC's of Financial Aid

It’s mid-December, two weeks away from the New Year. Many of us live by milestones that remind us how quickly time flies...birthdays, holidays, change of seasons. One of mine, I shamelessly admit, is the start once again of the financial aid cycle. With college applications hopefully finished or in the final stages, it is time to look ahead to the next set of deadlines, those for submitting financial aid forms. Bemoaning and complaining about the financial aid process is a yearly ritual. Yet it need not be so cumbersome and daunting. Familiarization with concepts, knowing deadlines and being organized is the key to successfully navigating aid forms and triumphing over the process. Here is my annual college financing primer which highlights some of the critical terms you will need to know.
The Cost of Attendance, or COA, refers to the total annual cost of college, not just tuition and fees. Don’t forget to factor in room and board, books, transportation, and other personal expenses when trying to estimate what a year of college will cost. College financial aid officers look at the total COA when they package aid awards. Come October 2011, colleges will be required to post the COA on their website.
The Free Application for Federal Student Aid, better known as the FAFSA, is used by colleges and universities to determine eligibility for financial aid. All students must file a FAFSA in order to receive any federal student aid. This includes the non-need based unsubsidized federally guaranteed Stafford student loans, so if you anticipate borrowing for college, you will have to complete the FAFSA. It becomes available online January 1, 2011 for the 2011-2012 school year at Prior to filling out the form, both the student and one parent must each obtain a pin number which is in essence your electronic signature. You can register for a pin at Be sure to record your pin in a place where you can easily retrieve it for future use.
The Expected Family Contribution or EFC which is calculated from the information you provide on the FAFSA is the amount determined to be what the family can and should contribute to the cost of the student’s education. The EFC is based on the family’s current assets and prior year's income, including both the student’s and parents’ financial data.
After completing and submitting your FAFSA, you will receive a Student Aid Report, or SAR, which will show your EFC.
Nearly 600 schools also require that families complete the CSS/Profile form for the allocation of their institutional funds. The CSS/Profile is administered by the College Board and can only be filed online. Families can currently access the Profile for the 2011-2012 academic year by going to the College Board’s website:
Now that you are familiar with these terms, there are some additional things that you should know about financial aid awards.
- Your “demonstrated need” (the COA minus your EFC) won’t necessarily be the amount shown on your SAR if the college also uses the CSS/Profile or another financial aid form. These methodologies are not the same, and therefore will produce different results. Institutions allocating their resources will naturally rely on the methodology that sets a lower threshold for your financial needs, so don’t be surprised if the aid package is less than you expected, even from schools that claim to meet demonstrated need.
- Colleges tailor the CSS/Profile formula to their specific institutional requirements. In other words, your demonstrated need may vary from school to school. For example, some colleges consider the equity in your home; others do not.
- The college offering the most financial aid may not necessarily be providing the best package. One has to look at the composition of each award. A financial aid package that meets need with grants which do not have to be repaid is far more attractive than one comprised entirely of loans.
- If your financial situation changes materially after you’ve filed the forms, such as loss of employment, you should notify the colleges immediately.
Lastly, be sure to visit the tuition and financial aid page of each school’s website (often buried in the Admission section) to check on requirements, deadlines and merit aid, if awarded. Meeting these deadlines is crucial. Since financial aid is a limited resource, getting things in early can make a difference. The sooner you complete the FAFSA, CSS/Profile and any other required forms, the better your chances of receiving financial assistance.