Many of us look at the price of college and wonder how we’re going to pay for it. And while community college tuition is usually lower, in a number of states their tuition has risen sharply as well. So what’s a new student to do? For a large number of students, the answer is to seek financial assistance from federal, state and private sources in addition to funding from their target colleges themselves. Virtually every office of financial aid in every college in the country has to figure out how to distribute financial aid dollars, and they use the methodology from the federal government. Student access this methodology by completing and filing the Free Application for Federal Student Aid, or FAFSA.
The FAFSA is seen by many as this incredibly complicated form that is designed to trip students up as the seek a college education. This really isn’t the case, but I’ve come up against the FAFSA wall myself and it can be frustrating, but it’s not designed to be. The FAFSA is designed to determine how much money a family can pay for their student to go to college taking into account not only their income but other actors, such as the number of children attending college in their family. Much of what I’ll be talking about here can be access through this website: https://studentaid.ed.gov/sa/ which is sponsored by the federal government. This is a great place to see summaries about financial aid and the aid granting process.
When you file the FAFSA, providing more financial information that you’re likely to be comfortable with, the system determines what they call your financial need or in fact the Expected Family Contribution of EFC. This is a figure that the method says your family should be able to pay for a specific student to attend college. When you’re looking at the price of a particular college, the college itself gives you their cost of attendance (COA), which is what it will take to pay for tuition, housing, meals, fees, transportation and other expenses. When you subtract the Expected Family Contribution from the Cost of attendance, that tells you how much your student is eligible for in terms of financial assistance. It doesn’t mean that your student automatically qualifies for that much aid.
Let’s look at a specific example with made up figures.
Student A is the second student in college, and the FAFSA method says that her EFC is $3,200 per year. Mind you, both her parents and her believe that’s too much, but let’s put that aside for a while.
Student A has been accepted by two colleges, one public and one independent. Here are the expenses for each of these two schools. All figures are for a full academic year.
| Whole Grain State College | Independent University |
| Tuition $12,000 Housing $ 4,500 Meals (19/ week) $ 5,500 Mandatory Fees $ 500 Personal expenses, $ 2,500 including transportation Total: $25,000 | Tuition $35,000 Housing $ 9,200 Meals (19/ week) $ 6,300 Mandatory fees $ 1,100 Personal expenses, $ 2,500 including transportation Total $54,100 |
On the face of it, Whole Grain is the clear winner. But let’s dig a little deeper. Student A has an EFC of $3,200 per year.
| Whole Grain cost of attendance $25,000 EFC -$ 3,200 Financial aid eligibility $21,800
| Independent U cost of attendance $54,100 EFC -$ 3,200 Financial aid eligibility $50,900
|
So Student A is eligible for much more financial aid at Independent University than at Whole Grain. But what about merit awards from college and universities? They indeed do make little “grants” to students often based on their academic records. These grants may come from the colleges’ endowments or their operating budgets. Let’s change Student A’s equations a little bit and add merit awards to both eligibility calculations.
| Whole Grain cost of attendance $25,000 EFC -$ 3,200 Merit Awards $ 3,000 Financial aid eligibility $18,800
| Independent U cost of attendance $54,100 EFC -$ 3,200 Merit Award $ 24,000 Financial aid eligibility $26,900
|
Keep in mind that these figures don’t include any state grants that Student A might be eligible for. With the addition of the merit award figures, the gap between the financial aid eligibility for the two schools narrows. So let’s say Student A decides to go to Independent Thinkers: what might her financial aid look like?
There are three basic forms of financial aid:
First is gift aid, which is in the form of grants from the federal government or state. This also includes scholarships that are tied to academic merit, but may also be tied to athletics, ethnicity, hobbies etc. The second is loans, which need to be repaid with interest. There are several kinds of loans offered by the federal government. You can learn more about them at the federal government website I point out earlier. The third form is work study, or money that the college believes the student should be able to earn on campus in a job. When a student accepts a work study assignment, it doesn’t always guarantee them a job: on many campuses, they still have to go to offices and apply for positions that might be in the athletic facility, food service or another campus office. There are some schools that will assign work study students to specific jobs on campus even before they arrive on campus, so it’s best to ask these questions of your financial aid office.
Every financial aid package will list out the aid that the student has been awarded from these various sources. So Student A might receive a small Pell Grant, some specific loans and a work study award to lower her expenses. If she were to accept the entire financial aid package as contained in her award letter, the out of pocket amount is what remains. While most students think this should be their EFC, it may be higher than that. So when deciding on a college or university, the family first has to decide if the out of pocket amount is something they can handle. Often it is, but it will probable present something of a challenge to the family. The other question to ask is: what is the total loan burden Student A is going to take on over four years and how much debt will she graduate with? It’s not uncommon to hear about students graduating with $75,000 in student loan debt or more. This may represent what their parents paid for a house twenty five years earlier, so it’s not a piddling amount. And only the family speaking openly and honestly about finances can make the decision on where to go to college.
A few things to think about in summary:
It’s not a sin to say at the end of the process that one school is simply too expensive for the family to afford. I would recommend that you don’t start out at that point, since you can only know the full price and of a college after looking at all financing options. Just be sure your student knows that at some point financial realists have to be used in decision making.
How much debt is too much to graduate with? I tend to think if a student is graduating with $20,000 in debt that isn’t too bad: other parents may think that’s way too high, while others think $50,000 is okay given the investment you’re making in your students future.
And since this is for your student’s education, it’s always wise to make sure they are heavily involves in these discussions, as challenging as they may be. It’s the best way they can begin learning the financial realities of adulthood.
There is little that warms the hearts of college students more than receiving a CARE…
As your student makes their final preparations for college and new student orientation, don’t think…
When students go off to college, we worry about many things. These include: how will…
Family vacations can serve a dual purpose if you have a student thinking about college.…
This is the second in my “making the most of summer” series. We often look…
A year or so ago, I talked about how high school students could make the…