“Terms that Matter When Assessing Cost and Affordability”

With the college admission process now moving at full speed, the inevitable questions with regard to cost and affordability are becoming much more real for families of applicants. While gaining admission to colleges of choice is certainly cause for celebration, the elation is short-lived when the candidate’s family comes face-to-face with the costs of attendance—costs that are often muted or obscured by otherwise promising rhetoric in the recruitment process.

As you move forward in your assessment of college options, be careful to sort through the promotional rhetoric coming from institutions to uncover the reality of the opportunities that are beginning to present themselves. The following are terms you need to know and recruiting statements about which you should be wary.

  • Total Cost of Attendance (TCA)   This is the number that matters most when calculating the out-of-pocket expenses your family will incur at a given college. It will include costs ranging from tuition to activity fees and travel expenses. Quite often, institutions cite tuition or tuition, room and board (TRB) in their recruitment materials. “Other Expenses” can collectively represent an amount equal to 10-15% of a college’s TRB on top of the latter. For example, the TCA for a college quoting a TRB of $50,000 will likely be in excess of $55,000 and this is a number for which your family will be responsible should you enroll at that school. Much of the cost will be billed directly; however, it will be the emergence of indirect expenses, often unexpected, that can become problematic if you are not prepared for them.
  • Expected Family Contribution (EFC)   In this country, it is assumed that the first responsibility for meeting college costs rests with the student’s family. Should the total cost of attendance at any college of choice be daunting, if not seemingly insurmountable, you would be wise to investigate your eligibility for need-based financial assistance. Such assistance can come in the form of grants, loans and campus work-study funded by the federal and state governments as well as the colleges themselves.

The determination of your EFC will involve assessments of your family’s income/assets as well as its cost of living. The difference between the two is, presumably, your family’s disposal income—money that can be applied to the TCA. If the EFC exceeds the TCA, it is expected that your family can afford to pay the entire cost of attendance. When the EFC is less than the TCA, you will have demonstrated need of assistance.

A number of methodologies are used to arrive at the EFC. The Free Application for Federal Student Aid (FAFSA) is a form designed by the federal government to determine your eligibility for funds it disburses. Most state governments rely on the FAFSA as well, and many colleges will employ the FAFSA to determine a student’s eligibility to receive institutional funds. Any student who anticipates receiving some sort of financial assistance must complete the FAFSA as soon as possible.

In addition to the FAFSA, many selective private colleges also require financial aid applicants to complete the College Scholarship Service PROFILE. This form uses a methodology that is much more granular in arriving at the EFC. It should also be completed as soon as possible.

Important Notes:

  1. Complete all required forms as soon as possible. To do so, use your tax returns from the second year prior to the student’s year of college entry. Using that IRS return, you can submit the FAFSA as early as October 1 of the student’s senior year in high school.  Waiting to submit could mean that, while you might demonstrate a need of assistance, available funds have already been allocated.
  2. Upon completion of the FAFSA you will receive a Student Aid Report (SAR) that reveals your expected family contribution. This information is also forwarded to the colleges you have designated. The CSS PROFILE will not provide feedback to you; the results of its analysis go directly to the colleges.
  3. The two methodologies rarely agree in their assessments. Quite often the CSS PROFILE will show a larger EFC than the FAFSA.
  • “We meet 100% of demonstrated need of admitted students.”   Recognizing that their costs seem prohibitive, many colleges promise to meet 100% of the need of admitted students. While this sounds good, it’s a bit of an empty promise—especially at private colleges—largely because those places can exercise discretion with regard to how need is determined. The need analysis is much more straightforward at most state universities.

In reality, this means your definition of “need” can vary dramatically from that of a college. Remember, an EFC has been revealed to you on the SAR. Private colleges can choose that number of they can elect to justify another number based on its interpretation of the PROFILE. In fact, it is likely that a dozen different colleges might look at your financials and come to a dozen different conclusions regarding your EFC!

Given the subjectivity involved with defining “need,” statements like the above should be taken with a grain of salt. Colleges “hold all the cards” with regard to how need is defined (differential need analysis) and what might be regarded as acceptable financial aid components (preferential packaging).

  • Differential Need Analysis   The subjectivity of need analysis on the institutional side is due in large part to “differential need analysis,” a common, albeit discreet, practice at institutions that have various methodologies (FAFSA, PROFILE, etc.) at their disposal for calculating need. Given options, they can choose the need analysis “answer” that best suits their purposes. This is why it is important to put yourself in competition for admission at colleges that value you for what you have to offer. They will choose the methodology that allows them to treat you most generously.
  • “We are committed to eliminating loan expectations for some or all of our admitted students.”   Again, this sounds good, as it would seem the institution is committed to your debt-free education. Frankly, it might work out that way, in which case, good for you! Imagine, though, a scenario in which the FAFSA projects your EFC at $10,000, but the institution elects to justify its need analysis on the PROFILE, which shows an EFC for you of $15,000. If you cannot come up with the $15,000 in cash, you or your parents will end up borrowing the difference. Even if the college uses the FAFSA analysis and gives you an award based on an EFC of $10,000, you still might be feeling “cash poor” such that borrowing becomes a necessity.
  • Preferential Packaging of Financial Aid   Another reason that colleges can make the claim to meeting 100% of the demonstrated needs for admitted students is that they get to decide what constitutes a financial aid award. For example, meeting 100% of need with grant or scholarship support looks a lot different than meeting it with a combination of student and parents loans from a range of government, institutional and private sources. You can be sure that the composition of your financial aid awards will vary according to the manner in which you are valued by the institution.
  • “We are ‘need blind’ in the admission process.”   “Need blind” admission is a noble intention. By definition, it applies to every candidate in every aspect of the selection process—no exceptions. It also presumes an unending reserve of financial aid funds at the institution. In reality, funds are not unlimited and exceptions must often be made to ensure that the financial aid budget is not overspent. If you have chosen to apply to institutions because they promise to be need blind—to look only at your application for admission, not your family’s financial status—you are about to discover there is no material benefit to you in that statement.

In the final analysis, it is vital that you go into the “purchase” phase of the college selection process fully aware of the nuances and variability of financial aid strategies employed by colleges that will have a bearing on cost and affordability for you. Each place will treat you in a manner reflective of its desire to invest in your enrollment. If you have questions about the need analysis or the financial aid awards you receive, it is imperative that you speak directly with the financial aid officers at the colleges in question. When you do, don’t expect to negotiate. Rather, present an appeal that is based on new information—and hope for the best!

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