“Financial Aid: December College Planning Tips”

By Peter Van Buskirk

Getting into the college of choice might weigh heavily on your mind at the moment, but the odds are the prospect of affording college costs looms even larger. And, if financial aid is critical to your ability to attend that college—or any college for that matter—now is the time to get organized around the possibilities. The following tips are intended to help bring order to the financial aid application process.

1. Know the five sources of funding for college. The first source is—no surprise—the student’s family. The second and third are the federal and state governments which provide cash—grants, loans and work study funds (in your name)—to your chosen college in amounts that can total more than $10,000 per year.

Colleges, the fourth source, then can choose to offer “assistance” that addresses the difference between the total cost of attendance and the combined resources coming from the family and the federal and/or state governments. If they do so in the form of a grant or scholarship, they are effectively agreeing to forgive you payment in that amount. They might also offer a range of borrowing opportunities for you and your parents which will result in more cash to the college—money that you will pay back to lending institutions.

The fifth source of funding involves service organizations, philanthropic foundations and places of employment that offer scholarships. After the funding from your family, each of the other sources is integral to the overall financial support you might receive.

2. Become familiar with your “EFC.” As noted above, your family is presumed to be the first source of funding for college. The amount that your family is expected to contribute is known as your Expected Family Contribution or “EFC.” Simply put, your EFC is the difference between your family’s income and assets and your family’s cost of living. The actual determination of amounts for each category is drawn from multiple data points that are derived from the financial aid forms listed in #3 below.

3. Complete the required forms in a timely fashion. The determination of your EFC and your eligibility for funding from sources beyond the family starts with the completion of the Free Application for Federal Student Aid (FAFSA). A government document, the FAFSA, calculates your EFC and determines your eligibility for federal, state and, in many cases, college funds. Your family should plan to complete the FAFSA as soon as possible using financial data from your IRS tax return two years prior to the year you start college. Upon completing the FAFSA, a Student Aid Report (S.A.R.) showing your EFC will be sent to you and each of the colleges you have listed on the FAFSA.

In addition, many private institutions require the College Scholarship Service (CSS) Profile as well to the determine your eligibility for institutional funding. More granular in its assessment of family finances, the Profile should also be completed as soon as possible if you are applying to any of the schools that require it. A report will be sent to the colleges you have designated. You will not receive any information regarding this need analysis.

Some colleges also require the completion of their own forms. Make sure you know the forms that are required for each college and submit them at the earliest possible date.

4. Understand the concept of “need.” In the conversation about financial aid, “need” is the difference between the total cost of attendance and your Expected Family Contribution (EFC). If your EFC falls short of the cost of attendance, then you have demonstrated need. Theoretically, colleges will provide financial aid to meet the demonstrated needs of the students they admit. As you will see in #5 and #6 below, though, the determination of “need” can vary from place to place as will the disposition of each college with regard to meeting your need. Moreover, you should be prepared for the likelihood that the need analysis completed using the FAFSA data might show an EFC that is lower than that revealed by the Profile.

5. Don’t make assumptions about EFC or need. And be wary of online forecasters or of any service that suggests it can optimize your financial aid potential. While parameters for determining financial need might seem to be predictable, the processes of admitting students and awarding financial aid are heavily nuanced across institutions.

For example, colleges typically engage in subjective practices such as differential needs analysis (they will choose the methodology—FAFSA or Profile—that allows them to justify the amount of “need” they will recognize) and preferential packaging (different amounts of grant, loan and work study are assembled that reflect the value attached to a given candidate) to leverage the enrollments of students they want the most. As a result, online forecasters, including the net price calculators found on college websites, rarely provide an accurate picture of your likely out-of-pocket expenses should you be admitted. Moreover, some colleges will eventually make financial aid awards that come short of meeting the demonstrated need of admitted students or that include disproportionate amounts of loan—funds that will ultimately come from your pocket on top of the EFC.

6. Be prepared for the fact that not all colleges will meet your full “need.” As colleges preferentially package financial aid (see above), they will be sure to treat well those students whom they value most highly. Students who appear to be very good—but not superior—in the evaluation of credentials, might be admitted with “gapped” financial aid awards. In other words, the financial aid will come short of meeting the need (the differential between total cost of attendance and your family’s expected family contribution). Unfortunately, such financial aid awards are not very transparent—the true EFC is rarely revealed on the award letter and it is only after calculating the numbers yourself that you find the total out-of-pocket expense your family will need to assume.

By the way, don’t assume that a financial aid award comprised of large sums of loans, to be taken by the student and/or the parents, is meeting your need. The college is simply creating a range of sourcing opportunities for your family to generate cash that will help to cover our college costs. The amount of student loan to be assumed in the first year does not need to be greater $7,500 and can be less. While it might be prudent to use the parent loan (PLUS) to address your cash flow needs within the EFC be careful about taking out PLUS loan monies as part of the financial aid award.

7. Don’t wait to apply! Waiting until the admission decisions are known or until you have completed your tax returns to begin the financial aid process is extremely risky. The reason: most institutions “spend down” their financial aid budgets as they proceed through the selection process. If you wait until you have an offer of admission in hand to apply for aid, the money might well be gone.

8. If the numbers don’t look right, appeal! Soon after you receive an offer of admission, you should expect to receive a financial aid award letter if you have applied for financial aid. This will be true of candidates for both Early Decision and Regular Decision. Hopefully, the numbers are consistent with your expectations and you feel reassured about your ability to meet the cost of attendance for the colleges in question. If not, contact the financial aid office at the school with your questions and any new and relevant information that might be considered in an appeal of your financial aid award. Do this as soon as possible.

9. Discuss cost/affordability at home. Communication about cost and affordability at home is critical to good decision-making. Make sure everyone is on the same page with regard to how much you are able/willing to spend on a college education. This “ounce of prevention” can help to avert stressful conversations about paying for college at the end of the process.

10. Manage expectations. Know where your credentials will be most competitive and set your (college) expectations accordingly. Hundreds of millions of financial aid dollars will be awarded each year—and they will go to the students who are valued most at the institutions in question.


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