We’ve heard the horror stories.
Someone applies for Federal Aid and receives a whopping $0. Or, better yet, they apply with what they believe is a significant level of need and receive very little.
Why is this? Let’s break it down.
Your Expected Family Contribution
When you fill out the FAFSA, you will enter information regarding you and your family’s financial situation. This may include information such as taxed and untaxed income, assets, benefits (such as unemployment), and more. With that, you will also be asked about your family’s size and the number of family members that will be attending college during that same year.
This information is then used to calculate what is known as your EFC, or your Expected Family Contribution. The formula to find your EFC is established by law.
The name of this metric is slightly misleading in that your EFC is not the amount of money you or your family will have to pay for college or the amount you will receive in aid. This metric is used by financial aid staff to determine the amount of aid you are eligible to receive.
The Cost of Attendance (COA)
The next metric used in calculating your aid is your COA, or Cost of Attendance at the school you choose to attend.
At most 2- and 4-year institutions, your COA will be calculated based on the entire school year (fall and spring semester). For career schools or programs that operate on a different structure, such as an 18-month certificate program, the COA may cover a different time period than a year.
If attending at least half-time, the COA will estimate the total of the:
- Tuition and fees
- Room and board (living expenses and housing)
- Books and supplies
- Transportation
- Loan fees
- Miscellaneous expenses
- Allowance for childcare expenses
- Disability-related expenses
- Costs for study-abroad programs
Note that in this COA calculation, there may be expenses you don’t end up incurring. For example, many universities offer their own health insurance. Many students who are still on a parent’s plan will opt out of the university-sponsored insurance, thus, removing the cost of that from the overall COA. However, the university’s estimated COA is what will be used in your Federal Aid calculations.
Need-Based Aid
These two metrics are then used to determine your financial need with a very simple formula:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need
The result is then used to determine how much need-based aid you are eligible to receive (pending that you meet other eligibility requirements).
Need-based aid is slightly limited in that you cannot receive more need-based aid than the amount of your financial need.
For example, if your COA was $30,000 and your EFC was determined to be $16,000, your financial need would be $14,000. Therefore, you wouldn’t be eligible to receive more than $14,000 in need-based aid.
Need-Based Federal Aid comes in these four forms:
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
- Direct Subsidized Loans
- Federal Work Study
Non-Need-Based Aid
After your need-based aid is assessed, your institution will determine how much non-need-based aid you can get, utilizing the following formula:
Cost of Attendance (COA) – Financial Aid Awarded So Far* = Eligibility for Non-Need-Based Aid
*This includes aid from all sources such as your school, private scholarships, etc.
Non-Need-Based Aid is calculated without your EFC in mind. It looks strictly at how much of the COA is not being covered by other financial aid.
Let’s use the same example from above.
If your COA was $30,000 and your EFC was determined to be $16,000, your financial need would be $14,000. Therefore, you would be eligible to receive no more than $14,000 in need-based aid.
Let’s say you were awarded $10,000 in need-based aid. The institution would then do the following calculation to determine your eligibility for non-need-based aid:
$30,000 (COA) – $10,000 (Financial Aid Awarded So Far) = $20,000 (Eligibility for Non-Need-Based-Aid)
These numbers could get a bit more funky-looking if you had private scholarships or other sources of aid, but for simplicity’s sake, this would leave you eligible for $20,000 in non-need-based aid.
Non-Need-Based Federal Aid comes in the following forms:
- Direct Unsubsidized Loans
- Federal PLUS Loans
- Teacher Education Access for College and Higher Education (TEACH) Grants
Crunching the Numbers
All of these different metrics and formulas are used to determine the amount of aid you receive in your aid package. Note that these formulas largely calculate how much you are eligible for and in no way guarantee that you will receive that full amount.
Summary
That was a lot of calculations, but hopefully this gif is entirely unrelatable after reading this.
While you won’t have much of a hand in actually calculating any of these metrics, it’s important to understand how the numbers you see in your aid package got there. For tips on how to navigate your financial aid award letter, check out our blog that breaks it down!