April 14, 2015

What Every Family Needs to Know About FAFSA & Financial Aid

 

Getting a better idea of how FAFSA and financial aid work can help you maximize the amount of aid you receive.

Why is the cost of college such a mystery for most families? The bulk of students do not pay the full quoted tuition price but instead will receive a financial offer from all of the colleges they have been accepted from. The price will be different for every family.

 

The offer is calculated with information gleaned from the FAFSA (which also means if you didn’t fill out the FAFSA, you aren’t getting any financial aid).

How the FAFSA Works

When families submit the FAFSA the government calculates a figure for them known as the Estimated Family Contribution (EFC).

The Estimated Family Contribution (EFC) is what your family is expected to contribute to the cost of a college education. It is important to note that this is not what you think you can contribute; it’s what Uncle Sam thinks you can contribute. This amount, as you would probably expect, may or may not have any relationship to what you think is realistic.

In order to establish your EFC and to be eligible for any type of financial aid from the federal government, state governments, or from the college or university itself, families must file the Free Application for Federal Student Aid or FAFSA, which is located online at www.fafsa.ed.gov, and is filed yearly.

As the name implies, the FAFSA is free to file. If you are being asked to pay in order to file, you are in the wrong place.

You can submit this form as early as October 1st before you head to college using that year’s tax return.

Only one FAFSA is filed, even if you are applying to multiple schools. A section of the FAFSA will ask you what institutions you want the FAFSA sent to. You should send this to all schools you have applied to as well as any schools that might be your last minute fallbacks. The schools will not prepare a financial aid package until you are accepted, and unlike college applications, it costs you nothing to list them on the FAFSA.

Per this tip from Inside Higher Ed, you will want to add the schools in alphabetical order, so that the colleges cannot infer attendance preference and offer packages (or admission) accordingly.

NOTE: Do not wait until you get an acceptance letter before you apply for financial aid. Deadlines set by the colleges are vital to getting money, especially grant aid.

 

Crucial Things to Know About your Financial Aid Offers

 

1. Your Student’s Cost of Attending Will Likely be Higher Than Your Estimated Family Contribution

Colleges use your EFC to determine your financial need. In theory, the school should offer you as much financial aid as you need to cover the gap between the sticker price and your EFC. In practice, this is rarely the case. Students often have to cover the gap by taking on additional loans.

2. Financial Aid Packages May Include More Loans Than You Think

A financial aid package includes loans, scholarships, grants and work-study. Unfortunately, it’s not always crystal clear to families what constitutes a loan and what constitutes a scholarship. Some financial aid packages have even listed loans as “awards”.

Not every school does this, and some are quite clear about each item that appears. But double-check to make sure you know how much of the financial aid package is made up of loans, and what type of loan they are. Subsidized loans are generally preferable to unsubsidized.

3. The School Offering the Biggest Discounts Won’t Necessarily be the Best Deal

When you go grocery shopping you know that $11 bottle of olive oil is still more expensive than the $8 bottle of the same size, even though it says it’s been marked down from its original price of $14.

While there’s a lot more to choosing a college than choosing what groceries will end up in your cart, the same philosophy about discounts apply. You may be excited to see a large scholarship on your student’s financial aid package, but if it’s an expensive college, to begin with the scholarship may still not make it affordable for your family. It’s helpful in this instance to think of scholarships as marketing dollars the college uses to sway your student.

Comparing Your Offers

There is other tricks college use, like front-loading your financial aid offer with lots of grants for freshmen that go away in your sophomore year. Or packing an aid package with loans making their offer appear to be generous when it really isn’t.

To top it off, there is no standard format for how colleges report their financial offers, meaning comparing offers can be difficult. How do you know if the one you received is fair?

Based on data the schools themselves report to the government, you can determine whether you received more or less than the typical applicant. If you want to try our tool that automatically compares your financial aid offers, start here!

Few families know that you can contact the college to ask for more money in the form of scholarships and grants. If you want help with this process, check out Project College Cost Cutter.

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