Online Guide to
College Planning

How to get a university grant, scholarship, or student loan under the College Financial Aid System!

THE BASICS OF THE FINANCIAL AID SYSTEM

The whole education financial aid process is based on one simple calculation. All "need based" financial aid is awarded based on the amount of financial need that a family and student has at a particular school. Financial Need is calculated (search the web for a financial aid calculator) by taking the cost of attendance (which includes college tuition, fees, books, room and board, living expenses, transportation costs, etc.) and subtracting the family contribution (which is calculated based on the parent's income and assets, and the student's income and assets). The difference between these two numbers is the total amount of need or eligibility for "need based" aid that a family has at a particular school.

So, for example, let's say the cost of attendance at a particular school is $20,000, and the family contribution is $10,000, then the family's need at that particular school is $10,000. COA = $20,000 - F = $10,000 FN = $10,000. To completely understand this formula, you must first understand how financial aid offices compute financial aid for college students, i.e., calculating the cost of attendance, the family contribution, and financial need.

COST OF ATTENDANCE

Cost of attendance is quite simply the total amount of money that it will cost a student to attend a particular school for one year. This budget will include tuition, fees, books, room and board, living expenses, transportation costs, etc. Many families falsely assume that the only cost is tuition, when, in fact, a school must include all relevant costs when calculating eligibility for financial aid. If you notice that a school did not include all relevant costs in their award letter to the student, its is important to immediately bring it to the school's attention since an increase in the cost of attendance will also cause an increase in the financial need or eligibility for financial aid.

THE COLLEGE FINANCIAL AID FORMULA
THE FAMILY CONTRIBUTION:
FEDERAL VS. INSTITUTIONAL METHODOLOGY

The next part of the financial aid formula is the family contribution, which is the minimum amount that a family is expected to pay at any school. There are actually two different types of "Methodologies" for calculating the family contribution - the Federal Student Aid Methodology and the Institutional Methodology.

The Federal Methodology includes all or part of the following items when determining the family contribution: The student's contribution is calculated by adding:

1. The student's taxable income of assets +
2. The veteran's educational benefits +
3. The student's untaxed income and benefits +
4. Federal, state and social security tax paid +
5. An income protection allowance

The total equals the Student Contribution. The parent's contribution is determined by adding:

1. The parents taxable income and assets +
2. The parents untaxed income and benefits +
3. The federal, state and social security taxes paid +
4. An asset protection allowance dependent on the age of the oldest parent

The total equals the Parent Contribution. The student and parent contributions are then added up to determine the total family contribution.

Some private colleges use a different college financial aid methodology called "Institutional Methodology" when calculating the family contribution and determining eligibility for their own campus-based funds. Generally, the Institutional Methodology will include things that are not included in the Federal Methodology, like the value of the parents' home, an allowance for medical and dental expenses, and tuition for younger children. It also does not allow a parent to be included as an additional student in college when awarding the school's campus-based funds.

Some schools will also include the value of retirement plans, and insurance and annuities in this college financial aid calculation. So, a family contribution of $5,000 under the Federal Methodology may become $10,000 or more under the Institutional Methodology. Therefore, you must be aware that the Federal calculation of the family contribution is the minimum amount you will have to pay, but in many cases, it will be higher than that at different schools.

In fact, it is absolutely impossible to determine exactly what a family's contribution will be under the college financial aid system until they receive their actual award letter from each school. However, there is a light at the end of the tunnel! Schools must use the Federal Methodology when awarding Federal financial aid. It is just as important for you to be aware that the family contribution calculation can change from school to school.

FINANCIAL NEED

The financial need is determined by subtracting the family contribution from the cost of attendance at a particular school. Colleges will then set out to fill all or a part of this need depending on the school's ability to meet that need. Some schools will have the ability to meet 100% of need, while others can only meet 50% or less. It is important to know which schools will have the ability to meet most or all of your need. You should learn what percentage of need they meet (in general) at each school, so you will know, in advance, whether or not a school will be affordable.