Financial Aid Calculation & Expected Family Contribution

Theoretically, the formula for determining financial aid is simple:

Financial Aid = Cost of Attendance - Expected Family Contribution

So how do you solve that equation? Just like any other math problem: let's expand our equation and define our terms.

Financial Aid is:

• Government grants (such as the Pell Grant, or state grants like California's Cal Grant)
• Grants and scholarships from the college
• Federal Work Study or a campus job
• Government-issued low-interest student loans (yeah, those are considered "aid"… even though you do have to pay them back someday)

Cost of Attendance (COA) is:

• Tuition (the cost of taking classes)
• Books and supplies (for your classes and studying)
• Fees (for orientation and other things that have to do with being a student)
• Room and board (dorm room and meal plan)
• Living expenses (shampoo, caffeine)
• Travel expenses (airfare or bus fare needed to get to and from school)

Expected Family Contribution (EFC) is:

• Parent contribution (how much money your parents can reasonably contribute from their income, assets, and savings accounts)
• A percentage of money from your savings account (if you have one)
• Some cash from a summer job (most colleges expect you to get a job every summer and contribute about $2,000-$3,000 from your summer earnings, in addition to a percentage of your savings account)
• Your EFC is a number that comes from the FAFSA and, if a college requires it, the CSS PROFILE or other financial aid forms.

Another way you could look at this equation is:

Cost of Attendance = Financial Aid + Expected Family Contribution

If Wishes Were Horses: Financial Aid in the Ideal World

In the ideal world, then, this equation is pretty simple and the total cost of your college attendance is covered. You and your parents are only paying what you can actually afford, and the college and the government are covering the rest. Phew!

Is it possible that you'll get a real-world financial aid award that fits this ideal scenario? Yep. Some colleges really do have the money to give you this lovely package. These are usually the schools with big endowments (a.k.a. fat bank accounts). Try looking for these seven magic words on a college's financial aid website (or give them a call):

“We guarantee to meet 100% of your demonstrated financial need.”

Music to your ears. Just get into that school, and you can be sure that college is going to be affordable for you.

Back to Life, Back to Reality: Meeting and Greeting Unmet Need

In reality, though, the government doesn't provide all that much money in financial assistance for higher education, which puts a big burden on the colleges to shell out tons of their money. And a lot of schools just don't have enough cash lying around to fully meet all students' demonstrated financial need. If you go to one of those schools, your equation might end up looking a bit like this:

Cost of Attendance = Financial Aid + Expected Family Contribution + Unmet Need

What is unmet need? Well, that's money above and beyond what your family can reasonably afford (your EFC) that your school also will not be able to cover. Basically, it's a big fat financial gap that your family somehow has to find the cash to fill. (Shudder.) This is when you start filling out scholarship applications like there's no tomorrow, taking out less-than-awesome loans, and considering less-than-ideal options like living at home while going to school.

Colleges won't advertise on your financial aid award that you've got unmet need. But, in your financial aid award at a school like this, you'll probably notice a higher parent contribution and a higher student loan.

Lots of great schools (such as many fantastic state universities) simply can't provide students with the fat grants we all want. So, if you do end up receiving a somewhat frightening financial aid award, know that you are not alone and you still have options. You can:

• Apply for as many outside scholarships as possible (check out our tips on getting scholarships)
• Take out private loans (like loans from your bank; these aren't nearly as good as government loans, so beware)
• Your parents can take out additional loans
• Consider taking less expensive community college classes during your summers to cover basic requirements (check with your college first to make sure the units will transfer). This way, you could end up graduating early and saving on tuition.
• Get creative and trim down on the college costs you can control: buy used textbooks, take Greyhound rather than JetBlue to and from school, consider living at home if your college is nearby, and so on…

Real Financial Aid Awards

To prepare yourself for really understanding financial aid (instead of shrinking away in fear and confusion) it's good to check out some examples of actual financial aid packages. This way you can get used to reading financial aid awards, and familiarize yourself with how they can differ between schools.

Williams College
Williams College, a small liberal arts college in Massachusetts, guarantees to meet all demonstrated need. They also provide some nice, clear examples of financial aid packages for families at different income levels.

University of Michigan
The University of Michigan, a very large and very good public university, shows several detailed portraits of students from a range of financial backgrounds and the financial aid packages they would receive.

Wesleyan College
Wesleyan, a liberal arts college in Connecticut, provides profiles of students and their financial aid awards.

University of Nebraska, Kearney
The University of Nebraska details sample financial aid awards for a variety of students, including independent students, as well as students at different years of college.