Category Archives: FAFSA

EFC, Net Cost and Aid Packaging

Step 1 in figuring out how to pay for college is estimating your EFC. You can use the FAFSA4caster, or the more detailed EFC Formula Guide (note that’s for 2018-2019; the 2019-2020 version should be released this month). But EFC is just a starting point: schools aren’t required to meet your need, and they certainly aren’t required to meet it through gift aid. That’s why net cost and aid packaging are important concepts to understand.

Colleges are required to have net price calculators on their websites. Many have adopted the helpful tactic of linking them through the College Board website so you can save your information rather than re-enter it for each school. A good net price calculator will ask about all factors that go into aid decisions at the school– need and merit, if applicable. If you’ve estimated your EFC, you might be disappointed at your net cost. For example, the closest anyone came to our EFC was $6,000 above it. Our net cost for two schools we visited was $10,000 more than our EFC; another was $20,000 more; a fourth offered us full-price admission. (In our case, the gap between EFC and net price is partly due to the fact that the FAFSA divides your EFC evenly between two college-aged children, whereas private schools tend to assume it’s not evenly divided; and partly due to the CSS PROFILE including home equity and thus calculating a higher EFC to begin with.)

Once you’ve got your net cost, though, you need to look at the actual aid package. Taking a step back, colleges are generally funded primarily through one of the following:

  • State or other public revenues
  • Endowments
  • Tuition

Aid packaging philosophies follow from there. Publicly-funded schools typically rely on state grants and Title IV federal aid programs including Pell Grants, direct student loans, and parent PLUS loans. (Yes, some public universities also have sizable endowments which may contribute additional scholarship funds.) Endowment-funded schools tend to have larger grants available, which are awarded based on the institution’s priorities. Tuition-funded schools are just that, and will have limited scholarships or discounting available outside of federal aid programs.

All by way of saying, a net cost of, say, $25,000 may be considerably more than that, depending on how the aid is packaged. Let’s say a school costing $60,000 annually offers the student the following:

  • $25,000 scholarship
  • $2,500 subsidized direct loan
  • $3,000 unsubsidized direct loan
  • $2,000 of work study
  • $2,500 parent PLUS loan

In that case, the student’s net cost is really $35,000, not $25,000, because the work study and loans are in fact the student’s or family’s money.

So your EFC is a good starting point, but once you start identifying schools of interest you need to be doing their net price calculators, and then comparing how the aid is packaged.

Need-Blind, No Loan, 100% Need Met Policies

On our recent college odyssey, we heard about a lot of need-blind admissions policies, and no loan/100% of need met financial aid policies. These are mostly good things but perhaps not as good as they sound on the surface, so it’s worth unpacking them. Continue reading Need-Blind, No Loan, 100% Need Met Policies

What Year?

With the change to prior-prior tax year reporting on the FAFSA and CSS PROFILE, it seems that keeping track of what data dates pertain to what is becoming increasingly complicated. This table summarizes the relevant years or dates for each school year.

School Year 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025
FAFSA/ PROFILE Income Year 2016 2017 2018 2019 2020 2021 2022
Assets As Of October* 2017 2018 2019 2020 2021 2022 2023
AOTC Tax Year** 2018, 2019 2019, 2020 2020, 2021 2021, 2022 2022, 2023 2023, 2024 2024, 2025

* Assets are as of the filing date, which may be as early as October or into the following year depending on the school’s filing date.

** Remember that the AOTC can only be claimed for four tax years, so families should decide whether the fall of freshman year is better than spring of senior year for claiming. With the income limit of $160,000 (married filing joint) or $80,000 (single), some families might not be eligible every year.

Parents may find that different strategies are needed during different years. For example, a family with a student beginning college in fall of 2020 might reduce pre-tax retirement contributions this year (to increase taxes, which are deducted from income on the FAFSA and therefore reduce EFC) and then maximize contributions beginning in 2021 to reduce AGI for AOTC claiming purposes.

 

 

EFC vs Net Cost

Families who are a few years out from college should calculate their EFC, but as college approaches and students start identifying schools they’re interested in, net price calculators become far more valuable. There can be vast differences between EFC and net price, and even significant school-to-school differences in net price due to different aid policies. Continue reading EFC vs Net Cost

Student Loans by School

If you’ve been reading this for a while, you probably know I’m a huge fan of College Navigator as an information source. It’s run by the National Center for Education Statistics and has some information that any prospective student should be aware of. Last week I mentioned the loan default rate by school. Another affordability-related topic that prospective students should consider is the student body’s borrowing rate– also available on College Navigator. Continue reading Student Loans by School

Negotiating an Aid Award

When it comes to negotiating and aid award, it’s helpful to understand both how the Professional Judgment (PJ) process works and how negotiating in general works.

With the PJ process, the school has a specific set of constraints and you must work within them. The Department of Education allows schools to make adjustments “on a case-by-case basis only to adjust the student’s cost of attendance or the data used to calculate her Continue reading Negotiating an Aid Award