Category Archives: Need-based Aid

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

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

Manipulation of Student Loan Default Rates

A recent New York Times article brought attention to a GAO report about schools manipulating their cohort default rate data to avoid federal sanctions that can result from schools having too high a percentage of students default on their loans. Because cohort default rates are a metric I’ve encouraged prospective students to look at, I wanted to provide some additional detail. Continue reading Manipulation of Student Loan Default Rates

Scholarships and Why You Still Need to Save

According to the College Board, about 2/3 of college students receive some form of scholarship or grant. And the NCAA doles out more than $2.9 billion in scholarships annually. Many parents see numbers like those, look at their own children’s awesomeness, and say, “We’ve got this.” But breaking down those numbers shows that you will still pay quite a bit for college and therefore probably need to save. Continue reading Scholarships and Why You Still Need to Save

When to Accept an Admission Offer

Sorry not to have written anything in a while. We had spring break (more on that later) and now it’s the crazy season at my day job (financial advisor).

With admission offers out and acceptance deadlines coming, many students jump on the acceptance from their top choice. Often, that’s the right thing to do: it relieves the stress Continue reading When to Accept an Admission Offer

Feeling Guilty About College Savings?

If your college savings fund is generating negative emotions, you’re in good company: A recent survey by Student Loan Hero found that almost half of parents who are saving for their children’s college feel guilty about not saving enough. The survey also showed some rather worrying data: Continue reading Feeling Guilty About College Savings?

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