When it comes to filling out financial aid forms there are some families that have high incomes or a lot of wealth that have every reason to question whether it is worth the effort.
First, check to see how you stand for aid eligibility by going to collegeboard.com and use the College Board’s Expected Financial Contribution, or EFC, calculator.
If your EFC if below a college’s total annual cost, you will get help from the college or the federal government in filling in the gap. This is aid based on financial need. If your child has a special talent or ability or high academic standing, they may get a merit award from the college, even if there is no financial need.
So you’re wondering if you will receive needs-based aid. Let’s say you don’t own your own home, you have no savings and just one child. If you have $90,000 in pretax income, your EFC would be around $13,000 a year. If your child went to a college costing $13,000 a year, you would probably get little or no aid. This EFC is based on the “institutional methodology” used by many colleges.
If your income is $150,000, your EFC would be above $30,000, which is the average cost of a private four-year college. If you make $210,000 your EFC might be $48,000 and, at that level, you probably won’t get aid, even if your child goes to an expensive college.
If you have two children in college at the same time, your odds of getting some aid are far better.
If your EFC is just $10,000 or $20,000 above a college’s cost you should probably apply the first year. Give it a try. But you should also understand that, even if you get financial aid, you’ll still have to pay a lot.
Moreover, the aid you reveive may not be grant money. At many schools, the first aid you will get is a subsidized Stafford loan.
With the College Board’s calculator, you can get results not only using the institutional methodology, but also the government’s federal methodology.
The federal formula ignores home equity, while colleges often take it into account. Both formulas ignore retirement accounts, so don’t include these sums when listing your investments. Some colleges may include 401(k)s and similar accounts when determining aid.
Even if you have no chance of receiving aid, you should fill out the federal-aid form if you want to be eligible for the government’s unsubsidized Stafford loan program. Similarly, if you don’t expect aid now but think you will be eligible when your second child applies in two years, you may want to file the aid forms. Some colleges also require students seeking merit aid to file first for needs-based aid.
In addition, apply for aid if you have extenuating circumstances. If you have high medical costs, if your income will be lower in the years ahead, or if you’re incurring high expenses looking after elderly parents, you may receive aid, even if the formulas suggest otherwise.
Related Activities and Side Trips
- College Financial Planning: Options to Reduce the Need for Debt
- Education Resources
- Plan Ahead to Get Financial Aid for College
- Research to Find the Right College to Get the Best Aid Package
- Tips for College-Bound Students – How to Get Into a Good College
- Tuition Discounts to Protect Cash Flow and Wealth
- Understand the Grant, Scholarship and Loan Options for Financing College
- Watch the Asset Allocation of Investments for College Savings
