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How Is Financial Aid Determined

Article on How Is Financial Aid Determined

Students considering their college options should also dedicate time to assessing available financial aid. Students are likely to be eligible for some form of government assistance, whether through loans, grants, or bursaries. The choice of school can in some cases be determined by the cost of attendance and available financial aid. Here is a quick guide outlining how that financial aid is determined.

Step 1: The Free Application for Federal Student Aid (FAFSA)

The FAFSA is the first step for a student to discover their eligibility for financial aid. Now available online at www.fafsa.ed.gov, the FAFSA determines eligibility for aid including federal grants such as the Pell grant (which is non-repayable unlike student loans). Determining the student’s status as either dependent or independent is the first stage of the FAFSA, with classifications covered at the government site.

Step 2: What Information is Included in the Determination

Students and their families should know that numerous pieces of information are required for the FAFSA. These include detailed assessments of earnings and income, both taxable and untaxed, for the previous financial year for the student and their parents. Other information such as dependents, residency status, business financial reports and mortgage details are also taken into consideration.

Step 3: Are Parents Expected to Pay for Everything?

It is not assumed that all parental income can be put towards college costs, instead reasonable amounts are estimated for general living costs and for things like retirement plans or emergencies. In addition the value of the family home is not included in the assessment of need although an investment property will be classed as an asset and will affect calculations.

Step 3: The Expected Family Contribution (EFC)

After filling out the FAFSA and dependency status, the amount the student’s family is expected to contribute is determined based on an analysis of need. A set formula is used to calculate this EFC and this does not depend on which school the student wishes to attend. Financial aid assessments generally assume full-time enrollment; part-time attendance will affect the amount of financial aid awarded.

Step 4: Verification

The student may be asked by their chosen college for verification of the information contained in the Student Aid Report they will now receive. This can require submitting copies of tax returns and other financial documents. If a student fails to report information accurately they are liable to pay back any funds received on the basis of false information; they may also be fined and/or face imprisonment.

Step 5: Attendance Costs

Each college outlines its own cost of attendance based on housing costs, tuition fees, books, and so on. Financial aid is determined by subtracting the EFC from the cost of attendance at their chosen school. The student will receive a Student Aid Report detailing their EFC, and financial aid awarded, including details of grants and student loans as relevant.

If a student’s circumstances change during the application process they should log back into their application online and submit new information. Knowing how much aid is available allows the student to make an informed choice for future study.