We’re continuing to share previews of our upcoming book, Better Off After College. From Chapter Three, "Junior Year: Refining Your List," we discuss some recommended tools for estimating what you'll pay for the schools on your list.
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"As discussed in Chapter Two, you won’t fill out your official FAFSA until October of your senior year—and you won’t get your official financial aid information from the college until after you apply and are accepted. But it’s important you not be in the dark until then about what you’ll perhaps need to pay for college. Here are a few recommended tools to use as you do your research.
Estimating (and Understanding) Your EFC
There is a tool called the FAFSA4caster, from the US Department of Education, which you can use to get an estimate of your EFC. It will also show you the federal financial aid you might be eligible for at a given college, including Pell Grants, work study, and federal loans. Keep in mind that the aid estimates shown by FAFSA4caster are incomplete because they don’t include money from your state or college (need-based or merit aid), or private scholarships. So, it’s best used to get a sense of your EFC before senior year.
Understanding Why Your EFC Seems High
This is a common refrain from parents who see their EFC number and think, “There’s no way I could pay that much per year!” Here are some of the most common reasons your EFC might be high:
- Your household income is high. For most students, a high household income will be the reason for a high EFC. EFC increases as the family’s household income increases, holding all other factors constant. The EFC formula considers both parents’ incomes and the student’s income, with higher-income families expected to contribute more to their student’s education. The formula also increases if the student in question has a higher income.
- You have a lot of non-retirement financial assets (excluding your family home). If your family has accumulated wealth and investments, your EFC can be high, even if your family’s income is low. This includes checking and savings accounts, stocks and bonds, and even the student’s 529 savings plan.
- You live in a low-tax state. Because state taxes can contribute greatly to the cost of living, the EFC formula grants higher state tax allowances to families from states with higher tax rates. A higher allowance results in a lower EFC, because it is deducted from your income in the formula.
- You have fewer children attending college. The more members of a household attending college, the lower each college student’s expected EFC. Note: If, in future years, you’ll have multiple children in college at the same time, your EFC can drop significantly.
Once you have your approximate EFC, you’ll know what your price will be at minimum for most colleges—unless the price of the college is lower than your EFC (in which case you’ll likely get no aid and pay full price), or you receive a generous merit scholarship.
If your EFC is low, look for the share of need that the college meets through grants. A higher percentage of need met means the price to you will be closer to your EFC. Some wealthy colleges have “no-loans” policies which means they do not count loans in their financial aid package, and try to make it possible for you to meet your costs without debt.
If your EFC is fairly high and you don’t anticipate qualifying for much need-based financial aid, you should consider colleges that are more generous with merit-based aid. If your student has high grades and test scores compared to other applicants for a specific college you may be well positioned to get merit money. For example, if a college’s average incoming student has a GPA score of 3.3 and a combined SAT score of 1100, and your student has earned a 3.7 GPA and a 1500 SAT score, you’re more likely to get a merit scholarship (assuming the college awards them).
In other words, if your student is high achieving compared to other students at a particular college, applying there could result in your paying less. This means you may be trading prestige for cost – in many cases a trade that families are willing to make in order to provide a debt-free or low-debt future."