When applying for college or university, the first thing any student and family should do is complete the FAFSAⓇ. The FAFSA processes all of the calculations that lead to determining your family’s demonstrated financial need -- how much money you’ll need to attend school.
Yes, filling out the FAFSA is long and there are many questions, but the final calculation that needs to be made is quite simple:
Cost of Attendance
- Expected Family Contribution
Demonstrated Financial Need
Cost of Attendance (COA) is the price of attending a specific school. This is more than just tuition. This is tuition and fees, room and board, books and supplies, transportation, etc. The COA is different at every school to which you apply.
Expected Family Contribution (EFC) is how much your family is expected to pay towards that education. This is another - more complicated - calculation completed by the FAFSA. This formula includes family size, taxed and untaxed income, family assets, amount of family members enrolled in school, etc. For the complete EFC formula, visit the FAFSA form site and find your upcoming school year.
Once the EFC is subtracted from the COA, the demonstrated financial need is produced. This is how many dollars, according to the FAFSA, that the student would need in addition to their EFC to attend a particular school.
The Variability of Financial Need
All parts of the financial need equation are variable, meaning that your financial need could vary drastically from school to school and year to year.
The cost of attending any individual school will vary even just by the differing tuitions and room and board prices. It can also change depending on your major: Are there lab fees? Or specific equipment needed for specialized work? This will all change your COA.
Your EFC is also variable. The amount that your family makes every year might change. Have there been any withdrawals from your retirement plan this year? Perhaps another sibling started school. All of this and more will change the EFC value.
This is why you must submit the FAFSA every year.
Financial Need and Income Level
Low-income families tend to get more financial aid than high-income families. In theory, the less money you have to contribute to a student’s education, the less you will have to pay. In some cases, the EFC for very low-income students can be $0.
To explore the breakdown of financial aid provided in the 2015-16 school year, a Student Aid Study was conducted by the U.S. Department of Education. It was found that just over 96% of undergraduate students with family incomes under $20,000 received financial aid in some form, while just over 78% of students in families making over $100,000 received aid.
Though the incomes of these families varied drastically, the vast majority of both groups — over three-quarters in both cases — received financial aid. This is because the cost of attending school will affect different income levels differently.
While a low-income student might try to attend a school that costs $15,000 and receive a financial need value of $10,000, a higher-income student might apply to a $30,000 school and have a need of $10,000 as well. Though their EFCs are very different, because the COA is doubled at one of the schools, the financial need for both students is the same. This is why many high-income students also find themselves eligible for at least some financial aid.
Financial Need vs Financial Aid
Once your EFC is calculated, it is provided to your schools of interest. Ideally your financial need will be covered by the school of your choice. There are a number of schools all over the United States that guarantee coverage of your entire demonstrated financial need. This might be through a combination of scholarships, grants, federal loans, and participation in the work-study program.
Most schools, though, can’t guarantee this kind of coverage. They might cover a lot or at least some of your financial need, but don’t give you the full amount. In this case, financial aid offered through the school does not equal your financial need. If there is a gap between your school’s financial aid and your financial need, you can aim to fill that with outside scholarships and private loans. Learn more about filling your financial aid-to-need gap.