About 70 percent of all college students receive some form of financial aid. This support comes from many sources and can be in the form of scholarships, grants, loans /and/or work-study. Colleges award these funds on the basis of academic merit, special talent or demonstrated financial need. Merit and special talent awards are made by colleges to those students that exhibit high academic achievement or who have a special ability or talent (e.g. athletic ability, musical ability, etc.) The remaining financial aid funds are awarded on the basis of need - the difference between what it costs to attend a college and what the family can afford to pay. The question most often asked by families when they meet with a financial aid officer is, how is financial need determined?
What is financial need?
Simply stated, financial need is the difference between the cost of attending a particular college and the amount of financial support your family can provide to cover these costs. The basic model for calculating need is shown below.
The dollar amounts for the items that make up the cost of attending are determined by the college. Some of these (tuition, fees, room and board) are paid directly to the school. Other costs (transportation, books and miscellaneous) are real costs that you will experience when attending college but they are not paid to the school directly.
The amount of the parent and student contribution varies for each family and is determined by analyzing the income and assets of each family.
Who determines the family contribution?
This is a simple question that has a complex answer. Who gets to determine the family contribution depends on who is supplying the money to fund the financial aid. If the money comes from the federal government, the expected contribution is calculated using a standard formula developed by United States Congress. If the money comes from some other source, the funding agency or institution can either use the calculations made by the federal government or develop its own formula for calculating family contribution. The major point of confusion occurs when an institution awards a student financial aid that is funded by the federal government and financial aid funded by the college itself or some non-federal agency. In these cases, funds coming from the federal government must be awarded according to the rules established by Congress while funds coming from the institution, or other non-federal source, can be awarded using the institutions formula. As a result, the family contribution required by different institutions can vary for the same family. For example, one institution may determine that a family should contribute $10,000 while another institution may decide that the family should contribute only $8,000. In both cases however, the amount of family contribution required to participate in federally funded financial aid programs would be identical. The difference occurs in what the institution requires of the family to participate in institutionally funded aid programs.
How is the family contribution determined?
This is another simple question with a complex answer. Let's take a look at the federal approach. Each year, the federal government requires those who want federally funded financial aid to complete a form called the Free Application for Federal Student Aid, more commonly referred to as the FAFSA. The purpose of the FAFSA is to collect information on a family's annual income and assets. Information for the parents' and student's income and assets must be submitted. The student decides which college or colleges should be notified of the results of the analysis. Upon receipt of the information from the processor, the college will make a financial aid offer to the student.
Families are encouraged to complete and submit the FAFSA form in January or February of your senior year. Most institutions will begin awarding aid in late February and will continue through spring. Note - a student must be admitted before an institution will award financial aid.
The school may then decide to employ its own assessment methodology to determine how to distribute its own funds. Many schools simply use the results of the FAFSA analysis but some schools require the student to submit additional information.
Where can I find detailed information about the needs analysis process?
A complete description of the process can be found on the internet at the Web sites shown below.