College Financial Aids
There are many ways to fund college. Financial Aids usually are funded in Federal, State, School level and also available via private/nonprofit organizations grants, scholarships and other assistance programs. They are required to re-apply EVERY YEAR. There are 3 types of Admissions: ED – Early Decision; EA – Early Action; RD – Regular Decision.
In sum, there are 2 types of Financial Aids:
- Gift type (grants and scholarship, no need to be repaid). This include Employer contributed (5-7% of total aids); VA program (1-3%); Private scholarship (1-2%).
- Loan (with interest) or work-study type.
There are 2 ways for students to qualify Financial Aids:
- Merit-based (academic and special talents such as athletic, musical, etc)
- Need-based (most of federal (65%) /state (5-10%) / college level aid (20%)).
Parents often ask, “How much financial aids will we receive from school?”
First thing you will need to do is to: fill out your FAFSA Form (Free Application for Federal Student Aid). This is available October of every year. Once the Office of U.S. Dept of Education process your application, they will send your info to all of the schools you listed on FAFSA. It’s kind of like a One-Stop Shop, each school will require and use the FAFSA information to make decision on how much financial aid you are eligible. Each school’s schedule is totally different. You must check with each school to find out when you can expect to receive a financial aid offer.
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Different schools have different formulas, but basically, they use these three factors:
1. Status: Your status of school enrollment (FT – full-time, HT – Half-time, LHT – less than half-time, etc.)
Your status of school enrollment will impact the dollar amount you qualify for. For example, certain student loans are available only to students enrolled more than half-time.
2. COA: Cost of Attendance ( 👍 metrics to compare schools)
COA is usually available on the school’s website. COA usually includes: a) Tuition and Fees, b) Room and Board, c) Books, supplies, living expenses, transportation, loan fees, and more. COA varies from school to school and it’s a very realistic metrics when comparing schools in a whole. Some schools may have lower tuition, but living expenses are much more higher.
3. EFC: Expected Family Contribution
or SAI: Student Aid Index (2024-2025 Academic year +)
EFC is the main piece of the puzzle. It’s the main info you wrote on FAFSA. The EFC info that you filled out includes family income and other sources. It is not necessarily the amount of money your family will have to pay out of pocket for college and it’s not the financial aid you will receive. However, it is a main # used by your school to calculate how much financial aid you are eligible for at that school. The Tax Returns must be filed on-time with a 2 year lookback period.
Since EFC is misleading, SAI is the new future concept.
If you have questions about your EFC, contact the financial aid office at your selected college.
Schools then use this formula to determine your financial need:
Cost of Attendance (COA) – Expected Family Contribution (EFC) or Student Aid Index (SAI) = Financial Need (FN)
Financial Need (FN) – Other Resources (OR) = Adjusted Financial Need (AFN)
For example: if COA is $50,000, EFC is $25,000, the FN is $25,000. This is the “Eligible” Financial Need. If the students have OR (other resources), for example, $2,500 private scholarships from a chess club; $2,500 grants from a fencing club, then the AFN is $20,000.
There are many other resources: 529s & Cash Value Life Insurance, Student / Parent Investments, Scholarships & Grants, Gifts from Grandparents, Home & Retirement funds, Student / Parent College Loans.
Once the school determined your needs + accepted you, you will receive financial aid offers from the schools. All your financial aid offers will be different. Different schools have different aids programs and even same school has different aids available in different years. So you have to be in it to win it.
Different offers can come from different sources: school itself, private foundations, state or federal level. Make sure you understand the type of funding and if you will need to pay back or not.
There are many online tools and calculators that can help you estimate the cost. Knowing those can help you compare schools and make the wise decisions.
If you take out a federal student loan, make sure you have a plan to repay it once it starts: either during enrollment or after you graduate. Due to Covid -19, Department of Education has a student load forbearance program, which temporarily pause the payment, but make sure you understand when the payments restart.
Lastly, if you are behind on your payment, make sure you reach out to your loan servicers, so they can work out a plan that fits you better, because not paying it will have detrimental consequences.