My family and I are confused. Earlier this spring, we received a financial aid award from the college I plan to attend. The award letter showed that our Expected Family Contribution (EFC) for the 2014-2015 academic year is $15,500. Based on this amount, while a bit of a stretch for our family’s finances, my parents and I agreed we would be able to pay the amount. When we received our bill from the college last week, it showed that we needed to pay $22,500, instead of the original $15,500. Why would the amount on the student bill be $7,000 more than what the college’s financial aid award letter originally indicated?
Despite the confusing terminology, the expected family contribution (EFC) is not the amount a family will have to contribute to pay for college. The EFC is a measure of the family’s financial strength that is used to determine eligibility for need-based student financial aid.
In most cases, the net price will be higher than the EFC. The net price is the difference between the total cost of attendance and gift aid. The cost of attendance includes tuition, fees, housing, dining, textbooks, transportation and miscellaneous expenses. Gift aid is money that does not need to be repaid, such as grants and scholarships. The net price is the amount the family will have to contribute from savings, income and loans to cover college costs.
Based on data from the 2011-2012 National Postsecondary Student Aid Study (NPSAS), the net price averages about $7,000 greater than the EFC for undergraduate students at 4-year colleges and universities. The difference between the net price and EFC is about $4,000 at 4-year public colleges and more than $10,000 at 4-year private non-profit colleges. The actual difference will vary from college to college, depending on the generosity of the college’s financial aid policies.
Many colleges do not provide enough financial aid to cover a student’s full demonstrated financial need, leaving a gap (unmet need) that the family must pay in addition to the EFC. Also, many financial aid packages include loans, not just grants. Loans are borrowed money that must be repaid, usually with interest.
Financial aid award letters are usually presented as estimates of available aid, not binding commitments. Families often discover that the final college bill differs from the amounts listed on the financial aid award letter.
Families who experience financial difficulty because the financial aid package falls short of the family’s expectations should talk to the college’s financial aid office. Tell the college’s financial aid administrator about any unusual family financial circumstances, as the college may be able to make an adjustment to compensate. Unusual circumstances include anything that has changed since last year, such as job loss and salary reductions, as well as anything that sets the family apart from the typical family, such as high dependent care costs for a special needs child or elderly parent or high unreimbursed medical and dental expenses.
College financial aid administrators may also refer the family to various forms of education financing, such as tuition installment plans, Parent PLUS Loans, and private student loans.
Otherwise, the main option available to families is for the student to transfer to a less expensive college, such as an in-state public college. But, even at a public college, the net price can be thousands of dollars greater than the EFC.
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