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Home Fafsa Estimating Potential Financial Aid Financial Aid Formulas and EFC Calculators

Financial Aid Formulas and EFC Calculators

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Financial aid formulas seem like magic to most families. A few weeks or months after the student files the Free Application for Federal Student Aid (FAFSA®) and other financial aid application forms, the college or university financial aid office sends the student a financial aid award letter that lists a mix of grants, scholarships, student employment, loans and other forms of financial aid. How the colleges and universities determine a student’s eligibility for need-based financial aid is a mystery for most families.

Need-based financial aid is based on demonstrated financial need. Financial need is defined as the difference between the college’s cost of attendance (COA) and the expected family contribution (EFC). Accordingly, a student may demonstrate greater financial need with a lower EFC or by enrolling at a higher-cost college.

A college’s packaging philosophy determines how the college financial aid administrator assembles a financial aid package to meet the student’s demonstrated financial need.

There are two main types of financial aid, gift aid and self-help aid:

  • Gift aid is money that does not need to be repaid, such as grants and scholarships.
  • Self-help aid includes education loans and student employment. Student loans must be repaid, usually with interest. Student employment must be earned.

Financial Aid Calculators and EFC Estimators

Given the complexity of financial aid formulas, there are tools that can be used to estimate your EFC and financial aid eligibility. An example of an EFC estimator includes the FAFSA4caster from the U.S. Department of Education. Students and parents who want to do a “hand calculation” and gain a deeper understanding of need analysis can use the EFC Formula Guide. These tools are useful for you and your family to explore how changes in income and assets, the number of children in college and other factors affect the amount of financial aid you are awarded.

Keep in mind, all colleges and universities which receive federal student aid must provide a net price calculator on their web sites. The net price calculator provides an estimate of your net price—the difference between your cost of attendance and just the grants and other gift aid awarded to you.

You may want to check out Edvisors School Snapshot tool for a high-level overview and the average annual cost of each school you are considering. Although a less personalized approach, it can give you a sense of which schools are affordable.

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