College financial aid is money given by the federal and state governments and the colleges to help students pay for the cost of a college education, and you can make this financial aid work to your advantage. There are two basic type of aid you can receive: The first type of aid is called Self-Help that consists of loans (that you pay back) and work study. The second type of aid, Gift, covers grants and scholarships.
There are also two factors that determine how much and the type of financial aid you can receive. These are based on the merit of the student (scholastic, athletic, musical talent, etc.) and the financial need of the student. Of the two, financial need is the prominent factor in determining financial aid.
The following example highlights some important basics concerning “need-based” financial aid and how it is determined. In this example we’ll use a private and public school. The Cost Of Attendance (COA) for the private school is $25,000 and for the public school it’s $15,000. (The COA is what we covered in Blog 17. It covers things like tuition and fees).
Assume that the family/individual applying for this aid has filled out the appropriate financial aid applications (FAFSA and/or PROFILE.) They have an assessed Expected Family Contribution (EFC) of $5,000. Again, the EFC is the amount that the schools say you should be able to afford for college based on the information you’ve submitted:
|Cost of Attendance (COA)||25,000||15,000|
|–||Expected Family Contribution (EFC)||5,000||5,000|
|=||Financial Need (FN)||20,000||10,000|
|=||Total Amount of Money Still Needed||2,000||5,000|
|(EFC + Unmet Need = Your Cost)|
|Total Out of Pocket / Year||7,000||10,000|
This is a hypothetical example used for illustrative purposes and is not representative of any specific scenario. Individual situations will vary.
Although the private school has a COA that is $10,000 greater than the public school, the total contribution at the private school is $3,000 less than the public school. This is because private school can have a greater availability of funds for financial aid than public schools. The private school met 90% of the need whereas the public school was only able to meet 50%. Although it is not shown in the example, the private school may likely offer a greater percentage of Gift Aid in their financial aid package that will not have to be paid back.
If you’re concerned about the high cost of college, we can help you devise strategies to reduce out-of-pocket costs, find the best options and advise you on how to become eligible for more financial aid and grants. Call Mooney Lyons Financial Services at 847-382-2600 for more information or visit our college planning website at: http://mooneylyonscollegeplanning.com/.