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College Financial Aid 101 – A Primer

You can run but you cannot hide. It’s just about time to face the (college) finances. I promise that it’s not as gruesome as you fear… The underlying principle upon which the financial aid system is based is surprisingly simple:

COA – EFC = Need

Looks simple, now for the English translation and this is where it gets a bit more complicated.

COA = Cost of Attendance, or what it costs to go to a particular school. COA has two main parts, hard costs and soft costs.

Hard costs + Soft costs = Cost of Attendance (COA)

The hard costs are the fixed charges like tuition, fees, room and board (or T,F,R,B). You can look on virtually every school’s website (or those complete repositories of collegiate info like and find these hard costs in mere minutes.

The soft costs are other expenses you will incur but which vary from student to student. These items include books, supplies, travel, and personal expenses. Because these amounts vary widely, schools pick an average amount to use. While you may be able to dig and find this information on the web, you may not know it without asking for it specifically. Many schools use a figure in the $1500-$2000 neighborhood. Don’t rush to do this though, it may or may not be necessary for you.

In our main equation, COA-EFC=NEED, EFC is the Expected Family Contribution, (or what your family is expected to contribute to your child’s education). It is not, however, what YOU think you can contribute, it’s what Uncle Sam thinks you can contribute, and that, as you may surmise, may or may not have any relationship to what you think is realistic.

In order to get an EFC (and hence to be eligible for any type of federal, state and institutional financial aid), families must file the FAFSA (Free Application for Federal Student Aid). This form cannot be submitted before January 1st of the year in which the student will enroll in college (so, 1/1/2011 for students who will go to college in September 2011). FAFSA deadlines vary by school, yet it only gets submitted once, so it’s really important to know the earliest deadline by which the FAFSA must be filed. That’s the date from which you must work. Many institutions (particularly private ones) may have deadlines in February for prospective students.

Filing the FAFSA is significantly easier if you have completed your tax return prior to completing this application. If you’ve done your taxes, much of the FAFSA is simply a matter of looking up the referenced line on your taxes and filling in the blanks…mostly.

If you have to meet a February filing deadline, having your taxes completed may have the same odds as defying Newton’s law of gravity, so onto Plan B which is not nearly as neat and clean as Plan A. The easiest Plan B option is to take your last completed tax return, your W-2 or final paystub for the year and try to estimate your taxes, taking out the old income information and replacing it with the current year. The two numbers often don’t differ significantly. The FAFSA will give you the ability to indicate that the figures you’re submitting are based on estimates and you will (relatively painlessly) be able to update them once the actual numbers have been established.

There are two ways to submit FAFSA data. You can use a paper FAFSA which can be obtained from the high school guidance office, or you can submit the FAFSA electronically at Using the online application has many advantages including speed of processing and ease of making changes/corrections. Using the online application will let you know if the form has been submitted correctly and gives you your Expected Family Contribution (EFC) on your confirmation page upon submission.

So, by way of example, let’s just say your EFC comes out to $12,000. Your choices are: Private college A which costs $45,000 for tuition, fees, room and board (plus another $1500 or so for books, supplies, etc.) for total Cost of Attendance of about $46,500 Or

Public University B which costs $15,000 for tuition, fees, room and board (plus $1500) for a total COA of $16,500.

Private College COA $46,500 EFC -$12,000 Total Need $34,500

Public U COA $16,500 EFC $12,000 Total Need $ 3,500

In a perfect world, you would pay the same $12,000 to go to either school because that is your EFC. Private College A would offer you $34,500 while Public U would offer you $3,500 thus making your costs $11,200 at either school. Reallity? That’s a subject for another day as is what happens if you cannot afford your EFC, how financial aid dollars can be used as a marketing tool and more.

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