Regardless of the type of college funding your family seeks, the first step you should take to qualify for financial aid is to fill out a form known as the FAFSA, the Free Application for Federal Student Aid.
The FAFSA is an all-important document that determines something called your EFC or “Expected Family Contribution.”
Your federal EFC is calculated by the government and is a measure of your family’s financial strength. Some schools use your EFC as a rough guideline to determine how much money you can contribute to your education. (Or if you’re a parent, your child’s education.)
Additionally, some colleges and scholarship programs require the FAFSA just for you to be eligible for institutional aid, scholarships and grants – even those that aren’t based on your income. So to ensure that you’re in the running for all possible free aid, you should always, always complete a FAFSA.
But be forewarned: no matter what your EFC is, your actual out-of-pocket costs can vary greatly from one school to the next. That’s because not all U.S. schools use the FAFSA as the sole way to determine your financial aid package.
The FAFSA Vs. The CSS Profile
About 250 American colleges and universities, mostly private schools, also use another form called the CSS/Financial Aid Profile, which is a separate financial aid application created by the College Scholarship Service of the College Board. (Another 150 or so private scholarship providers also require a CSS Profile when you seek scholarship funds).
When a college or university only requires the FAFSA, it’s using the “Federal Methodology,” which is a standardized formula that determines your Expected Family Contribution and your eligibility for federal aid, such as Federal Pell Grants, Federal Work-Study or Federal Direct Loans.
When a postsecondary school requires the FAFSA and the CSS/Financial Aid Profile, it’s using the “Institutional Methodology,” which is a different financial aid formula that a college uses in order to award its own institutional aid.
So the next thing you need to understand is that your financial aid offer can vary greatly, depending on whether a school is using the Federal Methodology or the Institutional Methodology.
Adding to the complexity of financial aid is the fact that schools using the Institutional Methodology can tweak the financial aid formulas in any way they want.
For example, some colleges will count all your home equity as an asset; while others will cap the amount of home equity in their calculations.
Complicated Financial Aid System
Furthermore, a group of about two-dozen elite colleges and universities, called the 568 Presidents Group, use the Institutional Methodology as their base financial aid system. Then they apply another shared set of calculations to evaluate a family’s ability to pay for college. This third formula is known as the Consensus Methodology.
Pretty complicated, isn’t it?
Despite all the nuances of the financial aid system, a basic rule of thumb to know is simply this: in order to get the most possible financial aid, you want your Expected Family Contribution (EFC) to be as low as possible.
A lot of factors go into calculating your EFC. That’s why whole books have been written on the FAFSA.
One excellent book that I highly recommend is called Filing the FAFSA, by Mark Kantrowitz, Publisher of Edvisors.com, and David Levy. (The book is available as a free download on a computer, tablet or e-reader to students and parents who register for free on Edvisors.com.
15 Common Financial Aid Mistakes
Mistake #1: Failing to do any financial aid forecasting
Mistake #2: Failing to file the FAFSA or CSS Profile at all
Mistake #3: Missing a deadline
Mistake #4: Putting assets in the student’s name, not the parent’s name
Mistake #5: Overstating assets and income
Mistake #6: Not checking the box for “dislocated worker” when appropriate
Mistake #7: Applying only to schools that don’t offer merit aid
Mistake #8: Ruling out “expensive” schools prematurely
Mistake #9: Careless math blunders
Mistake #10: Not updating financial aid officers when circumstances change
Mistake #11: Not understanding “wild card” aspects of financial aid
Mistake #12: Handling divorced households the wrong way
Mistake #13: Misunderstanding the official definition of financial aid or need based aid
Mistake #14: Being “blinded” by semantics
Mistake #15: Failing to apply for any outside scholarships and grants
In subsequent articles, I will offer detailed explanations of each of these financial aid mistakes to help you avoid these pitfalls and get the most possible funding from your college or university.