So, a student in your household is looking at higher education, and that inevitable question has just been raised:
How much financial aid will schools say you need?
Given what a year in college can cost these days, you might think a lot.
But how much, if any, need-based assistance you are eligible for may not be as clear cut as you think.
What many people consider as their own “need” isn’t how that term is defined by those making aid eligibility decisions.
It can be a jolt to families as they take the initial, crucial step of filling out the Free Application for Federal Student Aid, commonly called FAFSA, which can be found at fafsa.ed.gov.
Experts say families with earnings in the middle can find themselves in a precarious place — having income too great to be eligible for substantial amounts of need-based aid, yet not large enough to be sufficiently insulated from campus costs.
“People think, ‘I’m going to get a Pell grant or a state grant.’ Middle income people don’t necessarily qualify for all that,” said Kimberly McCurdy, a higher education access partner with the Pennsylvania Higher Education Assistance Agency, which administers the state grant program.
She said it’s one more reason why it is also crucial to begin saving early. “Those people have peace of mind,” she said.
Credit card, medical and other debt may make things tight in your household, but they do not entitle you to additional college assistance in the eyes of those who award need-based grants, loans and work-study assistance, experts say.
Some possessions, such as a second home and rental properties, count on the FAFSA as assets and potentially reduce the amount of aid you will receive, while others, including your primary home, qualified insurance, qualified retirement plans and Social Security do not.
FAFSA is used to compute an expected family contribution, known as EFC, the first step in determining a student’s need.
The EFC is the sum that the parent and student are seen as being able to contribute to college. It is based primarily on family income plus those assets required to be included on the form.
“The lower the number, the closer to zero, the more free money a student would receive,” said Marla Kane, a PHEAA access partner. Discovering that your EFC is zero does not mean the student has been awarded a free college education.
The maximum federal Pell grant is $5,730 this year. The current maximum PHEAA grant is $4,011. Both are based on need.
Once the EFC is calculated, colleges will use the number and subtract it from the total cost of college of attendance, which includes tuition, fees, room and board, books and other living expenses.
The campus cost minus the EFC is considered by colleges to be the family’s financial need. That figure will be what the school bases its financial award package on, Ms. Kane said.
Experts say one of the biggest mistakes a parent or student can make is failing to fill out a FAFSA, which is a requirement for getting federal, state and college aid as well as many private scholarships and work-study grants.
Some do so because they assume they are not eligible for assistance given their current financial situation, but a job loss or other life change can suddenly alter your ability to pay. Without a FAFSA on file, colleges are hard pressed to reconsider family’s financial aid situation.
Ms. Kane likened the form to an insurance policy. Others agree.
“I think the best advice for families is to file a FAFSA,” said Stacy Hopkins, director of financial aid at Indiana University of Pennsylvania. “Families will often disqualify themselves. ‘We think we make too much’ or whatever their pre-conceived notion is about filing for financial aid,” she said.
About 400 colleges and scholarship programs also require an additional financial aid form, the CSS/Financial Aid PROFILE, a College Board form which considers additional information in computing need, including home equity.
The FAFSA is free to file. However, the CSS/Financial Aid PROFILE costs $25 for the first school and $16 for each additional school.
Money is left on the table by those who skip the FAFSA.
In Pennsylvania alone, about 30,000 high school graduates eligible for the need-based federal Pell grant left a combined $103 million on the table by not filling out the FAFSA, counting both those who went on to higher education and those who didn’t, according to a recent study by the consumer-focused website NerdWallet.
The FAFSA form must be completed each year the student is in college. It can be filled out starting Jan. 1 of the student’s senior year of high school, initially with estimated tax income until actual numbers are available.
Students should pay close attention to deadlines, which vary state to state, school to school, class to class.
The Pennsylvania deadline is May 1 for four-year schools but Aug. 1 for community colleges and some other two-year schools.
However, some schools have earlier recommended deadlines.
Sometimes aid is awarded first-come, first-served, so filing the FAFSA sooner rather than later can be an advantage.
To understand the effect that income and assets can have on the EFC, Ms. McCurdy from PHEAA shared an unofficial sample comparison based on a family of four with one in college and no reportable assets.
The EFC would be zero with an income of $24,000; $2,512 with $50,000 in earnings; $7,899 at $75,000; $16,333 at $100,000 and $31,223 at $150,000.
If the parent has assets of $100,000, the EFC would grow anywhere from $1,800 to $3,600 depending on household income, according to the unofficial estimate.
If the student has $2,500 in assets, the EFC would increase by $500. If that student has $8,000 in income, the EFC would increase by approximately $700.
The calculations assess assets held by the student at a higher rate than those held by the parent.
The number of children currently in college also has an effect on the aid amount.
Most colleges will not be able to meet full need. So, the better prepared the student is academically, the better the chances for assistance.
Said Wendy Beckemeyer, vice president of enrollment at Robert Morris University: “The neediest best student receives the greatest percentage of aid.”
First Published: February 12, 2015, 5:00 a.m.
