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Financial aid FAQs

BobWallaceBobWallace Registered User Posts: 2,222 Senior Member
This Financial Aid FAQ is divided into 5 Sections: (1) Glossary / Acronyms, (2) The Basics, (3) Need-Based Aid, (4) Merit-Based Aid, (5) Residency and Independent Status, and (6) Taxes

Section 1: Glossary / Acronyms

FA = Financial Aid
FAFSA = Free Application for Federal Student Aid
EFC = Estimated Family Contribution
COA = Cost of Attendance
OOS = Out-of-State
NPC = Net Price Calculator
NCP = Non-Custodial Parent
HYP = Harvard, Yale, and Princeton
UGMA = Uniform Gifts to Minors Act
UTMA = Uniform Transfers to Minors Act
FSEOG or SEOG= Federal Supplemental Educational Opportunity Grant
TAP = Tuition Assistance Program (New York State)

Section 2: The Basics

Q: What is FAFSA?

A: FAFSA is a form used to file for federal student aid. The name means Free Application for Federal Student Aid. FAFSA is not an aid program, it is just the name of the form. One of the outputs of the FAFSA is the Estimated Family Contribution, or EFC.

It is necessary to complete the FAFSA to qualify for Federal aid such as Federal Loans and Grants. It is also required by many colleges to qualify for institutional aid, however some colleges use additional or alternative forms/methods.

The FAFSA uses household income as the primary basis for EFC, meaning the income of one or two parents and the student.

The FAFSA determines your eligiblity to receive federal aid: including Pell grants, FSEOG grants , Federal Work Study and Federal Student Loans (subsidized/unsubsidized Stafford loans and Perkins loans). The FAFSA is required by all public colleges and universities and a large number of private schools require the FAFSA (some in addition to other FA forms).

You can find the FAFSA and related information here: Home - FAFSA on the Web-Federal Student Aid

Q: What is EFC?

A: EFC, Estimated Family Contribution, is an output from the FAFSA. The Difference between college Cost of Attendance (COA) and EFC determines eligibility for Federal Aid, such as Federal Loans and Grants. The EFC may also be used by colleges to determine Financial Need.

You can get an estimate of your EFC by using the FAFSA4caster: FAFSA4caster

Q: What is the Cost of Attendance (COA)?

A: The cost of attendance it is the total projected amount it will cost to attend a particular school.

Direct Costs: The first part of the cost of attendance usually lists the tuition, fees and room and board. These costs are paid directly to the college.

Indirect costs: The other costs listed are usually for books, transportation and personal expenses. These costs vary from student to student.

You can control indirect costs - that is, your costs could be less than the estimated indirect costs. If so, your real costs may be less than estimated COA. If you are not careful, your real costs could be more than estimated COA. In addition, if your school charges by the credit hour, COA may be estimated on a lower number of credits than you will actually be taking - in which case, your actual tuition & fees may be more than the estimate used in the COA - so your COA could be higher than the estimate.

Q: What is my Financial Need?

A: For Federal Aid, the student's Financial Need is determined by subtracting the Estimated Family Contribution (EFC) from the college Cost of Attendance (COA). If the COA is $30,000 and the EFC is $5,000, then the Financial Need is $25,000.

Many colleges use the same formula to determine Financial Need, but most colleges do not promise to meet all need. Your financial need as calculated by a particular college can be very different from the Federal financial need.

If you do not receive aid totaling your Need, you are "gapped" --- and you will have to figure out how to finance the gap.

Q: What is the Net Price Calculator (NPC)?

A: Each college that participates in Federal Aid programs is required by law to provide a Net Price Calculator for prospective students to use to estimate what the college will cost, including projected financial aid. There are significant variations in how the Net Price Calculators work and the accuracy of the results they give. It is best to be as accurate as possible when filling it out so you get an accurate result.

More information on NPCs can be found here: Net Price Calculators

Most NPCs estimate only need-based aid, however some include estimates of merit-based aid as well.

Q: What is the CSS/Profile?

A: Approximately 400 schools use the CSS/Profile to gather additional financial information in order to grant their own institutional aid.

Unlike FAFSA, the CSS Profile is not free. The cost to file the CSS profile is $25 for the first school and $16 for each additional school.

If you attend a one of these schools, they use a combination of both the Federal Methodology (FM) and Institutional Methodology (IM).

Many schools that use a Federal Methodology to determine EFC will require only the FAFSA. Schools that use an Intuitional Methodology or a combination of the 2 will require the CSS/Profile or their own FA forms.

Differences between the IM and FM models are

• IM collects information on estimated academic year family income, medical expenses, elementary and secondary school tuition and unusual circumstances. FM omits these questions.
• IM considers a fuller range of family asset information, while FM ignores assets of siblings, all assets of certain families with less than $50,000 of income, and both home and family farm equity.
• FM defines income as the “adjusted gross income” on federal tax returns, plus various categories of untaxed income. IM includes in total income any paper depreciation, business, rental or capital losses which artificially reduce adjusted gross income.
• FM does not assume a minimum student contribution to education; IM expects the student, as primary beneficiary of the education, to devote some time each year to earning money to pay for education.
• FM ignores the noncustodial parent in cases of divorce or separation; IM expects parents to help pay for education, regardless of current marital status.
• FM and IM apply different percentages to adjust the parental contribution when multiple siblings are simultaneously enrolled in college, and IM considers only siblings enrolled in undergraduate programs.
• The IM expected family share represents a best estimate of a family’s capacity (relative to other families) to absorb, over time, the costs of education. It is not an assessment of cash on hand, a value judgment about how much a family should be able to use current income, or a measure of liquidity. The final determinations of demonstrated need and awards rest with the University and are based upon a uniform and consistent treatment of family circumstances.
• Except in the most extraordinary circumstances, Colleges classifies incoming students as dependent upon parents for institutional aid purposes, even though some students may meet the federal definition of “independence.”
• The profile will take into consideration tuition for children attending high school. They may consider school expenses outside of high school for special needs children. They will consider unreimbursed medical expenses and taking care of elderly parents.

Section 3: Need-Based Aid

Q: Which colleges give the best aid / claim to meet full need?

A: Here is the list of colleges that claim to meet full need:

Colleges That Claim to Meet the Full Financial Needs of Students - US News and World Report

Q: If my EFC is zero does that mean I can go to college for free?

A: Generally speaking, no. There are a limited number of colleges that will meet the full need of every student, and those colleges generally use methods other than FAFSA EFC to determine need. A zero EFC means you are eligible for many Federal and State Aid programs, but these may not provide enough assistance to pay for college and will likely include loans.

Q: Why isn't the FAFSA fair (because I am remarried, divorced, single, cohabitating, etc)?

A: Like many programs administered by the federal government, the results of the FAFSA may not seem fair or equitable to each individual. It is possible to get more individualized, special case consideration from the financial aid offices of individual schools.

Q: How do I find out what I need to submit to the colleges and the deadlines to apply for financial aid?

A: Each college has a financial aid section on their website. Go to that section. If you are an incoming freshman, look for that section. It will tell you everything you need to submit, and the deadlines for submission. It will also give you the school codes for the FAFSA and the Profile (if your school requires it).

Check EACH college website for your schools as these vary wildly from school to school.

Q: What is the effect of merit aid on my need-based aid award?

A: At the majority of schools, outside merit aid reduces your COA, so the college will possibly reduce your need-based aid by that amount. How they do that varies, but often begins with removing subsidization of Stafford loans, elimination of work study, then grants, etc. Consult your FA office at each institution for details, only they know the answer, and get it in writing if possible.

Q: My parents are divorced and my dad won't fill out the Non-Custodial Parent info that my school requires for Financial Aid consideration. He pays child support and I see him a couple of times per month, but he doesn't want to pay for college. Can I get a waiver so that I don't need to use his financial info? If I can get that waiver, then I should get a lot of aid because my mom makes about $40k per year, while my dad makes $150k.

A: Not likely. Those waivers are typically for cases where the NCP has not been in the child's life for years, hasn't paid child support, and (likely) you have no means to contact him. They aren't intended for parents who just don't want to pay - otherwise all parents would just opt not to pay.

Q: My parents are divorced. Which parent do I use for my FAFSA?

A: For FAFSA purposes, you must use the parent with whom you have lived the most in the past 12 months. It doesn't matter which parent claims you as a dependent for income tax purposes, and it doesn't matter which parent earns more money. If, however, you have lived with both parents exactly the same number of days in the past 12 months, you will use the parent who provides more support - and that is most likely the parent who earns more.

Q: What if my biological parents never married?

Use the parent with whom you lived the most in the past 12 months. If you live with both, you will use the parent who earns more money. If they never married, indicate that your parent is Single.

Q: I filled out my FAFSA, but I didn't get any financial aid. Why not?

A: You do not get financial aid merely by filling out a FAFSA. Filling out a FAFSA does, however, allow you to find out what types of federal aid you may qualify to receive from colleges. Every student is eligible for at least $5,500 in Federal Direct Unsubsidized Loans. This IS financial aid. For many students, this may be the only financial aid for which they qualify. The only way to know for sure what your awards will be at a given school is to send your FAFSA to that school, complete all requirements the school may have for aid recipients, and wait for an award letter.

Q: Am I likely to get good financial aid if I'm a Transfer student?

A: No (of course depending on the particular college). Colleges spend most of their financial aid funding trying to attract the freshman year candidates that they desire.

Q: Am I likely to get good financial aid if I'm a Waitlisted student?

A: You may well get decent financial aid. If you applied for financial aid, colleges know you need help and if they're going to their wait lists they want to secure a student as soon as possible--they don't want to have to go to the next tier, etc.

Q: I am an International student, do I get the same financial aid as US students?

A: In general, no. At some of the most well-endowed, selective colleges international students are eligible for the same or similar aid as US students. Most colleges reserve financial aid for US students.

Q: I applied to School X because it has a reputation for giving lots of need-based financial aid, however I didn't get any. Why not?

A: It may surprise some people, but even the schools that give the best aid (Harvard, Yale, Stanford, etc) won't give significant aid if your family's income and assets are too high. There are many full pay students attending those schools.

Q: My EFC is 0, yet when I got my FA package from the OOS flagship that accepted me, I only got a $5500 Pell Grant and a $5500 student loan. The cost is over $40k. Why didn't they give me the money to attend this school? Do they really expect my low income single mom to pay $40k per year? She only earns $20k.

A: No, the school doesn't expect your family to pay. They expect that you're going to either decline or that you have another source of money (Non custodial parent, grandparents, etc).

An OOS public usually doesn't have the institutional funds to give you the aid that you need. These schools usually expect OOS students to bring in money to the school. If they covered need with aid, they wouldn't bother to charge the high OOS costs.

Q: My dream school is Harvard, but I just saw online that it costs nearly $60,000 to go there! This is crazy! How can anyone besides millionaires afford this school?

A: Many families pay significantly less than the "sticker price" at the most expensive schools like Harvard. Ivy League universities and similar caliber schools offer very generous financial aid, and promise to meet 100% of financial need. This might not make the school completely affordable, especially in unique situations, but it goes a long way.

Q: I plan to apply for financial aid. Will colleges discriminate against me because I can't afford to pay?

A: Maybe. Some schools say they are "need-blind" and will not consider your ability to pay in making an admissions decision, while others are "need-aware" and might consider this. The most generous colleges tend to be need-blind, but just because a school is need-blind doesn't mean they will give you enough financial aid to allow you to go. On the other hand, a need-aware school could still give you a very generous scholarship.

Q: What is Preferential Packaging?

A: Some colleges distribute aid based not only on “need” but also on the desirability of the candidate.

An example from Muhlenberg College (who openly state that they practice preferential packaging):
Preferential packaging means, simply, that the students a college would most like to enroll will receive the most advantageous financial aid packages. Financial aid packages are made up of:


A preferential financial aid package includes a far greater percentage of grant aid than self-help (loans and work). Because they have discretion over how much grant aid they choose to award a student, a college can award a bigger grant to a student they would really like to enroll.

Muhlenberg College| The real deal on financial aid

Q: Why do colleges give out financial aid at all? Why don't they just take rich students and make a lot of money?

A: There are basically two answers to this question.

First of all, non-profit colleges don't exist to make money. They do need money to operate their programs, but they are happy to give out the surplus of their huge endowments to help needy and deserving students get an education.

Second, and more cynically, colleges achieve a lot of institutional goals through financial aid. It allows them to attract top students who might otherwise turn them down for cheaper schools, which increases both their admitted student GPA and test score ranges along with their yield, which helps them rise in the rankings. This is especially true in the case of second- and third-tier schools that offer generous merit aid, in the hopes of attracting students who might otherwise go to a more well-known school.

Q: What are UGMA and UTMA accounts?

A: The Uniform Gifts and Uniform Transfers to Minors Acts (UGMA and UTMA) allow the establishment of an account for gifts of cash and financial assets for a minor without the expense of creating a trust. Because the minor is the owner of the account, it counts as his asset on the FAFSA, not the asset of the custodian, who is often the parent.

In other words, the UGMA/UTMA will affect the student's assets in the calculation. 20% of the student's assets count toward the EFC. However, if the parents qualify for simplified needs or automatic 0 EFC formula, both the parents' and the student's assets are ignored when computing the EFC.

Q: I have an EFC according to the FAFSA of around $80k. I submitted the CSS Profile tonight to my schools. I doubt I'll get aid. Was this a mistake in terms of admissions? Is having a need of "0" just like checking that "I do not plan on applying for need-based aid"? It's a plus if a school is need aware, right?

A: No this was not a "mistake" in terms of admissions.

“Need blind” is a part of the admissions process. Need blind means that the admitting institution does not consider an applicant's financial situation when deciding admission. Most schools are need blind to US citizens and US permanent residents.

Meeting demonstrated need is a financial aid process. Any school that does not meet 100% demonstrated need is known to gap. It is up to the family to fill the gap they best way that they can. If your family has an EFC of 80k, in the eyes of the college financial aid office, your family has the income/assets to pay the full freight for you to attend college and you will not require any of the school's financial resources.

This could be a plus at schools that are need aware or need sensitive especially where a school has at the end of their financial aid budget. When it comes to choosing between 2 similarly qualified applicants, the tip will go to the student who needs less of the school's financial resources.

Q: Why does FAFSA ask for info on cash, savings, and checking? My checking account obviously fluctuates each month based upon the day. If I submit my FAFSA on the first day after I have deposited a paycheck, it is clearly much higher than toward the end of the month.

A: FAFSA is a snapshot in time. Time it well!

Q: If I qualify for the Simplified Needs Test why is FAFSA asking me about my assets? I thought there was skip-logic.

A: Some states require that information for state grants.

Q: What types of Federal Aid are available?

A: Need can be met through grants (Pell, SEOG, institutional), federal work study, subsidized Stafford loans, and/or Perkins loans. If your EFC qualifies you for a Pell grant, you will get that grant. No other grants are guaranteed. SEOG is a limited pot of money awarded to your school by the government, and they divvy it up among their neediest students; missing a priority financial aid deadline can jeopardize your ability to get an SEOG grant you might otherwise have received. You will receive a subsidized Stafford if you have sufficient Need (determined by COA-EFC-scholarships-grants-Federal Work Study-Perkins), up to the maximum allowed for year in school ($3500 freshman/$4500 sophomore/$5500 junior & senior). Perkins loans are limited - not all schools have Perkins loans, and even at schools that have them only a limited number of students will be awarded Perkins loans. Federal Work Study is also limited, and schools can't always award FWS to all students who have Need --- and jobs are not guaranteed. You cannot subtract the FWS award amount from your bill, because it is an earn-as-you-go award (think of it as spending money if you can get an FWS job).

Eligibility for an unsubsidized loan is determined by COA-all other aid (scholarships, grants, loans, federal work study). You can receive up to the maximum amount for your year in school in a combination of subsidized and unsubsidized loans. For example, a freshman dependent student can receive $5500 in a combination of sub and unsub loans. If there is sufficient need to receive the full $3500 sub eligibility as a freshman, the student can receive another $2000 in unsub. If the Need remaining for sub loans is only $2000, the student can receive $3500 in unsub loans. If the student does not have enough Need for any sub loans, the student can receive $5500 in unsub loans. Even if a student is not awarded unsub, he/she can request it from the financial aid office as long as the total of all other aid does not exceed the COA. Note: Some schools do not participate in Stafford loan programs - no sub or unsub.

Parent PLUS loans are not guaranteed; they are subject to a credit check. Students whose parents apply for and are denied a parent PLUS loan can borrow additional unsub (up to $4000 freshman/sophomore, up to $5000 junior/senior). If a parent is denied the PLUS, the student will not get more than this extra unsub ... this is very important to understand. Students must request to receive the additional unsub due to PLUS denial; it is not automatically done, although some schools may ask if the student wants the additional unsub in case of a denial right on the parent PLUS application.

The current origination fee for sub & unsub loans is 1%; it may rise this spring due to the Congressional sequestor.

Q: How is aid paid out? All at once? By semesters?

A: Aid is generally split equally between the semesters/trimesters/quarters. There may be some particular scholarships that are not, but federal aid & most institutional aid is split equally. If a student is eligible for a loan but does not take it in the first semester, the student can generally get the full amount of loan eligibility in the second semester. If the student is not eligible in the first semester (didn't meet SAP, didn't enroll at least half time, etc), loan eligibility is calculated using a single semester COA - so while the student would be eligible for the full annual amount, it might be limited by a lower COA.

Q: I’m a graduate student – does aid work the same for me?

Q: Graduate students are not eligible for federal grants. Some schools do have federal work study for grad students, but many do not. Grad students are not eligible for subsidized loans. Grad students are eligible for up to $20,500 in unsubsidized loans per year - they may also apply for Grad PLUS loans up to the COA, but those are not guaranteed; they are credit based. Certain health professions have higher loan limits for unsub loans (such as med students & pharm students).

Section 4: Merit Aid

Q: I’m going to College X in the fall, but I didn’t get as much aid as I wanted. Where can I find scholarships to pay for school?

A: The best place to get scholarships is from colleges that award merit-based aid. Most external scholarships either have a need-based component and/or are not renewable for four years. Merit-based awards from colleges do not have a requirement for “need” and most are renewable for 4 years of college (but note that renewal is often based on meeting a certain GPA threshold.)
When it comes to merit aid, planning and research are necessary to put their odds in your favor. Colleges that award academic merit aid give it to a fraction of students at the top of the admitted pool. Students looking for large merit awards must target schools where their academic stats will stand out.

Q: What colleges give the best merit aid / where can I find merit aid?

A: Here are some threads that provide information in this area:





Q: I applied to School X because it has a reputation for giving lots of merit aid, however I didn't get any. Why not?

A: When people say that School X gives a lot of merit aid, they don't mean to every student. A school would just lower its tuition if that were the case. Merit scholarships are generally given to those whose stats are within the top 1-25% of the applicant pool.

Section 5: Residency and Independent Status

Q:I want to go to an out-of-state public school and pay in-state tuition. How can I do this? (Many variations on this question, such “Can I use a relative’s address?” “Can I move there for the summer before school and work?”, etc.)

A: In almost all cases, in-state tuition is for students who have lived in the state and graduated from high school in the state. There is no easy trick to become eligible for in-state tuition in a state other than your own.

There are some exceptions to this rule. For example, there are Tuition Exchange Programs and Waivers based on geography and/or agreements between states that will either reduce or eliminate out-of-state tuition. Some examples:

• Western Undergraduate Exchange (WUE) | Western Interstate Commission for Higher Education
• Academic Common Market
• MHEC : Student Access: Midwest Student Exchange Program (1)
• Overview : New England Board of Higher Education

Also check with individual schools – some also allow in-state rates to be paid by students from neighboring states or counties.

Another exception is merit-based out-of-state tuition waivers, which allow students with a certain GPA and/or ACT/SAT score to have their out-of-state tuition waived.

There are also some states that charge very low out-of-state tuition, such as Minnesota.

See also: Guide to State Residency

Q: Can I declare myself an independent student to get more aid? (Because my parents make too much money to get financial aid, etc.)

A: In general, no, it is not possible to declare yourself independent from your parents in order to be eligible for more financial aid.

The specific circumstances where you can be an independent student are given here: Will I need my parent’s information?

You must be able to answer YES to one of these questions to be an independent student:

1. Were you 23 years old on January 1st of [this school year]?
2. As of today are you married?
3. At the beginning of [next] school year, will you be working on a master's or doctorate program (such as an MA, MBA, MD, JD, PhD, EdD, or graduate certificate, etc.)?
4. Are you currently serving on active duty in the U.S. Armed Forces for purposes other than training?
5. Are you a veteran of the U.S. Armed Forces?
6. Do you have children who will receive more than half of their support from you between July 1 [summer before next school year] and June 30 [summer after next school year]?
7. Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you, now and through June 30 [summer after next school year]?
8. At any time since you turned age 13, were both your parents deceased, were you in foster care or were you a dependent or ward of the court?
9. As determined by a court in your state of legal residence, are you or were you an emancipated minor?
10. As determined by a court in your state of legal residence, are you or were you in legal guardianship?
11. At any time on or after July 1 [before this school year], did your high school or school district homeless liaison determine that you were an unaccompanied youth who was homeless?
12. At any time on or after July 1 [before this school year], did the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determine that you were an unaccompanied youth who was homeless?
13. At any time on or after July 1 [before this school year], did the director of a runaway or homeless youth basic center or transitional living program determine that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless?

Q: Can I change to independent status after I start school?

A: Students enrolling as dependent students are considered dependent throughout their undergraduate years when need for institutional scholarships is determined.
For institutional aid purposes a student may not “declare” independence due to attainment of legal age, internal family arrangements, marriage or family disagreements.

Section 6: Taxes

Q: Is my scholarship/grant taxable income?

A: Scholarships and grants that cover tuition, fees, and books are not taxable income. Scholarships and grants covering room and board are taxable income and must be included on the student’s income tax return. Scholarship and grant money spent on other mandatory expenses may also be exempt from taxation (see: Tax Topics - Topic 421 Scholarship and Fellowship Grants). Your college should provide you with a 1098T Form to guide you on filing your taxes, although these forms need to be checked for accuracy.

Q: My college recorded three semesters of tuition on Form 1098T. Am I allowed to keep track of expenses based on Jan 1 through Dec 31 tax year for the American Opportunity Credit?

A: Absolutely. The information on the 1098T is what the college has to report to the feds, but this report may have precious little correspondence with what you actually paid in qualified expenses. Print out the Bursar's statement that shows when items were billed and when they were recorded as paid, and pull together all of your records for qualified items (books, required course materials and equipment, etc.) that weren't billed through the college. That is what you will use for the AOC.

Q: I just started college at the community college and I have a scholarship so I only paid for my books. I only have like maybe $400 to claim for the AOC. Can I wait and file later?

A: Sort of. Most students are in college for four academic years, and those four academic years are often spread out over five tax years. (Fall 2013, Spring 1014 & Fall 2014, Spring 2015 & Fall 2015, Spring 2016 & Fall 2016, Spring 2017). You can claim the AOC for only four tax years, and only those tax years in which you are still classified as an undergraduate. So if your first semester is super cheap (and congratulations by the way!!), but you expect that you will have an expensive last semester, you can wait to claim the AOC until the second tax year you are in college.
This discussion has been closed.