Financial aid is intended to make up the difference between what a family can afford to pay and what higher education costs. More than half of the students enrolled in college receive some sort of financial aid, according to the College Board.
I. Free Application For Federal Student Aid (FAFSA)
Known commonly as the FAFSA, the Free Application for Federal Student Aid is the starting point for college financial aid. The form is produced and processed by the U.S. Department of Education. Information disclosed on the form is used by colleges and state agencies to help determine the size of financial aid awards.
- Two formats - Paper and electronic.
- The paper version is distributed to high schools. The form also can be completed, filed and tracked online using FAFSA on the Web. Filing the form online reduces processing time.
- Filing timetable - January 1 is the first date a student is eligible to file the FAFSA if planning to enroll later that year. Families should try to file as close as possible to this date in order to meet school, state and private aid deadlines.
- Tax return needed - Families should complete income tax returns before filling out the FAFSA, as much of the information is the same. You do not need to file your return with the IRS before filling out the FAFSA.
II. Expected Family Contribution (EFC)
Based on family financial information included on the FAFSA, a Student Aid Report is produced that includes the Expected Family Contribution, which is an estimate of what a family can contribute to college costs. The EFC is sent to state scholarship agencies and colleges listed on the FAFSA. The figure is used to determine the size of a financial aid award.
It is not expected the EFC will come from current income alone. It assumes the figure will be met through a combination of savings, current income and borrowing.
- Federal Methodology (FM) - A need analysis formula used by the federal government and a majority of higher education institutions that is based on information captured on the FAFSA. It takes into account family size, the number of family members in college and taxable and nontaxable income.
- Institutional methodology (IM) - A second need analysis formula used by some colleges and universities in determining financial aid packages. It takes into account a fuller range of family assets than the Federal Methodology, including home equity and family farms, and assumes the students will work at least part of the year. The Institutional Methodology relies on information collected on the CSS/Financial Aid Profile, a financial aid application administered by the College Board and used by many institutions.
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