During the application process, you’ll encounter a seemingly
endless string of terms and phrases. Don’t panic. Despite all the
obscure terms financial aid administrators may throw at you, they
really want to know just one thing: How needy are you?
Your initial working vocabulary needs to include the most
common sources and types of financial aid. Financial aid officers
have an uncanny ability to come up with new words and phrases daily,
so unless you’re on a steady IV drip of Ginkgo biloba, don’t try
to memorize all this at once.
- COA: Cost of Attendance
- EFC: Expected Family Contribution
- FAFSA: Free Application for Federal Student Aid
- SAR: Student Aid Report
- SEOG: Supplemental Educational Opportunity Grant
- SAP: Satisfactory Academic Progress
- FWS: Federal Work Study Program
- PLUS: Parent Loan for Undergraduate Students
- FAA: Financial Aid Administrator
The Department of Education defines need as the difference
between how much college costs and how much you can actually pay
for it. In financial aid-speak, need is the difference between your
Cost of Attendance (COA) and your Expected Family Contribution (EFC).
If your college costs are greater than your ability to pay, then
you have need. Financial aid officers figure out your level of need
by using a process known as needs analysis.
Most financial aid is based on need, so the needier you
are, the better off you’ll be. Sounds like the perfect formula for
an unhealthy relationship.
Needs analysis is the method financial aid officers use
to determine how much need-based aid you can receive. Remember:
need is the difference between the college’s COA and your EFC. The
needs analysis formula looks like this:
Cost of Attendance – Expected Family Contribution = Need
Let’s get to the point. If your EFC is zero, then your
need will be exactly equal to the COA. On the other hand, if your
EFC is greater than your COA, then your need is zero. More likely,
your EFC will be lower than the COA, and you’ll have some degree
Cost of Attendance (COA)
When you think about the cost of college, you probably
think about tuition. Tuition does make up most of the COA at a typical
private college, but the opposite is true for many public colleges
and universities, where the largest part of COA includes room and
board. COA can also include transportation expenses, personal expenses,
loan fees, and a reasonable amount for the one-time purchase of
The COA is NOT the same as a bill. The COA is the college’s
estimate of what your total costs will be for the year. Typically,
the only part of that estimate for which you will be billed is tuition
and fees, and room and board if you live in campus housing. The
COA can be as much as $8,000 to $12,000 higher than your tuition.
If you’re great at living on a shoestring, you’ll find your total
cost to be below that estimate.
COA can include:
- Fees and books
- Living expenses
- Personal expenses
- Dependent care
- Computer purchase
- Costs related to a disability
- Costs for eligible study abroad program
Remember: the higher the COA estimate, the better. A high
COA means your need will appear even greater, which means you’ll
be eligible for more need-based aid.
Expected Family Contribution (EFC)
Your EFC is what the government thinks you can pay for
college. The EFC is calculated using the information you provide
on the Free Application for Federal Student Aid (FAFSA).
Depending on how much you and your family have in financial
assets and how accurately you completed the FAFSA, your EFC can
be anywhere from $0 to $99,999. Your EFC, whatever the amount, is
what the Department of Education thinks you and your family should
have to pay for college out of your own pocket.
There’s a good chance your EFC will feel too high, especially
if you have very little cash but large amounts of savings or real
estate investments. Don’t panic—we’ll tell you how to cover your
EFC if you don’t have the money on hand.
The amount of need-based aid you get depends only on how
much need you have. Your grades, activities, and general fabulousness
are not factors. Your need-based aid will be limited to the COA
minus your EFC. The higher the COA, the more need you’ll have.
Need-based aid can include:
- Pell Grants
- Supplemental Educational Opportunity Grants (SEOG)
- Perkins Loans
- Most college work study
- Most state grants
- The subsidized portion of the Stafford Loan
- Scholarships and tuition waivers
For many students, especially those attending public institutions,
receiving a full award consisting of need-based aid will cover most
of the costs of attending college.
Just because the financial aid office has estimated your
EFC to be $10,000 doesn’t mean you have $10,000 on hand to use for
college. In fact, you might be wondering how, exactly, you’re supposed
to come up with that money. Not to worry: Non–need-based aid can
help you cover the amount of your EFC.
Non–need-based aid includes awards, scholarships, and
tuition waivers that are based on merit or other factors, including
academics, athletics, musical talents, and enrollment leveraging.
Federal sources of non–need-based aid include Unsubsidized Stafford
Loans and Parent Loans for Undergraduate Students (PLUS). Though
helpful, these are actually the least favorable forms of government
aid, with stricter repayment policies than the Perkins Loan and
Subsidized Stafford Loans. The PLUS loan also has a higher interest
rate than the Perkins Loan and both kinds of Stafford Loans.
Though the interest rates for Unsubsidized and Subsidized
Stafford Loans are the same, interest for the Unsubsidized Stafford
Loan starts accruing while you’re still in school. The Subsidized
Stafford Loan doesn’t start accruing interest until six months after