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What You Need to Know About Financial Need

financial aid eligibility printed on paper

Your "financial need" is not how much money you think you need for college. It is an official calculation that affects the size of your aid package.

Colleges consider your and your family’s “financial need” when deciding how much aid to award you. In financial aid lingo, your "financial need" is the difference between two important numbers: a college’s Cost of Attendance (COA) and your family’s Expected Family Contribution (EFC).

The greater the difference between your EFC and a college's cost of attendance, the greater your “financial need,” and the more financial aid you may be eligible for.

EFC, COA, and Financial Need Explained

Your financial need – and your financial aid eligibility – depends on your EFC and the college’s COA. Your EFC is a number representing how much you and your family can contribute toward your college costs. Your EFC is calculated based on financial and personal information you provide on your federal aid application, the Free Application for Federal Student Aid (FAFSA). Think of the EFC as an estimate of what the government thinks your family can afford to pay for college, based on your assets and income.

To calculate your financial need, colleges subtract your EFC from the college’s cost of attendance or COA – which is an estimate of how much it costs to attend the college for one year. The college’s COA should be posted on the college's website. You can also find a college’s COA in its CollegeData college profile using College Search.

How Colleges Calculate Your Financial Need

Here’s an example of how college’s calculate financial need:

If College A’s COA is $40,000 and your EFC from the FAFSA is $10,000, your financial need to attend College A will be $30,000.

$40,000 (COA) - $10,000 (EFC) = $30,000 (Financial Need)

College B’s COA is $80,000. At College B, your financial need will be higher.

$80,000 (COA) - $10,000 (EFC) = $70,000 (Financial Need)

College A and College B will try to cover all or some of your financial need using a combination of loans, grants, scholarships and work-study.

How Financial Needs Impacts Your Aid Offer

Some colleges meet 100 percent of a student’s financial need. But many colleges do not have the resources to do so, and instead meet only a percentage.

Using the previous example, if College A meets 100 percent of financial need, it would award our student an aid package totaling $30,000. Keep in mind, however, that this package may contain loans that the student needs to repay, as well as scholarships, grants, and work-study. In addition, this student will still need to pay their EFC of $10,000.

If College A meets only a percentage of financial need, it might give this same student a total aid package of $20,000. The same student would need to pay $10,000 in EFC plus another $10,000 in unmet financial need.

You can look up how much financial need a college meets, on average, in CollegeData’s college profiles using College Search.

Other Ways Colleges Calculate Financial Need

Colleges use your EFC from the FAFSA to determine your eligibility for federal student aid—this includes federal student loans, federal grants and work-study. Some colleges also award "institutional aid," which comes from the college's own funds. Many colleges use the FAFSA EFC to calculate your financial need for institutional aid, but some private colleges calculate a different EFC for this purpose. These colleges may ask you to complete another financial aid form called the CSS/Financial Aid Profile, which digs deeper into your financial picture. For example, it may ask for a home equity estimate or financial information from a divorced parent, two factors the FAFSA does not take into account.

Familiarizing yourself with the concept of financial need – and how colleges use it to award financial aid – can help you anticipate your college costs, understand and compare your financial aid offers, and make a wise college choice.

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