Be Prepared: Covering the Cost of Higher Education

It won’t be long before springtime will be here. This is the time when the seeds that were planted into the tilled ground begin to produce a harvest and flowers begin to bloom.

It is also the time when, after some consideration, the decision was made that after your teen earned his high school diploma or GED, he goes to college. So think about college admissions and financial aid award letters.

Families who are not familiar with the terms used in financial aid documents may begin to feel overwhelmed and confused about what their child is receiving.  Well, this article is for you. I know, it isn’t spring yet, but you better get organized in a timely manner. Spring will be here before you know!

First, we will start with some basic information.  Financial aid is basically support that you’ll receive in the form of grants and/or loans to cover the college education costs. Parents need to submit an application in which they provide information about their assets and the availability of money.

The government and the school students apply to will assess the financial aid packages per the predetermined guidelines to determine the need value and expected financial contribution (EFC), the number used to determine your federal student aid eligibility.

The tool used by the government and colleges/universities in determining financial need is the Free Application for Federal Student Aid (FAFSA) and/or the CSS/Financial Aid Profile. FAFSA is the primary form for determining aid, especially federal funds, and it became available after January 1st.

Right now, we have no idea whether Trump will leave things as they are as he’s been doing some pretty weird stuff over the last two years. But okay, let’s assume that, until the next elections, he’ll do nothing seriously bad about this.

Whereas the CSS/Financial Aid Profile is an institutional-based system used by select schools and scholarship programs in addition to the FAFSA and it’s made available in October prior to the new school year. January and February are the preferred times when families should focus on completing and submitting the FAFSA.

The earlier the form is submitted the better because it’s estimated that about 66% of the forms submitted contain an error and early submittals give you a better position for receiving funds if you qualify. Early submittals allow families time to make revisions and resubmit by their designated deadlines. There are many resources available to assist families with the process, so take advantage of them all.

The most common resources are the Department of Education student website,, the Federal Student Aid Information Center, 1-800-4-FED-AID (1-800-433-3243), guidance counselor, or financial aid counselors at the school.

Once the FAFSA has been successfully submitted, families will receive a Student Aid Report (SAR). SAR gives the outcome of what was submitted in the FAFSA and should arrive within three weeks of submitting your FAFSA. It will come either by e-mail or by mail. Once it is final and complete, the SAR will contain your Expected Family Contribution.

This is what colleges/universities will use to create your child’s financial aid package if they don’t request additional information. Unfortunately, financial aid award letters can be quite confusing.  Here are some tips on how to work through the confusion and also the student must learn to question and question to learn!

  • Get in touch with the school’s financial aid office in case you have questions regarding the aid they offer.
  • Take a close look at award letters from schools and compare types and amounts of aid they offer – is there more loan money than grant money or vice versa. The goal is to have more grant money (Free money) than loans. One way that schools make their packages look more attractive is to include loans. The only loans in an aid package should be government loans with more favorable terms that families qualify for due to their lower incomes. The two loans in that category are the subsidized Stafford Loan and the Perkins Loan.
  • Don’t be impressed if you see a PLUS Loan for Parents or an unsubsidized Stafford Loan, which are available to all parents of all incomes.
  • Know the cost of attendance (COA) for the school and determine if there is a gap between the aid being offered. COA is the total cost of tuition, room and board, books, transportation, fees, and personal expenses.
  • Sometimes financial aid award packages do not include nor cover the full COA. It has to do with back-to-school budget basics.
  • So, it’s important to know if there is a financial gap you must fill and how great or not so great the package being offered really is.
  • Know your family’s EFC. If this is not outlined in the award letter, you will not know what your expectations are based on the financial offer being made. Knowing this number will also enable you to determine if there is a financial gap and how much it is.

Use this to help you decide on which school to go to based on (a) how the school fits your needs and (b) the school’s affordability after taking into account all financial aid.

You may be asking how is EFC determined, here is the basic formula. Keep in mind the following Rule:

Cost of education – Estimated Financial Assistance (outside resources) – Family contribution = Student’s Financial Need

Here is a sample award package makeup:

COA: $35, 000 – EFC: $10,000 = Student Financial Need: $25,000

Merit aid: $9,000 + Need grant: $1,800 + Student loan: $5,500 + Work Study $1,800

= Total Aid: $18,100

This leaves an Unmet Need: $6,900 –

Therefore, $16,900 is the final EFC plus the loan

In this example, you can see why it’s important to carefully analyze the financial award packages offered to your kids. Although the school is offering $12,600 in grant money, $5,500 in loan money, the family is still left with a bill of $16,900 for one school year; in addition to having to repay back the student loan. Choosing your Lifestyle Health Plans is crucial. The key to successfully springing forward into the spring is to thoroughly research your options, start early, and PLAN!

Use these tips to help your family effectively and efficiently manage the financial aid process, and not let it manage you!!