Needs-based Financial Aid

Need-based Financial Aid

Well over 50 percent of today's college students receive needbased aid. Needbased financial aid eligibility is based on two simple issues --cost of education and family ability to pay. The cost of education can vary significantly from institution to institution. Generally, these budgets include all reasonable costs (tuition, room, board) of attendance.

To apply for needbased financial aid, complete the Free Application for Financial Aid (FAFSA) and, if appropriate, the College Scholarship Service's PROFILE. These documents are used to determine what amount, if any, a family (and that means the parent and student) can provide toward the annual cost of attendance. Required amounts of family contributions may vary somewhat from institution to institution, but the formulas in place ensure that most expected contributions are similar.

The formulas consider a variety of family circumstances when determining eligibility. (The College Board Web site has some great financial aid calculators you can use!) Consequently, there is no real cut-off point or maximum income a family can have and still qualify for assistance. You may be surprised to learn that an increasing number of families with significant incomes now qualify for assistance. Every student, regardless of financial situation, should consider applying for need-based aid and see what happens.

Formulas and Applying

Both the Department of Education and the College Scholarship Service apply "need analysis" formulas to the information your financial aid applications supply. These formulas, which were designed by congress and by the educational community, differ in important ways, but each estimates what amount your family can provide toward educational expenses in the upcoming year. If you are interested in reviewing these formulas, check the Department of Education and College Scholarship Service (College Board) Web sites. You can also find these formulas outlined in a variety of commercial publications available on newsstands.

Both the FAFSA and the PROFILE are available through guidance counselors' offices and both can be completed online. Either way, each form takes about an hour to 90 minutes to complete. You must complete and submit each form once every year. With each form, list all of the colleges to which you intend to apply. The Department of Education and the College Scholarship Service will take care of the rest by sending copies of your form to the institutions you have listed.

Divorced?

The custodial parent must complete both the FAFSA and PROFILE. Some schools that require the PROFILE will also require that the non-custodial parent complete a Divorced and Separated Form. This document will be included in the PROFILE and should be submitted directly to the college or university. If it is in appropriate for then on custodial parent to complete the form, or if he or she refuses, write to the school to request an exception to this policy. If the custodial parent has remarried, the stepparent must also complete the FAFSA. There are no exceptions. PROFILE schools will often require information on stepparents as well.

A Financial Aid Example

As we already explained, need analysis and packaging policies can and do vary from institution to institution. Here is an example of what might happen (where I work) at Duke University:

We ask the family to complete and submit the PROFILE and FAFSA no later than February

1. (We require tax forms, but those aren't due until May 1.) We also invite them to submit letters that explain any extenuating circumstances that might affect their family's ability to support educational expenses.

At Duke, students are admitted without reference to their need for financial aid. This policy of "need-blind admissions" means that we do not determine an applicant's aid eligibility until after the student has been admitted. As soon as we are notified of a student's admission, we pull together the application materials, determine aid eligibility and prepare awards for those who are eligible. Who will be eligible? The formula we use considers a wide variety of circumstances --there is no one answer. However, here is an example of a fairly typical applicant's award:

The Smiths are a family of four. Both parents work, and Melissa, the Duke applicant, will be the only one in college next year. Family income is roughly $60,000, and their assets are pretty standard relative to their income. They own their own home and have offered no unusual circumstances.

In this case, the parents' contribution would likely range from $8,000 to $12,000. Melissa's contribution in this example is $2,000, with $1,900 coming from summer earnings and $100 coming from Melissa's savings. The cost of attending Duke for next year will be approximately $34,000. For illustration purposes, let's assume that the parents contribute $12,000. So here are the numbers (all figures are in U.S. dollars):

Cost of Attendance	$34,000
Parent Contribution	12,000
Student Contribution	2,000

Demonstrated Need	$20,000

In addition to guaranteeing need-blind admissions, Duke meets 100 percent of each student's demonstrated need. Here is how this works:

Demonstrated Need	$20,000
Work Study	+ 1,800
Loans	+ 4,600
Grants	+ 13,600

Total Award	$20,000

The number of siblings in school at the same time is important. Parent contributions generally go down by 40 to 50 percent if more than one child is in school. Remember, this is just one example, and your results are likely to be different. For specific details, contact your prospective institution's aid office.

What Happens If I Qualify?

If you demonstrate need, you are eligible for need-based financial aid. Demonstrated need is a simple concept --it is each institution's cost of education minus the designated family contribution. So the "formula" looks something like this:

Cost Family Contribution = Aid Eligibility

If your aid award includes federal dollars (and most do), your total aid may not exceed your demonstrated need. Some institutions will meet 100 percent of your demonstrated need; others will meet only a portion of that need. The brochure from each school will outline its policy on meeting need.

Regardless of the portion of need that a school meets, almost all package aid offers three types of assistance:

Workstudy
Deferred interest and payment
Federal loans and grants

The portion of each fund in the package varies from one college to another. While free-and-clear grants are everyone's favorite type of financial aid, don't discount work and loan opportunities.

Citizenship Requirements

To qualify for federal need-based aid, the student must be either a United States citizen or eligible non-citizen. Generally, you are an eligible non-citizen if you have an Alien Registration Receipt Card (I-1551), a conditional permanent residence (1551C), or are an eligible-non citizen with an Arrival-Departure Record (I-94). (For details, check page 2 of the Free Application for Federal Student Aid) Although foreign students are not ligilbe for federal student aid, many institutions offer scholarships. If you are a foreign student in need of assistance, check with the college or university to which you expect to apply.

Federal law requires that you re-apply for need-based financial aid each year. There are no exceptions. Applications are generally available in early December of each year. Mark your calendar to re-apply in December. You don't want to receive your fall bill and discover that you failed to apply for aid. At that point, it may be too late!

In most cases, a school will tell you of your financial aid eligibility at the time that admission is offered. Colleges and universities know that you are concerned about costs and most will not ask you to commit to them until they commit to you.

What If I Don't Qualify?

If you don't qualify for aid in the first year, apply again in the second year. Circumstances change and so does aid eligibility. You may be surprised to find that you receive aid in the second year. And if your circumstances change mid-way through an academic year, most institutions are willing to meet some or all of your newly demonstrated need.