Should you apply for financial aid?
There are many families out there that assume they will not qualify for financial aid due to their household income and other factors. While they may not qualify for need-based aid through the financial aid process, families that at least complete the Free Application for Federal Student Aid (FAFSA) will be offered some form of financial aid.
This aid will come in the form of a favorable (by comparison to other options) student loan or potentially even a subsidized work study program. Sure, families may not want these options, and they are not forced upon families. But, there’s also the chance that this aid could be useful, and there’s also a chance that a family could qualify for need-based aid even with what’s considered a high household income.
For example, a family of four with one child entering college that has a household income of $150,000 and $50,000 in savings/investments (non-retirement) could have an expected family contribution (EFC) in the range of 40,000.
When determining need-based aid, schools use a simple formula. They take the total cost of the school and subtract the EFC to determine the remaining need of the family. Once they have the need, they will determine how much of that remaining need they will meet.
Here’s why the family mentioned above, though living with what would generally be considered a high annual household income, could still receive need-based financial aid.
If the student was applying for college at a school with a cost of $40,000 or more, which is the case of nearly all private schools in the US, they would technically have financial need based on the following equation.
- Total Cost – EFC = Financial Need
- $55,000 – $40,000 = $15,000
I’m using $55,000 as this is currently the average cost of private college tuition, room and board.
While some families will not qualify for need-based aid and may also not be interested in favorable loans or work study programs, hopefully this illustration shows why it is important to at least take a closer look at whether or not your family should apply for financial aid.