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Friday, November 19, 2010

Financial Aid

Several individuals have been inquiring about financial aid and, more specifically, scholarships that are allegedly "out there" like untapped oil reserves.  So, this entry will attempt to address the money issue related to the cost of higher education.

Let's start with a brief description of what financial aid looks like.  This aid typically is "packaged" in a combination of three sources - grants (free money provided by the schools), loans (money for "rent", usually subsidized by the federal government and with low interest rates), and work-study opportunities (employment on campus).  Combined, this "package" is supposed to meet the gap between what a family is expected to pay (called expected family contribution - "EFC") and the sticker price for attendance at a particular school.  So, for instance, if school X costs $50,000 and your EFC is $25,000, then the financial aid package should amount to somewhere in the vicinity of the difference ($25,000).  On the other hand, if School Y costs $25,000 (usually a public institution), then there may be no financial aid package provided - unless merit money is offered.  Not all schools offer full coverage of the difference.  In this case, families may tap into home equity or other sources (including personal bank loans) to close the gap.  Grants, by the way, come in two forms - money based upon demonstrated need and money that is merit-based (earned by virtue of a student's academic achievement and/or SAT scores that meet established criteria set by the schools).

How is the EFC determined?  Well, most every school requires families to submit the Free Application for Federal Student Aid (FAFSA).  This application is submitted to the government, not before January 1 of the year one's child is expected to enter college, and the information is based upon the previous year's tax records.  Some schools also require families to submit the CCS Profile available at The College Board web site (http://www.collegeboard.com/).  Either or both form(s) are then sent to the schools to which one's child has applied and the Financial Aid Office at each school then calculates a financial aid package.  It's not a precise science and, thus, aid packages may differ by school.  It's not unusual for these aid packages to differ according to the degree to which each school would like the student to matriculate.

Local scholarships are available and these are generally announced sometime between March and June.  The Guidance Department lists scholarship opportunities on the Naviance site.  This may be accessed in the "Parent" portion of the EOS web site.  As for those other scholarships "out there", FastWeb (www.fastweb.com) is one web site that is reputable.  There are several scams that fool too many people looking for "free" money.  One such site is http://www.fafsa.com/.  DON'T USE IT.  THE SITE YOU SHOULD USE IS http://www.fafsa.gov/For more links, see below at the bottom of this page.  There may be "oil" to discover, but you may also need to do lots of drilling down into the data mine to unearth it.

In my next post, I'll write about scholarship opportunities available right at EOSHS.  There are several ways to reduce the high cost of higher education.  You may be surprised that some are closer than you think.

2 comments:

  1. I heard that a good rule of thumb is 20% of income and 6% of assets is aasumed available for paying for a kid's education,... is that about right?

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  2. It does appear to be a good rule of thumb. There is a difference in the methodology used by the federal government with its FAFSA and the CSS Profile used by some colleges. My understanding is that the latter includes home equity in the asset column while the former does not. Retirement accounts may be viewed differently as well.

    One point I didn't mention in the post is that it may be wise to look at the percentage of students receiving aid at the various schools one may be considering. This percentage can vary. It may indicate the degree to which a particular school provides aid and, obviously, it tells you something about the percentage of students on campus whose families are picking up the full tab.

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