Title Image


Applying for Financial Aid

  |   Education Funding, Financial Fact or Fiction

Fact or Fiction

Only the lowest income families receive aid for college so there’s no point in applying.



Even if everyone has told you that there is no way you will receive any aid, apply anyway, especially if the student is interested in a private university. Your Expected Family Contribution (EFC) is based on more than just income.

According to the National Center for Education Statistics, for the 2014-2015 school year, 86% of full-time degree/certificate-seeking undergraduates at 4-year postsecondary institutions were awarded some amount of financial aid (84% of public institution students and 90% of private institution students). This aid is comprised of funds that don’t need to be paid back, such as Pell Grants and grants from state and local governments, institutions, and private sources, and funds that must be repaid (in most cases) such as federal and private loans.

As you begin to plan for future college expenses, keep the following tips in mind:

TIP #1

A few years before your student is thinking about applying to college, check out the FAFSA4caster from the Federal Student Aid office of the U.S. Department of Education. This tool requires much of the same information as the Free Application for Federal Student Aid (FASFA), where most people should start the financial aid process, and provides an idea of what aid might be available given the family’s finances under the federal methodology for calculating aid.

TIP #2

Don’t be too quick to structure assets in a manner that will potentially increase the aid awarded under the federal methodology (FM) because there are two other methodologies used by a number of schools:

The Institutional Methodology (IM): Used by many private institutions and a small number of public universities. As just one example of how the IM and FM differ in their aid calculations, under the FM, home equity is not included in the calculation, whereas families with considerable home equity may be penalized by the IM formula. Additional financial information required by schools that use the IM is reported on the College Scholarship Service Profile (CSS PROFILE), the application service of the College Board.

The Consensus Methodology (also referred to as CM and Section 568): Used by approximately 30 schools including Columbia, Cornell, MIT, and Yale. Unlike the FM which treats parental assets more favorably than the student’s assets, the CM treats parents’ and students’ assets equally to dissuade families from positioning assets for the sole purpose of increasing aid. Similarly to the IM, information from both FASFA and CSS PROFILE is used to determine the aid package.

The truth is, for many students and their families, the art and science involved in determining how to pay for school is more complicated than a majority of the classes offered by the school!

TIP #3

Maximize the potential for receiving aid:

  • Take advantage of information provided by your child’s high school;
  • Contact the financial aid offices of the schools of interest to learn what methodology they use to calculate aid and obtain statistics on how much aid they have awarded in prior years (according to the National Association of College and University Business Officers, for first-time, full-time freshman at private universities for the 2016-2017 school year, the average “discount” on the “sticker price” was 49.1%, a record high, due to the grants and scholarships offered);
  • Research information provided by the College Board, the National Center for Education Statistics and Federal Student Aid; and
  • Seek out any and all scholarship opportunities.

Final Thoughts

Although it is helpful to hear about the experiences of friends and family who have been through this process, remember their situation is not your situation and should not factor into your family’s decision to apply for aid. Once you apply and have some concrete information to consider, prepare a summary spreadsheet of the current and likely future aid package. Often just the act of seeing those numbers in black and white is enough to help you and your child make the best decision on a school that is a good fit educationally, socially, geographically, and financially.

AUTHOR - Tammy Wener

As co-founder of RW Financial Planning, Tammy oversees the financial planning process for all clients and manages the day-to-day operations of the firm. She truly enjoys getting to know her clients and is not shy about asking questions. Tammy has 15+ years of experience in the financial planning and estate planning fields and has worked with a broad range of clients including: couples simultaneously planning for financial independence, caring for their parents, and saving for college; newly widowed and divorced women looking to become more financially literate; young couples just starting out; families juggling the demands of a child with special needs; and financially independent individuals and couples exploring “what comes next.”