All the math you need to know

Yeah, I admit it. I like math. I am one of those people who actually enjoyed math classes; something about the logical rules of math appealed to me. But I recognize math isn’t for everyone.

If you are one of the 42% of Americans who doesn’t love math, though, no worries. Because I am about to introduce you to the only math you really need to know when it comes to financial aid.

So the basic formula for financial aid is this: COA – EFC = Need. That’s it. That’s all you need to know. Just some simple subtraction. Oh, and an explanation of the variables. So let’s dive in!

The COA. COA stands for Cost of Attendance. This is an estimate of the costs to attend the college or university where you are planning on attending. It is a number which is calculated for you and based on your estimated expenses, including the obvious costs like tuition and fees as well as books and supplies. But it also includes the not-so-obvious ones like room and board, transportation, and personal / miscellaneous expenses. The COA is personalized based on your profile so it takes into account factors like whether you will live on campus in a dorm, at home, or independently in an apartment, or whether you are in in-state resident or out-of-state resident (for colleges that offer in-state tuition discounts).

The COA isn’t exactly what you are going to be charged because there are both direct and indirect costs included. For example, you might pay room and board directly to the school, or you might be buying groceries and paying rent to a landlord. In either case, your estimated costs are factored into your COA. Keep in mind that your college or university will determine an estimated COA, and the costs are supposed to be reflective of a reasonable (but not luxurious) estimate, so you might find that your costs and actually slightly more (or less) than their estimate. No worries. You can ask for an evaluation of your COA if you have unusual expenses (for example if you are paying for child care so you can go to school or if you need to buy a computer for your educational use) and the college may make an adjustment for you based on your documented expenses. We will talk more about these kinds of adjustments in another post later!

So what’s the EFC? Your Expected Family Contribution (or EFC) is a measure of how much you (and your family) can contribute towards your educational expenses. It is supposed to be an estimate of your ability to contribute but isn’t necessarily the amount you will need to write on a check. If you are a dependent student (and we will talk more about that soon too) this is based on you and your parents’ income and assets. If you are an independent student, then the EFC is only based on your income and assets. We will talk more about the calculation of the EFC (yes, more math) but for now know that the information you put on the FAFSA and the CSS Profile will help colleges and universities determine the amount of your EFC.

The difference between the COA and the EFC is your Financial Need. This is the amount of need-based financial aid for which you can qualify. This means that the college or university will try to put together a financial aid package to meet this need. It also means that colleges who say that they meet full-need will provide this amount in total aid, and that colleges who do not provide merit-based aid (and only give need-based aid) will not exceed this number with their total financial aid.

So now you know some basic financial aid math. Where should we go next? How about we explore why it’s not apparent who is a parent?