It’s not really the ABCs, but…

Have you heard about the controversy sweeping the internet? Yes, that’s right. Someone rewrote the ABC song. You know, the one you sang as a child when you learned your alphabet? In order to make the letters more understandable, the new version changes the classic “lmnop” part to “lmn”. I know, mind blown!!! Check it out here and let me know what you think.

Is it really that bad?

I’m not sure that it is that bad, but it certainly isn’t the version I grew up with. But since we are talking alphabet, let me introduce you to some (perhaps) new letter combinations to you: COA – EFC = NEED.

What is that? And what does it have to do with financial aid? I’m so glad you asked.

COA stands for Cost of Attendance. The Cost of Attendance is an estimate of how much a year of education will cost for the average student at each college or university. Each school determines their own COA, and they may have several different versions of the COA depending on factors like living on- or off-campus, qualifying for in-state tuition, or going part-time vs. full-time.

The COA is not supposed to only represent the amount that you would pay the school directly if you were paying the whole cost of school. It is supposed to represent both direct costs (those you pay the school, like tuition and fees, on-campus housing and meal plans) and indirect costs (like transportation, books, off-campus housing and meals).

So, if you have your COA, the next important letters to know are the EFC (or Expected Family Contribution). In a previous section of the blog, I went through in great detail how we determine your EFC, but as a reminder here, keep in mind that the EFC represents an estimate of how much your family can absorb in college costs in a year. Again, no one expects you to be able to write a check for this amount, but rather this number represents your contributions from savings (if any) and current income based on the Federal formula.

The difference between these two figures, your COA minus your EFC, represents your NEED. This is the amount of need-based financial aid you can qualify for at the college. Each college will have a different COA, but you should have (approximately) the same EFC no matter which college you attend (*with a side note about private colleges who have money of their own to give away), so your NEED will be different college by college.

The way the financial aid system is supposed to work, though, your EFC should be the same school by school, so all that really changes in your COA and your NEED. This means that no matter which school you attend, your contribution (how much you and your family have to pay) should be the same.

Now there are many reasons this may not work in reality (maybe you applied late, maybe the college has limited resources, maybe your EFC is higher than the college’s COA so it appears that you are paying less), but generally this is the way the system works.

It’s a classic. No need to make a new version (unlike our new alphabet song).

We will be talking more about budgets and budgeting this month. Let me know if you have any questions about any of the topics, or suggestions for questions which are bothering you.

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