What You Need to Know About Financial Need - COLLEGEdata - Pay Your Way

What You Need to Know About Financial Need

Your "financial need" is not how much money you think you need for college. It is an official calculation that affects the size of your aid package.

In financial aid lingo, your "financial need" is the difference between the amount a college expects you and your family to pay and the cost to attend that college. Colleges take your financial need into account when they calculate how much aid to award you.

Calculating Your Need for Financial Aid from the Government

To determine your financial need for government aid, such as federal Pell grants and Stafford loans, colleges use a figure called your Expected Family Contribution (EFC), or EFC. Your EFC is the amount of money the government figures you and your family can afford to pay for college. It is calculated based on financial and personal information you provide on your federal aid application, the Free Application for Federal Student Aid (FAFSA).

To calculate your financial need, colleges subtract your EFC from the cost to attend that college. That cost, officially called the cost of attendance or COA, should be posted on the college's website.

Calculating Your Need for Financial Aid from the College

Colleges also award "institutional aid," which comes from the college's own funds. Most colleges use the federal EFC to figure your need for institutional aid, but some private colleges calculate a different EFC for this purpose. These colleges may ask you to complete another financial aid form called the CSS/Financial Aid PROFILE, which digs deeper into your financial picture. For example, it may ask for a home equity estimate or financial information from a divorced parent, two factors the FAFSA does not take into account.

Your Financial Need and What You Get

The greater the difference between your EFC and a college's cost of attendance, the greater your financial need and your financial aid eligibility. The lower your EFC, the more grant aid you will be eligible for. The higher your EFC, the more loan aid you will be offered. Your financial need, however, may not affect your aid package as much as you might like. Many colleges do not have the resources to fully meet every student's financial need. You can look up how much financial need a college meets, on average, using College Match.

How Need Impacts Merit-Based Awards

Many private scholarship sponsors consider only academics and personal qualities when deciding who gets their awards. Colleges also tend to award their scholarships based on merit rather than need, although need can determine the scholarship amount.

What's Next?

  • If you don't know your EFC, get an estimate of it using the EFC Calculator.
  • Use College Match to find colleges that meet all or most of their students' financial need.

Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.