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CollegeData - How Colleges Calculate Your Financial Aid

How Colleges Calculate Your Financial Aid

Just how colleges figure out their financial aid offers can seem quite a mystery. Here's what's going on behind the scenes.

Once students receive all their aid award letters, many are surprised to see how different their offers are. But when you see all the things colleges consider when putting together your aid package, these differences aren't so surprising.

Factors that Go Into Aid Calculations

Every aid award offer is based on these factors:

Cost of Attendance

Every college calculates an estimate of the cost to attend for one year, called the Cost of Attendance (COA). This cost usually includes housing, meals, tuition and fees, books and supplies, transportation, and personal costs. The COA is adjusted for various situations such as on-campus vs. off-campus housing.

Financial Need

If the student is under 24, the college will consider the income and assets of both the student and parent and determine what the family can afford to pay for one year of college. This amount, called the Expected Family Contribution (EFC), is deducted from the COA to arrive at the amount of the student's financial need.

College Aid Calculations

Colleges allocate need-based aid from government sources using a standard formula. Most colleges use this same formula to allocate aid from their own coffers. But a significant number of private colleges use other formulas to award their own need-based aid. These formulas count more of the family's income and assets and can result in a different expected family contribution (EFC) than one calculated using the government formula.

College Financial Aid Policies

What's Next?

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.