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FAFSAs, SARs and EFCs! Oh My!

Posted by admin on in College Advice |

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Now that you have hopefully completed your FAFSA, within a week or two, you will receive an email from FAFSA which contains your Student Aid Report (SAR). This Report shows all the data you submitted, and also your Estimated Family Contribution (EFC). You should check all information to make sure it is correct and makes changes, if necessary.

The big shock on the SAR is always the EFC. This is the amount that the federal government expects you, the parents, to be able to pay per year for college. This does not include student contributions. Those are separate.

Though the EFC is what the FAFSA folks think you can pay per year, they expect this money to come from current earnings, savings and loans. They don’t actually think you will be able to take the entire EFC from your current earnings. As you will see, that would be impossible for most families.

When you see your EFC, you will undoubtedly go into sticker shock. Let’s say you are a family with 4 members that makes $50,000 a year and has no significant assets. Of course, everyone’s financial situation is a little different, but given that situation, the federal government would calculate that your EFC would be around $5,000 per year. In that case, you would qualify for some significant need-based aid.

At a typical state college, which costs around $20,000 per year, your Demonstrated Need would be $15,000 per year. Between the federal government and the college, hopefully they would be able to give you (in the form of grants, loans and work study) $15,000 per year.

Many private colleges cost more. At a typical private college that costs $50,000 per year, your EFC would still be $5,000, so your Demonstrated Need would be $45,000 per year. Again, between the college and federal government, they would try to come up with a package offering you $45,000 a year in aid.

Another family, making $100,000 per year with no cash assets, would have an EFC of around $20,000 per year. So at a state school which costs $20,000, your Demonstrated Need would be $0. At a private college that costs $50,000, your Demonstrated Need would be $30,000.

To calculate your Family’s EFC, see my blog post entitled Calculate Your Family’s College Cost for the formula.

For many middle income families, this is where “shopping around” really comes into play. Even though the FAFSA puts your EFC at a certain amount, this does not mean you will necessarily pay that amount. Merit-based financial aid is what makes the difference.

Merit-based financial aid is usually based on your grades and SAT scores, compared to the other students accepted at a particular college. But it can also just be based on how much a college wants you to come to their school. This could be because you have a particular skill, come from a particular geographic area or your ethnicity. This is the great unknown.

Let’s go back to the family that makes $100,000 with the EFC of $20,000. If that student has excellent grades, then a state school may offer him or her $5,000 – $10,000 in merit-based aid. Then the total family contribution would be $10,000 – $15,000, not $20,000. Over 4 years that is a big difference.

Or let’s say that student was accepted to a private college in a distant state that really wanted him. That college might come up with a package totaling $35,000, so the family would again pay $15,000 a year.

So when you see your EFC, don’t panic. It is a number that colleges use to determine if you qualify for need-based aid. This is not necessarily the amount your family will actually have to pay. If your child applied to a variety of different colleges with varying selectivity, he or she will hopefully qualify for some merit-based aid somewhere, so that your family will end up paying less than the EFC as determined by the FAFSA.

The post FAFSAs, SARs and EFCs! Oh My! appeared first on Affordable Schools Online.

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