Some aid is based on financial need and some is not. What exactly is "financial need?"
In this topic, you'll learn:
Many financial aid programs are based on financial need, but what exactly is "financial need"? Many students and families assume they don't have financial need since they live a comfortable lifestyle. In fact, the amount of need depends on many factors, including not only income but also the cost of each school.
Financial need is determined by formulas that take into account student income, parental income for financially dependent students, savings, and the cost of attending a particular school. But at its simplest level:
Financial Need = your Cost of Attendance - your Student Aid Index
The cost of attendance will vary by school, but your Student Aid Index (an index number that measures your family's ability to help pay for college) stays the same across the schools you're comparing for a given year. So, using round numbers with a family whose Student Aid Index is $12,000:
| Public 2-Year | Public 4-Year | Private 4-Year | Cost | $12,000 | $20,000 | $40,000 | SAI | $12,000 | $12,000 | $12,000 | Need | $0 | $8,000 | $28,000 |
If the student chose to attend the public two-year school, they wouldn't qualify for any need-based aid since the amount the family should be able to contribute equals the cost. On the other hand, if the student chose one of the four-year schools, they would show a much larger financial need. Need is what aid eligibility is measured against, though schools don't always have enough funds to cover all of a student's need.
On the surface, it really is that simple. Of course, the reality is that coming up with the funds to meet the need is complex.
First, let's talk about cost and the Student Aid Index.
The first part of the formula, cost of attendance, includes all the expenses involved in attending a particular school. These expenses include tuition, room and board, student fees, textbooks, supplies, transportation and other costs, which vary per school. Each school prepares a budget that takes into account all those costs, including many others. Essentially, the budget is what an average student would spend for the year while living frugally. For those living on campus, the budget includes the actual cost of the dorm and food plan. For those living off campus, there is an allowance for rent and utilities. And when schools consider transportation, they may include not only the cost to get to and from classes, but also two or three trips home per year.
In addition to the required costs (tuition, fees, books, etc.) there are those miscellaneous things students spend money on, including lab fees and art supplies. Schools generally build these budgets around what most students spend, since a budget that's too low can leave students short partway through the year.
The second part of the formula, Student Aid Index, is the amount your family is expected to contribute to the cost of college. The dollar amount of the Student Aid Index is determined by a formula set by Congress. It takes into account your family income, savings, assets (such as investments or real estate), household size, and other factors. Your SAI is calculated using information you provide on the federal financial aid application (the FAFSA).
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