Ask the college admissions experts Lynn Lillian & Sharon Davis: How Do We Navigate the Financial Aid Maze?

Have you seen your friends posting about dropping their kid at college? Are you imagining the empty house next September after you help set up your own kid’s dorm room? And are you wondering if they’re ready, and if you taught your kid everything they need to know before you send them off? In addition to all these emotional thoughts, you may also be worried that tuition and room and board costs are going to drain you or saddle your child with debt.

To help you navigate the costs and have more confidence in these important decisions, College Mode has gathered some basic financial aid information to help you be a more knowledgeable consumer (and hopefully a little less stressed!).

Use Your Prior - Prior Income

There are two main sources for financial aid – the federal government and the institution you’re attending. The FAFSA (Free Application for Federal Student Aid) is the way for you to apply for federal financial aid and it depends on your income from two years ago – they call it Prior-Prior year. The primary determinant of how much aid you receive depends on your income from two tax returns ago.

Apply Early

Make sure your family applies for aid (even if you think you’re not eligible) around the same time your child is applying to college. Your son or daughter will get a Student Aid Report (SAR) along with an acceptance letter. As early as October 1, your child will fill out a financial aid application by listing your family’s current assets and income (exactly what assets must be listed will depend on the formula used).

Along with the federal application, the FAFSA, most private colleges generally use an application known as the CSS PROFILE. Based on these two financial aid applications, colleges will figure out your Expected Family Contribution. (To make all this even more confusing, in 2023, the terminology “Student Aid Index” (SAI) will replace “Expected Family Contribution” (EFC) in the financial aid formula. The basic formula will remain the same. The school(s) listed on your FAFSA form will have access to your SAR data electronically within a day after it is processed.

Know Your Expected Family Contribution

Early on in the process, families can estimate what colleges might expect them to pay by figuring out their Expected Family Contribution. The amount colleges think you can afford to pay will not be the same as what you think you can afford to pay.

When you’re considering which schools to put on your college list, one part of the process is to figure out the true cost of attendance. In addition to tuition costs, costs for room and board, and books, there are fees and estimated miscellaneous expenses that can be found on the college website, and should be included in your comparison.

By law, each institution is required to include a Net Price Calculator on their website. A college’s sticker price is the full published cost, while the net price is the cost of attending a college less any grants and/or scholarships that they receive. Families should pay more attention to the Net Price than the sticker price. And unlike anything else you might buy, the true cost for your student to attend that college will not be revealed to you until your student applies and you receive your Student Aid Report.

A great resource for families is MyinTuition. By answering six to seven questions in about five minutes, you can get a general cost idea for a whole group of private schools. It will give you a ballpark and takes much less time than the Net Price Calculator.

Invest and Save

Depending on which source and which institution, the funds in your 529 can impact what aid you receive. Colleges use the EFC (or SAI after 2023) to determine if you’re eligible for need-based aid and the calculation is based on income, assets, and number of dependents in college or will be going to college. So having assets in a 529 account will have an impact on the amount of aid you will receive, but in most cases it will be minimal (and you will be happy you didn’t take the risk and not save for college). The ownership of a 529 account also makes a difference on the impact it has on need-based financial aid. Since 529s are typically assets owned by the parent, they are usually assessed at up to 5.64% for EFC. This means the student’s aid package is reduced by a maximum of 5.64% of the asset’s value. In a simple calculation, if you have $20,000 in a 529 account, your EFC would go up by a max of $1,128.

Here’s a good article that explains this using real numbers and comparing two different families. Will 529 Hurt My Chances of Getting Aid

Navigating the college admissions process can seem like a heavy undertaking. If you would like to talk to experts who have your student’s best interest in mind, contact College Mode Consulting. We offer a free family consultation where we can answer many of your questions. Check us out at collegemodeconsulting.com, email us at info@collegemodeconsulting.com, or call us at 845-704-1650.