For parents and students, the single most important question about financial aid is usually: how much aid will the student receive at the college of his or her choice?

How Much Does It Cost to Attend College?

How Much Is Your Family Expected to Pay?

A Real-Life Example

How Much Does It Cost to Attend College?

Schools must tell students applying for admission how much it costs to attend. This information is usually provided in the school's catalog. The "cost of attendance" may also be called "cost of education" or "student budget."

A realistic estimate of costs should include the following expenses:

• Tuition and fees
• Books and supplies
• Room and board
• Transportation
• Miscellaneous personal expenses

Costs may also include other types of expenses such as loan fees, child or dependent care costs, study abroad or cooperative education costs, and expenses related to a disability.

Most schools use standard budgets that reflect the average amount a student will spend for each budget category. For example, rather than calculate individually tailored budgets for each student based on their specific room and board contract or their major, schools will usually use average amounts for a broad category of students. Be sure you understand what expenses are included in the school's cost of attendance estimate.

When you begin college, you'll need to take responsibility for budgeting your time and money. You can get estimates of college costs by writing directly to schools and asking for their most current catalog. That way, you will have up-to-date figures. The following information should help you understand school figures and identify where you might have some control. Controlling and perhaps even reducing your expenses will allow you to stretch limited resources further.

Tuition and Fees are called institutional charges because they are paid directly to the school. Some schools call tuition and fees "program charges" or the "contract price." Once you have decided which school to attend, there's not much you can do to change these charges. At some schools, it may be possible to reduce your total charges if you are able to take more credits per term and thus finish your program in fewer terms.

You should look carefully at the quality of the program you've chosen. The fact that one school is more expensive than another does not mean the academic programs it offers are better than those at a less expensive school.

At some schools, the academic year is divided into two or three terms, and tuition and fees are charged separately for each term. Here, you typically pay tuition and fees either at the beginning of each term, or several weeks before the beginning of each term.

At other schools, especially schools that offer programs lasting one academic year or less, you may have to pay for the entire program when you first enter. Some schools allow you to make payments during the year, but hold you responsible for all or most of the charges even if you do not finish the program.

Books and Supplies. The amount you'll need for books and supplies depends on the courses you select. You can buy these items in the school's bookstore, in a store elsewhere in the community, or at a used book fair. If you shop around or don't mind used books, you may be able to save some money.

Room and Board. If you attend a school near home, it might cost less if you live at home with your parents and commute to school. However, you do miss the experience of living on campus, and it may be easier to use the school's library or to participate in study groups if you live on campus.

Some schools require freshmen or students under a certain age to live on-campus in a residence hall unless they will live with relatives off-campus. Other schools do not offer housing, so students must either live at home or rent a nearby apartment. A school's estimated cost for housing depends on whether the student lives in a residence hall, in an off-campus apartment, or with their parents.

Normally, if you live on-campus you will purchase a meal plan from the school. There may be several plans from which to choose. If you select a plan that offers fewer meals, you may have to add to the plan later at an additional expense, or you may have to spend extra money on food from grocery stores or restaurants. If you live off campus, you'll still need to buy food and cook your own meals.

Transportation. The school might base its estimate of travel costs on two or three round trips home. It is possible that the amount you actually spend on transportation will exceed the school's estimate, particularly if you make more frequent trips home. However, you may be able to share rides home with other students from your area who have cars.

For students who live with their parents, or who live off-campus, the school will estimate daily commuting costs. Whether you drive a car and pay for insurance, parking, gasoline and repairs, or take public transportation will also affect your expenses.

Miscellaneous Personal Expenses include clothing, laundry, grooming items like soap and toothpaste, and an occasional night out. A budget should allow you to maintain a reasonable standard of living, but it will not allow you to be extravagant. It's reasonable to expect you'll need to blow off steam once in a while, and going out with a group of friends often helps keep the pressures of school in healthy perspective. You just need to remember your goal is to obtain a college education and it will mean making some sacrifices.

Other Special Costs. Financial aid administrators can add special categories of expenses to your particular cost of attendance if these expenses apply to you. These categories include:

• expenses related to a disability, if those expenses are not covered by other agencies;
• costs related to study at a school in another country, if your school has such an arrangement;
• certain costs of caring for someone who is dependent on the student, such as child care expenses for the student's own child while the student attends class;
• loan fees (such as the origination and insurance fees that are part of the Federal Family Education Loan and Direct Loan programs); and
• costs related to employment in a cooperative education program.

If you think you will have special expenses you should describe your situation to the school's financial aid administrator. If your cost of attendance is increased, you may be able to receive more aid to cover the additional expenses.  

How Much Is Your Family Expected to Pay?

The amount a family is expected to pay toward the student's cost of attendance is called an Expected Family Contribution, or EFC. The EFC normally consists of a student's share and a parents' share; each share usually takes into account both income and assets. Cash, savings, other bank accounts, and equity in investment property or a business are examples of assets. The value of a family's home is not counted as an asset.

If you are independent of your parents, no contribution from them will be required. Determining whether a student is dependent or independent of his or her parents for the purpose of applying for financial aid is defined in the law.

You are considered to be independent of your parents if you are: at least 24 years old, or if you are an orphan or ward of the court or were a ward of the court until you turned 18 years old. Veterans of the military and students who support children of their own are also independent, as are married students and students attending graduate or professional schools. If you don't fit one of these categories, you will be considered dependent on your parents when the amount your family is expected to pay is calculated.

Once your dependency status is determined, the amount your family can contribute for a given school year is calculated using a formula established by law. The same formula is used for everyone, no matter what college a student may choose to attend. In this way, schools can compare in a fair manner all the students who ask for financial help.

The Expected Family Contribution (EFC)

Most students continuing their education directly from high school will be classified as dependent students. The formula used to determine an Expected Family Contribution (EFC) for a dependent student takes into account all taxable and untaxed income received by the parents. Normally, the formula looks at income received during the most recently completed calendar year. For example, for the 2004-05 school year, the formula looks at 2003 calendar year income.

Of course, not all of the income can be used for educational expenses; your parents must use part of it to get to work, pay the rent or mortgage, buy food, provide clothing for family members, pay taxes, obtain health and life insurance, and cover other necessary expenses families typically incur. Therefore, the formula subtracts standardized amounts from the parents' income to determine how much money is available after basic living needs are met. Even then the formula expects only a portion of those leftover dollars to be used for college.

Assets are an additional measure of a family's financial strength. The formula recognizes that a significant amount of the parents' assets will need to be set aside for retirement or for emergency needs of the family. If the family has accumulated more assets than are typically needed for retirement or emergencies, a portion of the extra assets is considered available for education.

If more than one family member attends a college, the total amount your parents can afford to contribute is divided into equal portions for each student.

The student's own income and assets are also taken into account when the Expected Family Contribution is calculated; however, compared to his or her parents, the dependent student is expected to use a much higher percentage of income (50%) after taxes, as well as a greater portion of savings or other assets (35%) to pay for educational expenses.

The EFC formula is summarized in a chart at the end of this section.

Altering the Standards

In some cases, the standard approach to determining a student's dependency status, Expected Family Contribution, or budget does not reflect a particular student's situation. To ensure fair treatment, financial aid administrators have been granted the authority to make exceptions and adjustments for unusual circumstances. If you think special circumstances make you independent of your parents, even though you do not meet the standard requirements, talk to your high school counselor and contact the financial aid office at the college. Or, if you believe your family has unusual circumstances that make it harder to come up with money for your education, or if exceptional conditions make the standard budget unsuitable, speak to the financial aid administrator at the school you're interested in attending.

The reasons for making exceptions must be well documented and must be based on unusual individual circumstances. Further, adjustments are made at the discretion of the aid administrator, and what may satisfy the aid administrator at one school may not be acceptable to the aid administrator at another school. Even if your circumstances change after you have applied for aid, or received an offer of aid from the school, be sure to seek the aid administrator's help and advice.

A Real Life Example

We've introduced need analysis by explaining its components (cost of attendance, Expected Family Contribution, and need). Now let's look at how it is applied. We'll take as an example Jane, who has a brother also attending college. Jane, a high school senior, has decided to attend a public college in her home state; she will live in a residence hall on campus.

The school's estimated cost of attendance for a student living on campus is $6,500. This figure includes the following costs for the academic year:

To arrive at Jane's financial need, her parents' income and assets and Jane's own income and assets are analyzed. According to the formula, her Expected Family Contribution is $1,800. Jane's share of this contribution is $500, consisting of $300 from her income, and $200 from her savings. She actually has more than $200 in savings, and she earned considerably more than $300 in 2003, but the formula expects only part of her income and savings to be used for the coming year for her college expenses. Her parents' share of the Expected Family Contribution is $1,300. This amount is half of the total amount the formula determined Jane's parents should be able to pay for their children's education. The other half is to be used for her brother's educational expenses.

According to the need equation, Jane's Expected Family Contribution ($1,800) is subtracted from the cost of attendance ($6,500). The difference of $4,700 is Jane's financial need:

Cost of Attendance - Expected Family Contribution = Need

         $6,500          -                $1,800                     = $4,700

If Jane were considering other schools, her need could vary significantly from school to school due to differences in costs. But, remember, her Expected Family Contribution should remain the same. This means that as long as all of the schools Jane is considering have sufficient funds to meet the full amount of her need, her family will not be expected to pay more just because one school costs more than the other.

Once the amount of Jane's need is known, the school's financial aid administrator can begin the process of filling the gap between the cost of attending the school and her family's ability to pay for school.

The Packaging Process

To meet need, aid administrators combine various types of financial assistance in a process known as packaging. The first financial aid program the aid administrator will take into consideration is the Federal Pell Grant. Need for a Federal Pell Grant is determined by the same formula that determines the Expected Family Contribution. In Jane's case this means she is eligible for $720 from the Federal Pell Grant Program. She will receive this grant no matter what other types of aid she might get.

Jane also applied for state and private aid. The school must count those resources towards meeting her need. Jane will receive $500 from her state grant program. She spent several days reading about private scholarship programs in the reference section of her library, and wrote to several organizations that looked promising. Her efforts paid off; she'll receive $1,200 from private foundations.

In addition to her Expected Family Contribution, Jane's resources amount to $2,420 ($720 from Federal Pell Grant, $500 in a state grant, and $1,200 from the private organizations). She originally showed need for $4,700. Subtracting the funding she's getting from sources outside of the school, her remaining need is $2,280.

The school can award Jane a total of $2,280 from school funds and the federal campus-based programs. The aid administrator offers Jane a Federal Perkins Loan of $1,330, and the opportunity to earn $950 from the Federal Work-Study Program (described in the section What Financial Aid Is Available?). As a result, all of Jane's costs are met with the help of both her family and financial aid; none of her original need of $4,700 remains unmet. Her "financial aid package" is as follows:

What other aid could Jane get? In this example, Jane would not qualify for a subsidized Federal Stafford Loan because her full need is met. However, if her family is unable to come up with the entire Expected Family Contribution of $1,800, she could borrow up to that amount through an unsubsidized Federal Stafford or Direct Loan (described in the section What Financial Aid Is Available?). There are limits on the amount a student may borrow each year under the Federal Stafford or Direct Loan Program, but Jane's Expected Family Contribution is under the limit of $2,625 for a first-year student. Or, Jane's parents could borrow a Federal PLUS or Direct PLUS Loan to replace the Expected Family Contribution. This approach might be the better one, because it enables Jane to keep to a minimum the amount of money she borrows to pay for her educational expenses.

If the school did not have enough money to meet all of Jane's need, if Jane had missed the school's aid application deadline, or if Jane's circumstances interfere with her ability to earn the money offered under the Federal Work-Study Program, she could apply for a subsidized Federal Stafford or Direct Loan. She could borrow a subsidized loan to cover the difference between her cost of attendance and her resources. For subsidized student loans, resources include the EFC as well as financial aid from any source. Thus, if the school had offered her only the $1,330 Federal Perkins Loan, or if she had declined the $950 in Federal Work-Study, Jane would be eligible to borrow a $950 subsidized loan.

The Federal Stafford and Direct Loan limits apply to the combined amounts a student can borrow in subsidized and unsubsidized federal student loans. Therefore, the amount Jane borrows in subsidized federal loan money affects the amount she could borrow from an unsubsidized federal student loan. For example, if Jane borrowed $950 in a subsidized Federal Stafford Loan because the college had no Federal Work-Study available to offer her, she would be limited to an unsubsidized loan of $1,675, which is the difference between the $2,625 limit and the $950 subsidized loan.

Finally, if the school was unable to offer her any aid, she could borrow her unmet need of $2,280 from the subsidized Federal Stafford Loan Program. Jane also has remaining eligibility for an unsubsidized Federal Stafford Loan of $345 ($2,625-$2,280=$345). In addition, Jane's parents could borrow a Federal PLUS Loan on her behalf in the amount of the Expected Family Contribution of $1,800 (Jane's parents could also borrow the $345 Jane is eligible to borrow from the unsubsidized Stafford Loan Program, rather than Jane borrowing that amount).

Looking Beyond Federal Aid

Most financial aid programs, including the loan programs, limit the amount a student may receive each year from each program. If the school you want to attend is very expensive, it is possible there might not be enough federal, state, and institutional aid available to cover all of the costs associated with attending that school. It is very important for you to try to obtain private sources of aid. You might also have to work and save more during the summer and the school year, or your parents might need to use more of their own income to help you or even borrow more from the PLUS Loan program.

You may also want to ask the schools to which you are applying whether or not they offer a tuition payment plan. Many schools offer a program whereby tuition, fees, and room and board charges may be paid in monthly installments over the course of the academic year.

Whatever your family's particular circumstance, and whatever your educational goal, try to get all of the facts and help available. When you have all of the facts, you can make the most realistic decision without giving up your goal. A degree might be harder to reach, but it is still within your grasp.

The need analysis process just described must be repeated every year. If you receive federal aid your first year, don't forget the financial aid application process is an annual event! If you do not receive aid for your first year of college education, don't assume you will not receive aid for any other years. Apply every year, and continue to look for private (non-federal) sources of help. You'll learn more about the application procedures for financial aid in the next section.

The chart on the following pages illustrates the calculation of an Expected Family Contribution for a dependent student in more detail. If you would like help approximating your Expected Family Contribution, ask your high school counselor or the financial aid administrator at a local college. Or you may choose to follow the link identified above (Expected Family Contribution). By entering income and asset information at this site for you and your family, you will be able to compute an estimate of your family's contribution; there is no guarantee it will be identical to your "official" contribution; however, it will assist you in comparing educational costs.

Expected Family Contribution for a Dependent Student

The footnotes follow the chart.

National Association of Student Financial Aid Administrators
Opening Doors of Educational Opportunity
Copyright © 2004 by the National Association of Student Financial Aid Administrators.
All rights reserved.
Updated April 2004.