How Is Federal Student Aid Calculated?

Obtaining federal aid is a critical part of your college experience, so it’s important to understand how this aid is calculated. Some influencing factors include your enrollment status, the cost of attendance (COA) for your school, what educational year you’re beginning, and your expected family contribution (EFC). Together, these figures help a financial aid administrator (FAA) determine how much aid you qualify for.

What’s My Enrollment Status?

Your enrollment status is determined by your class load. Perhaps you’re a full-time student who takes a full roster of courses per semester. You could also be a three-quarter, half-time, or less than half-time student. Perhaps you’ve already graduated and wish to apply for grants via financial aid channels. If your enrollment status changes for any reason, you need to notify your FAA right away.

What’s My COA?

Every school has a different COA. Most colleges are two- or four-year institutions and will provide a COA that covers an entire year. Other schools could offer 18-month programs, so they’ll have a COA spanning that time frame. If you’re attending school at least half-time, your COA will consist of estimated amounts for these factors:

  • Room and board (cost of on-campus living and on-campus dining)
  • University fees and tuition
  • Supplies such as books, computers, transportation, etc.
  • Costs for studying abroad
  • Disability-related expenses
  • Money you spend taking care of a dependent (such as child care)

Of course, your COA can vary widely depending on which school you choose. A private university that’s out of town, requiring you to live on your own, is a more expensive option. A much lower COA would result from attendance at a local community college, allowing you to live with relatives. While you’re much more likely to get additional aid for an expensive school, it won’t come close to spanning the difference in cost of a more affordable university.

How Does My Educational Year Affect My Financial Aid?

Generally speaking, you’ll receive more aid as a freshman than as an upperclassman. Many students have enrolled in extensive educational programs, with a doctorate as their final objective, only to find that their planned financial aid was not nearly enough. Grants and loans tend to dry up as your educational level rises. It’s always helpful to explore research grants and other sources of aid that you can target in the future.

When countered with the rising costs of school as you move toward your goals, this phenomenon is a double-edged sword with implications that are difficult to foresee. The only strategy here is to prepare for the worst and take advantage of FAFSA® services and programs that can help you peer into the future and know what aid you can expect later on.

How Is My EFC Determined, and How Does It Affect My Federal Aid?

Despite the somewhat misleading name, the expected family contribution doesn’t equate to the amount of money your family will need to spend before you secure that degree. It’s simply a reference number that helps FAAs determine how much aid you qualify for. The EFC system helps ensure that students from families who are less financially stable will get more help than those from wealthier ones.

Calculating your EFC is one of the more difficult steps of your application, so getting help with your FAFSA® is highly advised. Students will fill out multi-page forms of one of three different kinds. There’s Formula A, Formula B, and Formula C. Each of these three worksheets has two versions — a full version and a simplified version.

EFC forms require many types of data. These include declarations of family members’ taxed and untaxed income, benefits, investment portfolios, available cash, and bank accounts. There are also reference tables specific to your state that help calculate exemptions and allowances. Other factors that influence EFC include how many household members are working and how many are attending college in addition to you.

Formula A is for dependent students. If someone such as a parent or guardian declares you as a dependent on their taxes, you probably fall into this category. If your family’s combined income is low enough ($25,000 or less), you could qualify for a zero EFC. This puts you in a good position to obtain federal aid. If family members are receiving benefits through assistance programs such as Medicaid, SNAP, or WIC, this will also help your EFC.

Formula B is for independent students without dependents of their own. Adults and married persons without children fall into this category. While a zero EFC isn’t available to Formula B students, you can at least qualify for the simplified form. The combined income of you and your spouse is used as the basis for this formula.

Formula C is for independent students with dependents. If you have children, this is the one for you. Both a zero EFC and a simplified form are available to Formula C students, provided you meet the income requirements.

Need-Based Aid

Once all the numbers are in, your university will calculate your need-based aid amount. They basically subtract your EFC from your COA. For example, if your school year will cost $20,000 and your EFC comes out to $15,000, your need will be $5,000. You shouldn’t expect this amount to be provided in full, and you can’t qualify for more than this amount. Need-based federal aid programs include the Pell Grant, federal work-study programs, Perkins Loans, the Federal Supplemental Educational Opportunity Grant (FSEOG), and direct subsidized loans.

Non-Need-Based Aid

Once your actual need-based financial aid award is determined, it’s subtracted from your COA. Whatever is left will be the basis of your non-need-based aid. Your EFC doesn’t factor into your non-need-based aid at all. All that counts is what your school will cost and how much aid you’re already getting. The federal non-need-based aid programs include the PLUS loan, the Teacher Education Access for College and Higher Education (TEACH) grant, and direct unsubsidized loans.

The world of federal financial aid is a confusing one, but navigating its rough seas is an important step in securing a stable educational future. Nearly $3 billion in FAFSA® aid goes unclaimed per year, so take full advantage by faithfully submitting your FAFSA® application every year.