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- [Host] Hey guys, I'm here with Kerry Traylor, owner and founder of College Strategy Experts. We're here to talk about how to know whether or not you qualify for need-based aid. - [Kerry] Yeah, so the answer to this question is unfortunately complicated because the formula that the U.S. Department of Education and the schools themselves use to determine whether you or your family qualifies for need-based aid is also complicated. First of all, the government and the schools have to determine whether you are a dependent. That is, whether you have received over half of your support from your parents in the last couple of years. They will always look at your student income and assets, but if you are a dependent, which most high school students are, they will also look at things like your parents' income, the number of dependents your parents have, the type and kind of assets they posses, the age of your oldest parent, your parents' retirement contributions, and how many kids your parents have in college at the same time. Your EFC can also be strongly affected by whether family assets are in your student name or in your parents' name. - [Host] Okay, so after you submit all this information, what do the government and schools do with all this? - [Kerry] So based on all this information, the federal government and schools will calculate something called your expected family contribution, or EFC, which represents the amount of money they feel that you can afford to pay for one year of college education. For example, they might say that your family can afford $10,000 a year or $35,000 a year based on a computer analysis of all the factors I mentioned above. Unfortunately, and this is key, your EFC in no way really represents what your family can actually afford to pay for college. So, many families are stunned at how much the government and schools feel you can afford to pay. That's why it's really important to get an estimate of your EFC as early in high school as possible, so that you can figure out which schools you can really afford. - [Host] And how is my EFC calculated? - [Kerry] Your actual EFC is calculated when you fill out one and sometimes two important financial aid forms in the year before you go to college. The first form called the FAFSA, is required by all American colleges and universities if you want any form of need-based assistance. Then in addition some schools, about 250, require you to complete both the FAFSA and an additional form called the CSS Profile, which stands for College Scholarship Service Profile. This form is administered by the College Board, which is the organization that also administers the SAT and SAT subject tests. - [Host] So, if you have to fill out both the FAFSA and the Profile, are you gonna get one EFC calculated from that, or could they be different EFCs for each form? - [Kerry] So, if the school requires just the FAFSA, the U.S. Department of Education will calculate what's called your Federal Methodology EFC. And then the schools that use the FAFSA will use this EFC to determine the kind of need-based aid you get from the federal government like student loans or Pell Grants. And sometimes they will also use that Federal EFC to determine what grants and scholarships you get from the schools themselves. However, roughly 250 schools require you to complete both the FAFSA and the CSS Profile. And in those cases they will calculate a second EFC called the Institutional EFC that will be used to determine how much of these schools' own need-based aid they will give you. A subset of schools that use the CSS Profile also use a third methodology to calculate their own awards and this is called the Consensus Methodology, as if you weren't confused enough. So in sum, you can actually have three different EFCs depending on the schools you're applying to. The FAFSA will calculate what's called your federal EFC. And your federal EFC will be used to determine how much federal aid you'll receive in the form of student loans perhaps, or in the form of, for instance, Pell Grants or SEOG grants. Schools that only use the FAFSA will use the federal EFC to also calculate what they give you in terms of their own institutional aid coming from their own school. Schools that require you to fill out both the FAFSA and the CSS Profile will actually calculate two different EFCs. And again they'll use the federal EFC to calculate your federal aid, but they'll use what's called the Institutional Methodology EFC to calculate what they will give you in terms of their own institutional aid. And these EFCs can be very, very different from each other. And then a subset of the schools that use the CSS Profile will potentially calculate a third EFC called the Consensus Methodology EFC. So, for those schools, they may use the federal EFC to calculate federal aid and the Consensus Methodology EFC to calculate their own institutional aid. - [Host] Got it, okay. So, which schools tend to use the CSS Profile? - [Kerry] The CSS Profile is used by a very specific list of about 250 schools. These schools tend to be the more elite private schools, although there are a few sort of flagship state public schools across the country that do use the CSS Profile. These schools tend to be the most generous, actually when it comes to need-based aid because they tend to be the schools that have larger endowments. However, because they have more money to give away, they're going to dig more deeply into each family's financial picture to figure out who needs the assistance the most. - [Host] Okay, so what are the key indicators that are gonna help me estimate what my EFC is gonna be and whether or not my family and I are eligible for need-based aid? - [Kerry] Definitely the overriding factor in determining your EFC and obviously then your eligibility for need-based aid is your family's adjusted gross income or AGI. And that's found on the last line of the first page of the federal tax return. Also, the number of dependents you or your parents have are going to affect that EFC strongly. And, of course, the other thing that affects your costs are the annual costs of the school you will be attending. Basically I always tell families that if their AGI is under $100,000 per year, they are definitely gonna qualify for aid at almost every school unless the value of their assets puts them over the need-based threshold. - [Host] So, what would be an example of that? - [Kerry] So, an example would be a family that has a relatively low AGI, let's say, an AGI of $60,000 per year, but these parents own a whole lot of property in which they have a whole lot of equity. So the value of their assets is so high that even though their income is low, they're still not gonna qualify for need-based aid. Then if your family has an AGI between 100,000 and 150,000 you should qualify again, they should qualify again for at least some aid at many institutions, again, as long as the value of their assets isn't too high. For institutions that have the very highest costs, you might even qualify for a little aid between $150,000 and $200,000 of AGI. Above $200,000 of AGI, your family is probably going to qualify for very little need-based aid, if any at all, even at the most expensive schools. But, of course this also depends completely on the number of dependents you and your parents have. I've seen families with six kids, three of whom are in college. That will affect and reduce the cost of education for any one child. - [Host] And is there anywhere that I can go ahead of time to try and accurately calculate what my EFC is going to be? - [Kerry] Yeah, that's a really good question. Schools are required by federal law to put a net price calculator on their websites, where you can go to calculate your EFC. Unfortunately, this law when Congress wrote it, did not require schools to keep their cost information current. So, unfortunately many schools have calculators that are many years out of date. You can also find a fairly decent EFC calculator on the College Board's website at bigfuture.collegebaord.org. Again, it's not as accurate as I'd like it to be, but sometimes it's the best EFC estimator you're gonna have. - [Host] And once I complete the FAFSA and the CSS Profile will I know what my EFCs are right away? - [Kerry] Interestingly, not always. Once you complete the FAFSA, you will receive something by email called a Student Aid Report or SAR from the federal government, and it will list your federal EFC. Unfortunately, however the College Board and schools that require the CSS Profile never really tell you what your actual Institutional Methodology EFC is, even after you complete the profile. - [Host] So this is the money that the schools will be giving you? - [Kerry] Correct. It's not only the money they'll be giving you, but it's the number that they use to arrive at what they give you. So, they have come up with this EFC, this Institutional Methodology EFC, but they don't always really tell you what it is unless you ask. In other words, you won't find it on your financial aid award letter anywhere and you actually have to call the financial aids offices and ask for how they arrived at your college costs because they just don't make it transparent. - [Host] So are you saying that colleges always meet all costs over and above my EFC, or is that not the case? - [Kerry] Yeah, again it's complicated. There are actually only about 60 schools in the country that will meet all of your costs over and above your calculated EFC. Most schools will only meet a percentage of your actually calculated financial need. Any percentage of need a school doesn't meet is your responsibility to pay, it's called, your unmet need. So you have to be really very careful in the end in figuring out what you're actually gonna pay.