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Most Important Financial Aid Questions

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US News & World Report ran an interesting article last week about how to increase your chances of getting all the financial aid you need. According to the article, only 3% of U.S. colleges promise to meet the full financial needs of their income freshmen class, without them having to take out any loans. If your college is among the other 97% that aren’t making that guarantee, there are some important questions you will want to be sure to ask them. Here are what I see as the top 5 questions, but be sure to check out the article for the complete list.

1. How does the school calculate “need”?

The most common formula for calculating need is based directly on what the federal government has to say, via the Free Application for Federal Student Aid (FAFSA). But other colleges — namely private schools — have their own calculations. A number of Ivy League colleges, for example, have a set income point at which a family qualifies for financial aid. At Harvard, for example, families earning up to $180,000 will pay no more than 10% of their income toward the cost of attendance.

2. What is the expected student contribution?

You no doubt have heard of Expected Family Contribution (EFC). It’s how much a school expects your family to be able to pay toward the cost of attendance, based on your FAFSA (or the types of calculations discussed in #1).  Well in addition to the EFC, many schools have a less advertised “ESC” — that’s expected student contribution. Usually it’s at least $1,000, which is basically how much a student can make from summer earnings. There are a few schools that do give enough aid so that students have no expected contribution.

3. Do international students qualify for aid?

Most schools don’t guarantee full aid for international students, but there are a few that will commit to meet the financial needs of non-citizens. If you are planning to come to the United States for school, definitely check into that.

4. How does the school calculate home equity?

A number of colleges consider the equity your parents have built into their homes as a possible resource that can be used to help pay for college. In other words, if your parents live in a house worth $250,000 and they owe $100,000 on it to the bank, they have $150,000 in equity — which might diminish your financial aid award. Some colleges, including Ivy Leagues like Harvard and Brown, don’t factor home equity at all. On a personal note, this is an issue that really burns me up. If you are responsible and buy a house that you can afford and work consistently to pay it off, it’s almost as if you are being penalized. At least in comparison to people who are upside down on their houses because they bought more than they could afford and then the market went belly up. Or just people who recently up-sized their homes and therefore don’t have a lot of built-in equity. Grrr! In any case, just be sure you ask, so you will know what you’re dealing with.

5. How does the school account for divorced parents?

If your parents are divorced, this is definitely an issue you will want to discuss with your college. There are a number of ways that schools handle divorce, and almost none of them are based on what your parents decided in their divorce decree. Some schools analyze both parents’ income, as well as that of any stepparents, and based the EFC on that total number. Other schools consider only the income of the original parents (without the step-parents income factored in). The FAFSA calculation looks only at the custodial parents, regardless of what the divorce decree or prenuptial agreement says. So let’s say you live with your mom and stepdad. They have a prenup, which states that stepdad isn’t responsible for contributing to your college costs; but according to the FAFSA, your aid award is being based on stepdad’s income!

What questions do you think are most important to ask the office of financial aid? Have you met yet with your financial aid officer? If not, maybe it’s time to set up an appointment!

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