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  • Alan Sell

How does the FAFSA affect Financial Aid?

Updated: Apr 22, 2022

With the average cost of attending college at $35,331 per year according to the Education Data Initiative, the question of how to fund college expenses is becoming critical for families across the U.S. The cost of college has more than doubled in the 21st century and continues to grow at roughly 6.8% per year. Understandably, this has students and parents searching for ways to maximize scholarships, financial aid, and other opportunities to reduce the cost of a higher education.


In the world of financial aid, the typical advice is always to start with the FAFSA form. But how does the FAFSA actually impact your financial aid determination? Colleges, State and Federal governments, and individual scholarships all use the FAFSA in different ways, but the bottom line for financial aid is that the information you input on the FAFSA is responsible for generating your Expected Family Contribution, which is then used in financial aid calculations.





What is the Expected Family Contribution?

Your Expected Family Contribution is the amount of financial resources the Federal Government expects you to be able to contribute toward college expenses. It's calculated by looking at the income and available assets of both the parent and the student attending college, as well as the number of students from the same family who will be in college that year. The formula used in calculating the Expected Family Contribution is established by law.


How is the Expected Family Contribution used?


Expected Family Contribution is used to find the amount of a student's Financial Need, which is based on the specific college in question. To determine Financial Need, first, the Cost of Attendance for a particular school is determined. Next, the school subtracts your Expected Family Contribution from the Cost of Attendance for the school. The result is the student's Financial Need. The amount of need-based financial aid a student can receive is limited by the amount of their Financial Need. A student can't receive more need-based Financial Aid than the amount of their Financial Need.


Cost of Attendance - Expected Family Contribution = Financial Need



What are the sources of Need-based Financial Aid?


When a student fills out the FAFSA form, he or she is automatically applying for funds from the federal government, his or her state of residence, and possibly his or her school. However, some outside organizations will also require the FAFSA for their scholarship and grant programs as well. The main sources of need-based aid are the federal government, a student's state government, the specific college the student plans to attend, and individual scholarships and grant programs. (Note: need-based financial aid isn't the only kind of financial aid out there. There are also non-need-based student aid programs, as well as merit-based aid programs and scholarships.)


The Federal Government has the following need-based aid programs:

  • Federal Pell Grant

  • Federal Supplemental Educational Opportunity Grant

  • Direct Subsidized Loans

  • Federal Work-Study

State, college and other scholarship/grant programs vary widely, but are no less important in discovering sources of financial aid. While it's a bit more research to discover the specific opportunities related to these sources of funding, they can be significant sources of college funding.


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