In college, students are confronted with a lot of new information. Trying to make sense of it all can be very challenging. With today’s high costs of college, there is a very important area of information that students cannot afford to be ignorant about: financial aid terminology.
Are you a student wondering why you did not qualify for a specific grant? Ever wonder why the cost of tuition and the cost of attendance are two different things? Read on and impress your financial aid administrator by being conversationally competent with these key terms.
In financial aid, you will run across a lot of acronyms. One of them is COA or the Cost of Attendance. This term is used to describe the maximum cost associated with attending a particular institution. This accounts for more than just the costs listed on a billing statement. It actually includes tuition, room, board, transportation, books and miscellaneous expenses. The total COA always exceeds the actual costs listed on a billing statement, and it represents the maximum amount of financial aid a student may be awarded during an academic year. Example: Tuition, room, board and fees at XYZ University is $35,000 per year. When including the additional costs of transportation, books and miscellaneous expenses the total COA is $39,000. This gap between the actual cost on the billing statement and the proscribed COA allows for students to apply for enough financial aid and student loans to receive a refund check. In this case $39,000 – $35,000 = $4,000. If the student’s total financial aid and loans add to $39,000, the student will receive $4,000 in refund checks from the school.
The Expected Family Contribution or EFC is the number given to students after they complete the Free application for federal student aid (FAFSA). It is used to gauge the students ability to pay for college costs out of pocket. The number takes into account family income and assets during calculation. Families with high income and assets have a higher EFC while families with lower income and assets have a lower EFC. The EFC is used in conjunction with need based grant programs like Pell to determine exact eligibility. It is important to know that the EFC is an amount of money the government believes you have available to put towards college expenses, but this does not necessarily mean that the cash is readily available to you sitting in a savings account. EFC is essentially a scale established to figure out how much financial aid can be awarded to a student, with low EFCs qualifying for the most financial aid and high EFC’s qualifying for the least.
3. Financial need:
Financial need is a number determined by the following; COA – EFC – any outside aid awarded = financial need. For example; student attends ABC college with a COA of $41,000. Student has an EFC of $16,500 and was awarded a $2,000 community service grant. $41,000 – $16,500 – $2,000 = a financial need of $22,500. Financial need is important because schools use it to determine eligibility for school originated need based grants. Schools recognize that many students may have an EFC too large to be eligible for federal or state based education grants, so they use financial need to determine eligibility for grant money from the school itself. It’s further reason why everyone should file the FAFSA even if they do not think they will qualify for aid. In fact, a student will have a different financial need for each school due to the varying costs of attendance. If a school has a very high cost of attendance, then the financial need for a student would be much greater than school carrying a lower cost of attendance. Financial need is also used to determine eligibility for subsidized Stafford loans and the Perkins loan. A student may have a high EFC but still qualify for these subsidized loans because the cost of attendance for their school is high.
If you have been selected for this procedure, you may be very well familiar with it. Verification is when the school requests copies of family tax and asset information to confirm that it is the same as what was put on the FAFSA. If there are discrepancies, the school adjusts the FAFSA info to reflect exactly what the taxes say. If you completed the FAFSA correctly, this should not be a problem. However, if there are radical differences, a student could lose financial aid eligibility.
SAP stands for satisfactory academic progress. At least once during every academic year, usually after the end of the spring semester, the school’s financial aid office checks over the grades of students to confirm the GPA and total credits completed. A student must maintain at least a 2.0 GPA to stay eligible for virtually all financial aid and must complete a certain number of credits on-time to maintain pace towards a timely graduation. If the student falls behind, they are deemed “Not making Satisfactory Academic Progress” and are no longer eligible for financial aid. Students are allowed to appeal this through a written/typed letter explaining what academic challenges they had and a plan of action for improvement in the next semester. If approved, the student is deemed eligible to receive financial aid again, but if they continue to fall behind the required standard the financial aid will again be revoked, leaving the student to pay for college out of pocket. If deemed not SAP and an appeal is not approved, students generally drop out of their college because they have no way of paying for it. Student loan providers generally do not provide loans where the student is not SAP as well.