Part: 1 - - General Information about Postsecondary Opportunities
SectionTitle: Demonstrating Need
As we mentioned in the last section, a student must demonstrate
FINANCIAL NEED to be eligible for most federal student aid.
Quantifying a family's need for financial assistance has often been
controversial, but it is not a recent issue. In fact, uniform systems of
need analysis were developed by the financial aid community in the
1950's, before most of the federal student aid programs had been
At its simplest level, a student's financial need is the difference
between the student's COST OF ATTENDANCE at the school and
the amount THE FAMILY CAN BE EXPECTED TO
CONTRIBUTE TO THE STUDENT'S EDUCATION.
The financial aid administrator usually develops an average COST
OF ATTENDANCE for different categories of students. Some
programs of study may have lab fees or higher charges for books and
supplies than other programs. Students living off-campus may have
higher costs for room and board and additional transportation
expenses than students living on-campus.
For the federal student aid programs, the financial aid administrator
must use the definition of "cost of attendance" given in the law. The
law specifies that the cost of attendance includes tuition and fees and
an allowance for living expenses such as room and board, books and
supplies, and transportation costs. The law also provides limited
allowances for dependent care and expenses for disabled students.
The process of NEED ANALYSIS focuses on the other part of the
need equation: how much can the family be reasonably expected to
contribute towards the student's education? Traditionally, financial
aid administrators have determined the expected contribution by
collecting information about the family's income and assets, and
comparing these figures with the family's expenses. The law has
adopted much of the traditional approach to need analysis for the
federal student aid programs. There is a single formula for federal
student aid, which produces the EXPECTED FAMILY
CONTRIBUTION (EFC). The EFC is used to award Federal Pell
Grants, campus-based aid and Federal Stafford Loans.
To determine the amount of a student's Federal Pell Grant, the
financial aid administrator simply looks up the cost of attendance
and the EFC on a PAYMENT SCHEDULE to determine the award.
The lower the EFC, the higher the award. A student with an EFC of
0 has the most need and tends to receive the largest amount of
Federal Pell Grant funds. A student with an EFC greater than the
cut-off is not eligible for a Federal Pell Grant.
The Federal Pell Grant Program is presumed to be the first source of
aid to the student, so the award process for a Federal Pell Grant does
not consider other sources of aid. For 1993-94, the Grant was
limited to $2,300 and the cut-off for eligibility was 2100.*1* Also
note that awards do not change above a certain cost. (In 1993-94,
the maximum cost shown on the payment schedule was $4,000+.)
For instance, in 1993-94 if a student had an EFC of 0, the student's
award was $2,300 whether the student went to a school that had a
cost of attendance of $4,000 or to a school that had a cost of $8,000.
When awarding CAMPUS-BASED AID or certifying a FEDERAL
STAFFORD LOAN, the financial aid administrator must consider
other aid available to the student, as well as the amount the family
can contribute (the EFC). For instance, let's say that a student
enrolls in a program whose cost of attendance is $6,000 and has an
EFC of 500. Initially, the student needs $5,500 in financial aid to
go to school. However, if the student receives a $2,000 Federal Pell
Grant and a $1,000 outside scholarship, the student's need is
reduced by $3,000. Therefore, the aid administrator can award up to
$2,500 in campus-based and Federal Stafford Loan funds.
When certifying an unsubsidized Federal Stafford or a FEDERAL
PLUS LOAN, the aid administrator doesn't use the EFC figure to
determine the student's or parent's need for the loan. However, the
amount of the loan may not exceed the difference between the
student's cost of attendance and the other aid the student is
receiving. The school must consider the student's eligibility for
other aid before determining the loan amount. For instance, if an
independent student in his or her first year of study has a cost of
attendance of $6,000, and is eligible for the maximum Pell Grant
($2,300) and maximum subsidized Stafford Loan ($2,625), the aid
administrator may approve the student for an unsubsidized Stafford
Loan up to $1,075.
In this section, we have given a simplified overview of how an aid
administrator determines a student's financial need for the various
federal student aid programs. Finally, using available federal and
non-federal aid, the financial aid administrator generally puts
together a financial aid package that is presented to the student in
the form of an award letter. The student may accept or decline any
of the financial aid offered in the award letter. The process of
PACKAGING AND AWARDING AID can be complex, especially
when the student is receiving work-study or noninstitutional funds.
If a student or a prospective student has questions about his or her
financial aid package, these questions should be addressed to the
financial aid office that prepared the package.
As we have seen, federal student aid awards are ultimately based on
the student's EFC. It is important to note that even though
eligibility for the Federal PLUS program is not based on the EFC,
the student's eligibility for a Federal Pell Grant and Federal Stafford
Loan (based on the EFC) and an unsubsidized Federal Stafford Loan
must be considered.
In order to receive an EFC, a student must first fill out the Free
Application for Federal Student Aid (FAFSA). Unlike the
admissions application, the FAFSA is sent to a processing center
that is independent of the school. The student's information is
entered into the Department's computer system that calculates the
student's official EFC. The application process for financial aid is
described in Part II of this Handbook.
*1* The EFC cut-off for eligibility for a Federal Pell Grant is
determined each year by Congress. At the time this publication
went to print the cut-off for 1994-95 had not yet been determined.