AwardYear: 1994-1995 Edition: PostSecondary Part: 1 - - General Information about Postsecondary Opportunities SectionNumber: SectionTitle: Demonstrating Need PageNumbers: 10-13 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 established. 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. |