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This resource is being maintained for historical purposes only and is not currently applicable.

Demonstrating need

AwardYear: 1997-1998
Edition: PostSecondary
Part: 1 - - General information about postsecondary opportunities
SectionNumber:
SectionTitle: Demonstrating need

PageNumbers: 14-16


Demonstrating need

As mentioned previously, 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 1950s, before
most of the federal student aid programs were established.

At its simplest level, a student's financial need is the difference
between the student's cost of attendance and the amount
the family is expected to contribute to the student's education.

You will probably develop an average cost of attendance
for more than one category of students. Some programs of study
might have lab fees or higher charges for books and supplies than
other programs. Students living off campus might have higher costs
for room and board and transportation expenses than students living
on campus.

For the SFA programs, you must use the definition of "cost of
attendance" given in the law when determining what expenses to
include. 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 allowances for loan fees, dependent-care costs, and
expenses for disabled students.

The process of need analysis determines how much the family
reasonably can be expected to contribute toward the student's
education, traditionally by collecting information about the family's
income, assets, and living expenses. For the SFA programs, the law
specifies a single need analysis formula, which produces the
Expected Family Contribution (EFC). The EFC is used to
award Federal Pell Grants, campus-based aid, and subsidized loans.
Please refer to the EFC Formula Book 1997-98 for further
information.

To determine the amount of a student's Federal Pell Grant, you can
look up the cost of attendance and the EFC on a payment schedule.
The lower the EFC is, the higher the grant award is; a student with an
EFC above the cutoff point 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 1997 98, the maximum yearly
grant is $2,700, and the cutoff for eligibility is an EFC of $2,500.
Also note that awards do not change above a certain cost of
attendance. For instance, in 1997-98, the maximum cost that affects
the amount of the grant is $2,700; if a student has a zero EFC, the
student's award is $2,700 whether the student attends a school that
has a cost of attendance of $2,700 or attends a school that has a cost
of $8,000.

When awarding campus-based aid or subsidized loans,
you must consider other aid available to the student in addition to the
EFC. For example, consider a student with an EFC of $500 who
enrolls in a program that costs $6,000. The student then needs $5,500
in financial aid to go to school ($6,000 - $500 = $5,500). However,
when 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 aid and subsidized loan funds ($5,500 - $3,000 = $2,500).

When processing unsubsidized loans, such as a Direct
Unsubsidized Loan
, an unsubsidized Federal Stafford Loan, or a
Federal PLUS Loan, the aid administrator doesn't use the EFC figure
to determine the student's or parent's eligibility because these loans
are not need based. However, the amount of the loan may not exceed the
difference between the student's cost of attendance and all other aid
the student is receiving, including aid from private and other nonfederal
sources. You must consider the student's eligibility for other aid before
determining a 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 a maximum Pell Grant of $2,700 and a maximum subsidized
Stafford Loan of $2,625, the aid administrator may approve the
student for an unsubsidized Stafford Loan of up to $675
($6,000 - $2,700 - $2,625 = $675).

In this section, we have given a simplified overview of how you
would determine a student's financial need for the various federal
student aid programs. Using all available federal and nonfederal aid,
you would offer a financial aid package to the student, generally 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.
Students often have questions about the financial aid package; these
questions are best handled at the school. The Department does not
regulate in this area.

Last Modified: 08/20/1998