Chapter 12: The Essentials of Need-Based Financial Aid
Written by Kaashvi, Dartmouth College
Welcome back to The College Countdown! If this is your first time stopping by our blog, I am Kaashvi, your friendly neighborhood college admissions enthusiast and your guide through this series. Whether you’re a returning reader or a newcomer, I’m pumped to have you join us for this thrilling journey. After our last installment on applying for scholarships, we are ready to continue the conversation of bankrolling your college education with the next issue in this series: the essentials of need-based financial aid.
When I was in ninth grade, I remember being told that Ivy League schools didn’t give out any kind of merit-based scholarships and thinking, “Well, there goes my dream of attending Princeton (yes, back then it used to be Princeton because of the movie ‘A Beautiful Mind’). I know there is no way my parents can afford to pay close to ninety grand a year for college.” Now, while that statement is a hundred percent factually correct, it is also a bit misleading because it leaves out some important pieces of information. Thanks to that missing information, I ended up getting a full ride to attend Dartmouth, another Ivy League school. Today, I’m spilling all the tea on need-based financial aid, so you can see how it can help you afford college too.
Merit-based aid or scholarships are just one side of the coin when it comes to paying for college. The other side, which is equally as important, is need-based aid. This type of aid is calculated solely based on your annual household income and your family’s assets and savings. In other words, it is based on your family’s ability (this is not the same as willingness) to pay for your education.
The cost of attendance (COA), also called the sticker price, is an estimate of your educational expenses, usually for a year. It includes everything from tuition, additional fees, room, meal plan, personal expenses (books, travel) to a health insurance plan. The COA can be broken down into direct (billable) costs and indirect costs. The former includes charges like tuition that you’ll see on your student account statement bill from the school, while the latter covers expenses you should budget for but won’t be billed directly by the school.
The number that the school’s financial aid department believes your family can afford to pay constitutes your estimated family contribution (EFC), which has recently been changed to the Student Aid Index (SAI). The amount of aid a school would need to give you for you to be able to comfortably attend is called your family’s demonstrated need. These calculations are made based on the documentation you submit: the FAFSA form, the CSS profile and your parents’ income tax returns. So, this means:
Estimated Family Contribution (EFC) = Cost of Attendance (COA) – Demonstrated Need
Now, here’s where it gets confusing. You see, not all colleges cost the same. For example, Bunker Hill Community College, the University of Massachusetts and Brandeis University are located within 30 miles of each other. But, they respectively cost $6,500, $34,750 and $81,000 a year to attend. Just like I did with Princeton, some of you might be rethinking the colleges you were planning on applying to after seeing those sticker prices.
So before you start crossing off colleges on your list, I have some good news for you. The sticker price listed on a college’s website is often very different (and a lot higher) from what a student is actually expected to pay. You could easily end up attending Bunker Hill Community College for less than $1,000, the University of Massachusetts for about $5,000 and Brandeis University on a full-ride because of financial aid. These more realistic figures are called net prices, and they can be anything from the full sticker price to almost nothing.
Most times, students at the same college pay different amounts for the exact same classes and experiences. The amount of financial aid you receive depends on three main factors:
a) Your academic or athletic merit (scholarships),
b) Your household income (need-based), and
c) Where you live (in-state or out-of-state).
To find what your net price to attend a particular college would be, you’ll need to use their net price calculator (NPC). This can be easily found on the college’s financial aid website. This tool will give you an estimate of the actual cost you should expect to pay out of pocket after accounting for grants, scholarships and any other aid you may be eligible for. Typically the more questions a net price calculator asks, the more accurate it’ll be in ballparking the net cost to you.
But if you’re like me and are applying to upwards of twelve schools, running the calculator for every school is a bit impractical. A lot of you are finalizing your college lists and then trying to figure out how to make those colleges affordable, when it should really be the other way around. It’s perfectly fine to run the NPC for your dream school (or a few schools you definitely want to apply to), but if you’re focusing on making random schools financially feasible while ignoring equally awesome and affordable options, you won’t get the bang for your buck.
To get the best financial outcomes for attending college, you should ask yourself two questions:
a) How well do you do at school?
b) Is your family financially well off? Do you have any valuable assets?
Based on your answers, place yourself in one of the four quadrants in the picture below:
If you’re thinking, “I’ve been taking the most demanding course load for the past two years, though my performance has only been just above average,” or “One of my parents was recently laid-off, but we do have a lot of savings”, remember that colleges know there’s a spectrum. Just approximate your answers and you’ll be fine.
Keep your quadrant number in mind, it’ll be needed for the coming sections to figure out which kind of colleges are likely to give you the most amount of financial aid. That will make it easy to narrow down your list to include colleges that not only meet your financial needs but also your preferences for location, size, majors, and other factors.
Types of Colleges
For most of you, there are five types of colleges in the running.
Public in-state universities
These are the colleges which share the name of the state you reside in (UChicago, NYU, USC and Penn are exceptions to this rule because they are all private universities) and are partially funded by your state government using the tax dollars you pay. Therefore, they offer a lower sticker price or reduced in-state tuition to their state’s students when compared to what is offered to kids from other states. They are ideal starting points for students in all four quadrants. Some state schools like UMass and Iowa State completely seal the deal by offering additional scholarships or need-based aid to reduce the net price even more.
But, do you count as an in-state student for the schools you’re eyeing? For most students, this can be answered by just one question: do you live in the same state as the college? If you do, you’re golden. If not, you probably don’t qualify for in-state benefits. There are some exceptions to this rule, but we’ll discuss them in the next portion.
Reach out to your counselor to ask if there’s anything specific you need to do to qualify for in-state tuition. For several states like New York, all you have to do is put your in-state address and answer some basic questions on your application. But for some others like North Carolina, students are expected to fill out a form called ‘Residency Determination Service’ if they want to receive the subsidized tuition. Not even I was aware about this until I started doing research for this article. You don’t want to pay the price (quite literally) for missing something so small.
Almost every state tries to incentivize its students to stay in-state for college through merit and need-based aid programs. Start by going to the NASFAA website and making a list of all state-sponsored aid options you qualify for. If your family lives in Pennsylvania, you are eligible to apply for the PA State Grant Program for example. Then, check whether the programs on your list are merit-based (and what grades or test scores you need) or need-based (and what forms you are required to fill out). The final step is to see how much is the maximum award and where that leaves you.
Getting in-state tuition rates and a state aid award goes a long way when it comes to financing your education. So, having a few of these schools on your list is a really good idea.
Public out-of-state universities
These are the colleges which are in a state that you don’t reside in. So, if I live in Wisconsin and want to apply to the University of California, Berkeley, I’m looking at a sticker price of $80,000. For reference, students who do qualify for in-state tuition at Cal have a sticker price of $45,000 (yes, it’s that big of a difference). But as with most things, there are some workarounds to out-of-state tuition to make these schools a little more affordable as well.
This can be based on:
Your merit: Both academic or athletic talent count towards these scholarships. They are often full rides and include additional stipends for the summer. You likely have to be in the top ten percent of applicants accepted to the school to end up getting one of these. Applying early to such schools gives you the best odds of reducing your tuition to in-state levels and even receiving some additional money on top of that. You might be automatically awarded one of these scholarships based on your grades or test scores or you might be invited to apply for them—either way, the money is still green.
Jefferson Scholars Program at UVA is one such scholarship that promises to cover the entire cost of attendance (over $360,000) for nominated students. The University of Alabama automatically awards scholarships up to $6,000 to students who match their criteria and apply early.
Your location: Weirdly enough, your location can change things for you if you’re hoping to get a reduced tuition rate at an out-of-state school. Many states participate in tuition exchanges wherein students from certain states can attend college in a partner state as if they were an in-state student. But there’s one caveat: this only applies if you’re choosing a major not available at your public in-state university. Some universities extend their in-state tuition rates to students from surrounding states as well.
In the midwestern region, students from Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota and Wisconsin are eligible for tuition reductions at certain schools.
Moving to the state where the college is located is another loophole to avail the in-state tuition. While it is the most straight-forward option out there, it is also riddled with complications.
Your parents: If your parents are separated and live in two different states, you might be eligible for in-state tuition in both states. If you or one of your parents is a veteran, some universities offer educational benefits for it (in addition to the money provided by the GI bill). Sometimes, colleges offer tuition benefits for children of alumni and employees who enroll there as well.
Your employer: If you can work out an agreement with your employer (they must reside in the same state as the college you want to attend) for them to sponsor your education, then they are eligible to pay the in-state rate. Starbucks has a partnership like this with ASU.
Private universities
These are the colleges which are privately funded by grants and donations and typically have much higher sticker prices. These colleges amount for two-thirds of all four-year institutions in the US. If you’re someone who wants to be with like-minded people, or knows exactly which field they want to major in, or are looking for a very specific trait in a school—private colleges can customize fit like no other, all thanks to their flexibility.
You already know not to be intimidated by the sticker prices of these schools, but what you don’t know is how to figure out which schools will actually be affordable for your family. This comes down to two things:
Your location (again): Private schools have the same cost of attendance for all students, whether they are in-state, out-of-state or international. However, funds from your state-sponsored program can often be applied to private colleges in your state. This situation would apply if you were attending Emory and were a recipient of the Hope Scholarship. This also extends to state grants like the North Carolina Need-based Scholarship.
Selectivity of the school: With highly selective schools like the Ivies, MIT and Stanford, the chances of getting merit-based scholarships is absolutely abysmal (mostly because a lot of these schools don’t offer them to begin with). But to make up for that, these colleges usually provide very generous need-based aid to cover the full need of every student.
With somewhat less selective schools, you have a higher likelihood of being in the top tier of the incoming class and getting full or partial rides. Sometimes, you end up getting surprise scholarships that offset the net price to you by quite some as well. This happened for me at Drexel where I ended up getting an additional $15,000 a year in scholarships I wasn’t expecting.
Two-year colleges
Maybe you’re not sure of what exactly you want to do with your life and the idea of paying off student loans stresses you out. Or, you know exactly what you want to do and don’t want to waste two years taking unnecessary classes. Maybe your high school performance doesn’t reflect your true potential and you want a fresh start so you can get into your dream school a couple years down the line. Maybe you just want a degree for the sake of it. If you feel like any of these statements apply to you, a two-year college might be exactly what you’re looking for.
There are three types of two-year schools: community colleges, trade schools and junior colleges. Community college is preferred by students who want to transfer to a public university and aren’t sure of their major, want a second attempt at improving their GPA or just want to save some money (these colleges can be as cheap as $1,200 a semester). Trade schools are a good
fit for students who feel ready to join the workforce after a year or so and are certain they won’t change their mind in the coming decade. Lastly, private junior colleges are meant for kids who aren’t sure where they want to end up, but definitely want to transfer to a four-year university.
International universities
Going to college is extremely expensive in the US if you compare it to most other countries in the world (Australia might just be the only exception). Attending college in a foreign country doesn’t have to be limited to one semester or a gap year, you can make it your whole college experience.
The biggest argument for studying abroad is finances. In most countries, undergraduate degree programs are three years long instead of four. That means, you’ll spend less money on tuition and will start working sooner than your peers. Though, traveling back and forth between two countries can be a bit pricey. There’s a good chance that the federal aid you receive for college might not apply to international universities.
The UK, Germany, France and Australia are some of the top countries where American students usually enroll. While choosing a country to apply to, it’s also important to consider the language barrier you might face and look into how licensing would work for you as a foreign citizen.
Now, let’s circle back to your quadrant number and see what kind of colleges you should be considering.
Quadrant 1: High performing and low income
This means you’re likely to receive the best of both worlds: significant need-based aid because of your financial need and scholarships due to your strong academic performance. Private colleges and public in-state universities would be your best financial fits.
Quadrant 2: High performing and high income
So, you either look for colleges that will reward your hard work in school, athletic ability or extracurricular talent with merit-based aid or schools that simply have a sticker price your parents can afford to pay. Private colleges are your best bet if you’re looking for scholarships, but public universities (both in and out of state) and international universities are also likely affordable fits for you.
Quadrant 3: Low performing and low income
It might not seem like it, but you do have some fantastic options waiting for you. Since you qualify for need-based aid by filling out the FAFSA, applying to two-year colleges and public in-state universities would be a smart choice.
Quadrant 4: Low performing and high income
Since your family’s financial resources can cover most costs and you probably won’t qualify for any kind of financial aid, we’ll have to be a bit more creative. Public universities are a safe option, but certainly not your only one. International universities, private colleges and two-year colleges are realistic possibilities.
With that, you now have an idea of what kind of colleges you should apply to. After you finalize your college list and run the net price calculator, you’ll get an estimate of what schools expect you to pay. Your need-based financial aid would have a lot of different components, some of which I’ll now discuss.
Types of Need-based Financial Aid
University-based aid
This type of aid is provided directly by the college after they decide what your demonstrated need is based on the documentation you submit. At Dartmouth, all of the money provided to meet the demonstrated need is in the form of a scholarship with no strings attached. This means that the student does not have to pay the money back at all. Some schools meet the demonstrated need with a mix of scholarships and loans (these loans usually go into repayment mode after the student graduates and have very low rates of interest).
Dartmouth and Harvard’s financial aid policy ensures that if the annual household income of a student’s family is under $125,000 a year and they have typical assets for families in that income bracket, they qualify for the ‘zero parent contribution’ initiative.
At need-blind schools, applying for financial aid doesn’t affect your chances of admission because your demonstrated need isn’t one of the factors taken into consideration. However, most schools follow need-aware admissions wherein applying for financial aid does impact your chances of admission.
Government grants
These are awarded by the federal government and apply to public universities, private colleges, two-year colleges and some vocational training programs as well. The Pell Grant is awarded to low-income students after they fill out the FAFSA and the maximum cap is usually around $6,500. The Federal Supplemental Educational Opportunity Grant is a campus-based aid program which offers additional aid to students with a high amount of demonstrated need.
Subsidized and unsubsidized federal loans
These loans don’t require a cosigner or guarantor and have lower interest rates than private loans. If you’re receiving a subsidized loan, they don’t accumulate any interest for the entire time you’re still in school, while unsubsidized loans do.
PLUS loans
This is another kind of a federal loan offered either to independent students or parents of students enrolled in college to make up for any gaps between the net price and the financial aid. Since they have fixed rates and virtually no borrowing limit, they are a very popular option. They do require a credit check, an origination fee and go into repayment mode immediately after the funds are granted. However, they do offer income-based repayment plans which significantly lower the monthly payments and make the loan a lot more affordable.
Private loans
This is the last resort option after all other avenues have been exhausted. They are issued by banks, credit unions or private companies and aren’t granted without a cosigner.
Work-study programs
This is a government-funded program that helps students find part-time employment while they are enrolled at school to earn financial aid. Through this program, students earn at least minimum wage and work a limited number of hours per week. These jobs can be both on or off campus and usually relate to the field the student is majoring in. So, you could work as a research assistant with your school’s chemistry department if your job is on-campus or with a non-profit organization teaching underprivileged kids if it’s off-campus. On average, if you’re participating in this program, you can expect to earn at least $1,500 for the academic year. Fun fact, a small portion of my financial aid from Dartmouth includes earnings from leave terms and on-campus work as well.
And there you have it—a full, in-depth look at need-based financial aid. As you are looking for colleges for your list, remember to keep your financial needs front and center. You’re often going to get much more financial aid from private schools, and your state schools will probably be your next financially viable bet. The financial aspect of college starts early, I’m talking October, so being prepared with your parents’ financial documents before that will save you a great deal of annoyance later on. Also, you can email colleges to ask for fee-waivers if the application fee is a burden for your family. Trust me, it’s worth the trouble when you’ve saved your family over $500 in application fees alone (I did that and my parents were very appreciative of it).
Good luck and apply away to those colleges! I want to thank all of you for joining me today and sticking around till the end. I’ll see you soon with a new article. Until next time, keep dreaming big!
ABOUT THE AUTHOR
Hey there, college-bound crew! I’m Kaashvi, an undergraduate student at Dartmouth College from India. I’m the brains (and heart) behind the College Countdown series here at The Ivy Institute and I am stoked to be your guide through this process.
So, a little bit about me: I was a STEM kid through and through in high school and all my classes were the highest level ones offered at my school and graduated at the top of my class for three consecutive years. Outside of class, I was involved in activities that let me nurture my love for inventiveness, responsibility and storytelling. From designing a vehicle to aid oil spill cleanup to working as an elected representative for the youth advisory council to volunteering at the local deaf school—I devoted a lot of my time to projects that were true to my values.
When I’m not typing away at my keyboard, dishing out college advice to people in my inbox and on this blog, you can catch me exploring new hiking trails, whipping up some questionable (but oddly delicious) desserts at my bakery or getting lost in a gripping mystery novel.
As an international student, the application process wasn’t just about finding a spot at a prestigious university but also about finding a place that felt like a second home. Now that I’ve made it out alive to the other end (with a boatload of stories to tell), I'm here to spill all the tea on how you can do the same. With some guidance and a whole lot of oversharing, together we’ll crush this admissions game like absolute pros.
Catch you on the flip side,
Kaashvi
