Paying for College
Find Out About Colleges Financial Aid
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Understanding How Colleges Use The Federal Formula
(And When They Don't)
The federal formula for financial aid (or federal methodology) is used to determine a student's eligibility for federal financial aid. It is also used by the majority of states (including Indiana) to determine eligibility for need-based state grant programs. However, when it comes to colleges and what they use to dole out institutional financial aid dollars, it's a mixed bag. The vast majority of public colleges and universities use solely the information provided on the FAFSA and the resulting EFC calculated under the federal formula. Many private colleges do too. Some private colleges, however, use an institutional methodology to calculate a "secondary EFC" which is used to determine eligibility for financial aid available from the institution.
Like the federal formula, the goal of an institutional methodology is to calculate an EFC based on the income and asset resources of the student and his/her family. The differences lie in exactly what resources are considered and the way in which those resources are assessed in figuring the EFC. For example, the equity in a family's primary residence is not considered under the federal formula. It may be considered under an institutional methodology. The allowances, or deductions, may also differ between the two formulas, as do the assessment rates on available income and assets.
Most colleges that use an institutional methodology utilize the CSS Profile administered by the College Board. This is a secondary financial aid form that a family must fill out (in addition to the FAFSA). Click here for a list of the colleges that are planning to use the CSS Profile for the 2007-2008 academic year. Keep in mind some colleges may use an institutional methodology and not the CSS Profile. If you are considering colleges that require a secondary financial aid form, like the CSS Profile, be sure to check the dates by which those schools require such forms be completed (as well as any FAFSA deadlines they may impose that may be earlier than published state or federal deadlines).
Bottom Line: The EFC generated by the federal formula must be used to determine eligibility for federal financial aid. It is also used to determine eligibility for state financial aid, for states that use the FAFSA and resulting EFC as the basis for their grant programs. Typically the only time the secondary EFC generated by an institutional methodology comes into play is when figuring institutional financial aid.
