F.A.F.S.A. – Why is it important?
F-A-F-S-A. The five-letter “F” word that high school seniors around the country inquire about, what is it?! Free Application for Federal Student Aid. Why is it important…keep reading!
The FAFSA is, as indicated in its title, an application – a form. This form requires important personal and financial information from students and parents. It is then processed by the Federal Government to help determine a family’s Expected Family Contribution, EFC. Yes, this is where the formidable “alphabet soup” continues for high school students applying to college. The alphabet soup, as many in the field like to refer to it, is a laundry list of acronyms for important decision throughout the college admissions process – COA, ED, EA, RD, and so on – FAFSA and EFC are a continuation of the long list of acronyms that are important for a student’s future.
Ok, enough of a tangent let’s get back to the matter at hand – FAFSA. The EFC is a dollar amount that the federal government decides, after putting your information through a complex algorithm, you should be able to reasonably contribute to your student’s educational journey. Then, this number is sent to the colleges of your student’s choice – the colleges that your student is applying to where the institution will utilize this “reasonable” dollar amount to determine the level of need. Financial need is the key to unlocking federal aid such as grants, student loans, parent loans, and federal work study.
This key also grants access to institutional grants that may be available to students. The formula that is utilized at most colleges to quantify the level of need for a student is: COA – EFC = NEED. (Yes, the relentless alphabet soup is back! COA, Cost of Attendance, is the amount of money a college/university states it will cost for all things associated with a specific school. For example, this number includes tuition, room & board, books, supplies, travel expenses, personal items, and more. This number is not a static number, it is also commonly referred to as the “Sticker Price”.) Need is an interesting word in the college admission process. Students often say to me “I NEED to get into X college”, or “I NEED to get an X on my ACT”. The reality of the word “need” implies something far different than the reality it reveals. In the Financial Aid world, “need” implies the amount of money that the federal government or a financial institution will offer a student so that student is able to attend their school. The storm of implication and reality can leave many students confused as to their next steps. At least, this was my experience (slight shoulder shrug).
The dilemma is this: the EFC listed is not an actual amount that my parents (or I) can afford for college, yet obtaining a college degree is necessary for success, so now what? As part of a financial aid package, students are often offered loans to help make their higher education dreams come true. In November 2019, an article was published on cnbc.com discussing this very topic. In the article, the author states that “student loans are now the second-largest category of household debt in the U.S., trailing only home loans. The amount of outstanding student debt is approximately $1.4 trillion dollars”. This is a staggering reality. How many high school seniors (fall of senior year is when you apply for the FAFSA, and spring of senior year is the latest that students will receive their aid package letters) think through paying back the loan, plus interest, after their college degree is completed? Or, again as in my case, are students thinking about their “need” to attend X college and are loans part of the solution? It is a question worth asking.
I am not saying that student loans are evil, my goal in sharing this is to educate students and parents so that each family can make the best choice for the future. My career, my passion, is to help students find the right “fit” college which includes maximizing GPAs, SAT/ACT scores and curriculum in order to qualify for the most merit aid available at each institution. I, often, counsel with families, students and even financial advisors about the reality of need based aid vs. merit aid. Knowledge is power!
I was a first-generation college student when I applied to colleges, and didn’t have either a college savings plan or access to a financial advisor. My parents had a dream for me, though, to complete a college education unlike them. As a result, they encouraged me to take out student loans because that was the only way to make the dream a reality in my family. Both of my parents were hard working middle-class folks, and academic scholarships were not an option for me (that is a story for another day), and since I didn’t have access to a college counselor, I deferred to my parents knowledge and said YES to student loans. I attended a small private college in Portland, OR and am thankful for the opportunity. I, then, went on to earn a Master’s degree in Business. To this day, I am working to pay off my student loans. While I am extremely thankful that my parents had a dream for me, in retrospect (which is always 20/20) I would’ve made some different decisions. But, the decision to forgo college would NOT have been the option. Opportunities have been bountiful because of my education.