How to Determine If a Financial Aid Offer is Good or Bad

on April 5, 2017

When you are deciphering a financial aid award letter, here is a critically important question that you absolutely must answer: Is this financial aid award fair?


The best way to assess the generosity of an award letter is to obtain a dollar figure called the Expected Family Contribution or EFC.


The EFC is a dollar figure that represents what a financial aid formula determines a family should be able to pay for one year in college.


Just as important, knowing your EFC also can provide you with ammunition if you decide to appeal a disappointing aid award.


Taking a Look at a Financial Aid Award Letter


To illustrate why knowing your EFC is essential to evaluating an a financial aid letter, here are figures from an actual award from an East Coast university:


Institutional grants: $25,000

Federal Pell Grant: $5,750

Federal Supplemental Education Opportunity Grant:  $1,800

Total grant aid: $32,550


The price tag of the university making this offer was $61,000.  After subtracting $32,550 in grants (free money), the family’s cost for the daughter’s freshmen year in college would have been $28,450.


The university offered this family a 53 percent price discount, but was this a generous award?  It would be difficult to answer this question unless the family knew what their EFC was.


A family with an adjusted gross income of less than $25,000 has an automatic EFC of $0. This EFC means that the family can’t afford to contribute anything to college. That rarely means, however, that the family won’t pay anything for college.


In contrast, there is no cap on what an EFC could be for a wealthy family. A high-income household could have an EFC that exceeds the price of the nation’s most expensive private universities.


A Bad Financial Aid Offer


Now let’s get back to the student who was offered that 53 percent discount. This applicant’s EFC was $0. So the award, which would have required them to pay $28,450, was a terrible one.


Based on their EFC, the parents could have appealed the award by contacting the admission office. The parents could have argued that the award was so low that it would be impossible to attend the university without additional help.


This poor award letter actually shared the household’s EFC on the bottom line of the award letter. Many colleges, however, don’t include this number. And institutions that do insert the figure usually don’t explain what it is or why families should pay attention to it.


Evaluating a Financial Aid Award


Here is what you should do when you get an award letter:


1. Understand how to obtain your federal EFC


When you file the Free Application for Federal Student Aid (FAFSA), the federal formula generates your official EFC. All institutions will use this EFC to determine eligibility for federal and state aid. The vast majority of colleges will also consult this figure when determining whether an applicant will qualify for its own in-house aid.


You will discover what your federal EFC is three to five days after filing the FAFSA electronically. That’s when you will receive a federal document called the Student Aid Report (SAR).  Your EFC will be displayed in the top right-hand corner of this document.


Even if a FAFSA-only college omits the EFC from its award letter, you’ll know what it is thanks to the SAR. And you can then decide whether to appeal an offer or not.


2. Understand why you might have two EFC figures


Your EFC can vary for schools that use an additional financial aid application called the CSS/Financial Aid PROFILE.


Many of the most selective private colleges and a handful of public institutions use the PROFILE. PROFILE colleges generate institutional EFC figures to determine which applicants will qualify for their own financial aid dollars.


PROFILE colleges can personalize their aid formula by choosing from hundreds of optional questions, which means that each institution can generate a different EFC. Often these EFC figures will be quite similar, but there can be outliers.


You will have to contact each PROFILE institution for its EFC number if it is not provided on the award letter. Here is the list of PROFILE institutions.


Appeal for More Financial Aid


If there is a significant difference between an EFC and a family’s costs based on what a college has offered an applicant, the family should consider appealing for more financial aid. You should contact a college’s admission office to discover what the procedure is for an appeal.


It’s important to understand, however, that most financial aid awards are not going to be as large as families had hoped. That’s because there are only a few dozen institutions that promise to meet the student’s full demonstrated financial need.


Consequently, just because a gap exists between an EFC and what a college has offered in its aid award doesn’t mean a family will be successful in an appeal.


Rather than rejecting students outright, some institutions will practice what’s called admit-deny. Colleges will accept some low-income applicants, but give them such poor financial aid packages that admission officers know that students won’t be able to attend without ruining their finances.


Compare Colleges Based on the Net Price


Even if a college has a family cost figure that matches the EFC, the aid offer might not be all that generous. Most colleges include loans in their financial aid packages. The family must repay these loans, in addition to the EFC. Some colleges will include more loans in the financial aid package than others.


To figure out what the college will really cost the family, calculate the net price. The net price is the amount that remains after you subject just gift aid (as opposed to the entire financial aid package) from the cost of attendance. Gift aid includes scholarships, grants and other money that does not need to be earned or repaid.


So, even if the family costs are close to the EFC, compare the net price for each college. If a college has a much higher net price than the other colleges, consider appealing for more financial aid.


Check Financial Aid Practices


Once you are equipped with the appropriate EFC figures, you should research what kind of awards a specific college typically provides. Taking this step will help you assess the chances of a successful appeal.


The College Board provides an excellent source for this research. You can call up the financial aid statistics of any institution by following these steps:

  1. On the College Board website, type in the name of the institution in the search box.
  2. On the left-hand column of the university’s profile, click on the Paying link.
  3. Then click on the Financial Aid by the Numbers link.
  4. In the upper corner of the page that contains the aid statistics, look to see what percentage of financial need the institution typically provides. Also check the average need-based aid award.
  5. Families seeking more merit aid, should check out what the average merit scholarship (referred to on the site as non-need-based aid) is.

Keep in mind that most institutions practice preferential packaging. That means that students that these colleges covet will typically receive better financial aid and/or merit awards.


Consequently, you’ll want to compare your academic statistics with the most recent figures available for a previous freshmen class. You can find these kinds of figures using the Cappex Scattergram.


Lynn O’Shaughnessy is a best-selling author, speaker and journalist. Her book, The College Solution: A Guide for Everyone Looking for the Right School at the Right Price, is available on

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