Every year, millions of Americans fill out the Free Application for Federal Student Aid (FAFSA) form to see how much college financial aid their kid can get. The form also determines how much parents need to contribute. In theory, the FAFSA is a good thing. It’s supposed to provide a clear idea of what you’ll have to spend about to get your child through school. In reality, it often overestimates how much families can afford.
As The New York Times reports, filling out the FAFSA is the first step in receiving federal grants, loans and aid. The form also provides an expected family contribution (EFC). Schools use the EFC as a way to determine how much aid to distribute. It’s the difference between the college’s tuition and the family’s payment. Once an EFC is determined, the school generates the financial aid package. The problem is that the EFC is often higher than most people can afford. The main reason for this issue is that the formula for EFC is dated. It has not been updated with ever-increasing tuition and cost-of-living costs. It assumes, no matter where someone lives, that a family of four with one kid in college can get by on $29,000 per year. For a single parent with one kid in college, that number drops to just $19,000. Mark Kantrowitz, a financial-aid expert and publisher of Savingforcollege.com, put it bluntly to the Times: “The assumptions they are using to calculate all of this have no connection to reality.”
There are no easy answers to the FAFSA problem. A bill from House Democrats has proposed changes that would allow more families to lower their EFC. However, as tuition costs continue to rise, the bill still doesn’t completely solve the issue. In the meantime, this underscores the need for parents to save as much as possible for college — and for students to apply to a wide range of schools that will offer them more in merit aid (the type that doesn’t have to be repaid).