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  • Jason Flurry, CFP

Which financial aid category are you in?

See how you look through the eyes of the financial aid office BEFORE you file for financial aid.

Everybody seems to know that financial aid is a part of the college planning process. What very few people understand, however, is how financial aid is actually awarded. There are three basic categories that each college has in mind when they review a financial aid application. The category that you land in has a lot to do with what your final financial aid award will look like. And, by understanding that in advance, you can definitely plan better for college. So here’s a quick look at those three categories.


Category one: The Struggler If you have a very low level of income, it’s tough enough trying to pay your day-to-day bills. Adding on the cost of college can be completely overwhelming. Fortunately, if you’re in this category, many colleges can offer you a tremendous amount of free money to make college affordable. We’ve worked with many families in this category whose children attended colleges that cost more per year than that family earned in income each year – and graduate debt free!


If you’re in this category and you have a very strong student, the hardest part of the process for you to master will be getting your son or daughter accepted at one of the best colleges in the country. Don’t worry about the cost of those colleges up front. The financial aid award process is usually pretty linear at those universities and many of them are characterized by being very generous with their awards. The main thing to remember with financial aid is make sure that you don’t make mistakes with your financial aid forms or miss important deadlines. You may be very pleasantly surprised at how much free money is available to you simply by asking for it.


Category two: The Set The Struggler category is on the low end income wise and this category is for those who are on the complete opposite end of the financial spectrum. Folks in the Set category are usually able to pay for college anywhere their kids want to go without much difficulty. The problem is – they just don’t want to. It’s probably better to say that they don’t want to overpay for college and many people got to be in this category by making good financial decisions, so it’s complete fair to look for ways to make college more affordable so your money can stretch farther.


People in this category usually know in advance they’re not going to qualify for any need-based aid, so their entire focus has to be on either merit scholarships or taking advantage of tax breaks related to college – or both. Those strategies can be combined and offer very substantial discounts, reaching all the way up to 50% or better in some cases.


Category three: The Stuck While category one was on the low end and category two was on the high-end, this category is right in the middle – or more realistically stuck here in the middle. Their income is not so low that they qualify for need-based aid everywhere and their income is not so high that they can just pay for college anywhere their kids want to go. They have to be more deliberate in their planning because sometimes they get financial aid and other times they don’t. Even in situations where The Stuck do get financial aid, their out-of-pocket Expected Family Contribution (EFC) can still be substantial compared to their level income and assets.

The vast majority of people who send their kids to college are firmly stuck in this category. That’s in part why there is roughly $1.5 trillion in student debt in America today. Most of these stuck families don’t plan ahead to make sure they’re going to be able to pay for college in a comfortable manner, so they end up making foolish financial decisions and saddling themselves and their kids with loads of debt.


It doesn’t have to be this way though.


Having a solid game plan that helps you find colleges that offer the maximum amount of money possible and includes proven ways to use your current income and financial resources wisely can make the college experience very rewarding for you and your kids. Working with a College Planning Specialist is essential to understanding the strategies and tactics that will help maximize your college plans too. There is hope for people who are stuck in the middle, but hoping alone that things will just work themselves out in your favor is not a good plan by itself.


Drawing the lines Now that you understand each of these categories, let me show you where the breakpoints are so you can understand how you may look through the eyes of the financial aid officer.

There are 74 criteria that going to determining your share of the college bill and income is only one of them, so take that into consideration as I give you these thresholds. These are general guidelines, but they can help give you some perspective as you’re looking ahead.


Families who generally make under about $75,000-$80,000 per year fall into category one at most colleges. They usually receive financial aid in the form of need-based grants everywhere they apply. Category two families who earn generally $250,000 or higher, almost never receive any form of need-based grants. The only exception is if they have multiple children in college at the same time, in which case the Expected Family Contribution can be divided by the number of those students each year. If, for example a family’s EFC was $90,000 and they had three children in college at the same time, although there top line number is very high, each child’s portion of that EFC would only be $30,000 each. If the colleges where they are attending cost more than that, and they are generous with financial aid, it’s possible each student could receive additional free money in spite of the high Expected Family Contribution. That’s especially true for the second child who may be bracketed on each end by a younger and older sibling who will be in college at the same time they are.


Category three families get stuck in the middle with income levels that range from around $80,000 - $250,000. Of course, the lower you are on that range, the greater the likelihood is that you will receive some need-based financial aid at some of the colleges where you apply. The higher you climb in category three, the less likely it is the colleges will consider you for need-based grants. So, if you find yourself on the higher end of that range, pay special attention to merit scholarship opportunities and make sure that you have a solid financial plan to be able to pay for your out-of-pocket costs. It’s still very possible that you could find great opportunities that also represent great value. Then you just have to design a game plan that helps you use your financial resources in a way that allows you to pay for college while also improving your overall financial situation during the college years.


A College Planning Specialist can help you build and implement a plan like this, if you aren’t comfortable doing it on your own. In fact it’s one of the most valuable solutions they can provide during this critical season of your life. If you’ve never explored adding a professional to your team, here’s a free resource you can use to determine which level of assistance is right for you.


Making the right call Filing financial aid forms is completely optional, although most colleges and high schools will tell you otherwise. Families at the higher end of category three or firmly planted in category two may not even want to share their financial information with the colleges, especially if they’re only going to qualify for loans. After all, if you’re not going to use the loans, why tell the colleges anything about your financial situation? I think it’s better to keep that information private and try to focus more on merit scholarships as a way to bring the cost of college down.


Financial aid can be a combination of grants, scholarships, and loans. It’s not all free money like many people think. And, since not every college meets 100% of your need, you really have to do your homework in advance to know what college is going to cost before you apply. Knowing which financial aid category you’re in will definitely help you plan more intelligently.

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