Learn more about how savings contributions affect your student's financial aid eligibility.
As you save for a child’s or grandchild’s future education, you might wonder what impact that saving will have on their chances of qualifying for financial aid. There are several types of financial aid (federal, state and institutional), but federal aid is the most widely dispersed and is based solely on financial need.
Agencies use a simple but dynamic formula to calculate financial need:
A school’s cost of attendance − Expected family contribution (EFC) = Financial aid eligibility
EFC is an annual figure expressed in dollars, and it determines whether a family has a financial need. You can estimate your EFC at savingforcollege.com. Financial aid offices often weight parental and student income more heavily than assets when determining EFC. In addition, student assets are weighted more heavily than parental assets.
From parents, EFC includes:
From the student, EFC includes:
None of the income and assets of a grandparent or other contributor are considered in the federal financial aid formulas. However, any withdrawals a grandparent or other makes toward education expenses may be considered student income and must be reported on the following year’s financial aid forms. Such income can reduce the amount of aid by 50%.
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