Paying for College #3: Expected Family Contribution
July 15, 2019
Learn from Spaugh Dameron Tenny's Shane Tenny, CFP®, and Will Koster, Associate Planner in this 4-part series. Read the full blog here: http://bit.ly/2melHkC
In this video find out if the FAFSA form will tell you how much you have to contribute and pay toward your kid’s college.
SHANE TENNY: All right. Welcome back. If you've watched our last video on the FAFSA, the Free Application for Federal Student Aid, you've learned that the whole point of filling that out is to calculate the magic number known as the expected family contribution.
WILL KOSTER: Yeah. And what is the expected family contribution?
SHANE TENNY: That's what you're dying to know, right? Does the FAFSA end up telling you how much you have to pay towards your child's college?
WILL KOSTER: No, definitely not.
SHANE TENNY: Huge disappointment Will
WILL KOSTER: Yeah, it tells you your expected family contribution. And that's just part of the formula determining how much subsidized student aid you may qualify for. You take the cost of attendance and subtract your expected family contribution, and that determines the amount of subsidized aid you may qualify for.
The FAFSA is submitted to universities to determine your expected family contribution, and that's based on your assets, your income, the number of people in your household, and the number of students you have in college at that time. The amount of subsidized aid that you may qualify for depends on the cost of the school and your expected family contribution.
SHANE TENNY: Okay, so why don't we put a hypothetical in here for you? Let's say that a family of four has an income of $300,000, and after filling out the FAFSA, they determine that their expected family contribution is $60,000. If they have a daughter who wants to attend Wake Forest, which costs about $70,000 a year now, then they would be eligible and qualify for about $10,000 in subsidized aid each year. Is that right?
WILL KOSTER: That's right. And the $60,000, your expected family contribution, can either be paid using funds you've already saved up or unsubsidized student loans. And we'll explain the difference between subsidized and unsubsidized loans in a later video.
SHANE TENNY: Okay. And one final point is that if the college that your child wants to attend costs less than your expected family contribution, for example, a state school that costs $20,000 a year when your expected contribution is $40,000, then you wouldn't be eligible for any subsidized aid. And you need to either cover the entire cost using savings or an unsubsidized traditional loan.
WILL KOSTER: That's right. And that opens up a whole nother can of worms as far as utilizing debts versus your savings to pay for college.
SHANE TENNY: Hopefully, this helps you understand a little bit more about expected family contributions so you can have a helpful dialog with your trusted advisor. And of course, if you don't have one, then by all means don't hesitate to reach out. Give us a call. We'll be happy to help in any way we can. Thanks so much.