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In college aid game, forms have function

By , - Last modified: March 7, 2019 at 3:31 PM

Most families navigating the college financial aid maze for the first time know the acronym FAFSA – which stands for Free Application for Federal Student Aid.

However, there is also a lesser-known application used by roughly 400 private colleges and universities, known as the CSS Profile, or simply the Profile.

Both applications calculate a student’s expected family contribution – an estimate of what they can afford to pay out of pocket – which is a significant factor in determining whether a school makes good financial sense for a family.

But there are differences in how the applications determine that contribution, creating situations where it might be more advantageous for students to apply only to FAFSA schools or to apply to schools that also require the Profile.

First, a little background.

Students who want to receive grants, loans or other forms of government assistance generally must fill out the FAFSA, which is used by every accredited college in the U.S. to determine a student’s eligibility for aid. Private schools use the CSS Profile, on the other hand, to determine how much of their own money to award to students.

The differences are in the details.

The FAFSA counts fewer assets than the Profile and considers just one year of income. In addition, FAFSA ignores home equity and the value of a family-owned business with 100 or fewer full-time employees, as well as income and assets of a divorced, noncustodial parent.

The CSS Profile, on the other hand, requires greater detail to assess a family’s true financial strength. The Profile assesses home equity and a business of any size, as well as income and assets of both divorced parents, including stepparents. It reviews three years of income and grants an allowance for medical expenses and private school tuition.

Here are how the differences play out in generic examples.

Take a student considering a FAFSA school costing $28,000 and a Profile school costing $64,000. The student’s married parents both earn income, and FAFSA and Profile have calculated the family’s expected contribution to be $22,000. If we subtract the contribution from each school’s cost, the aid eligibility is $6,000 for the FAFSA school and $42,000 for the Profile school. For this family, it’s possible that the Profile school may be as affordable as the FAFSA school.

In another example, a second student considers the same schools, but her parents are divorced. This student’s custodial parent is unmarried, earns a modest income and rents a home. Her noncustodial parent earns high income, is remarried to a high earner and owns a home. The FAFSA school counts only the income of the custodial parent. Profile counts the income of the custodial parent, the noncustodial parent and the stepparent. FAFSA has calculated the family contribution at $9,000, while Profile has calculated it at $45,000. In this scenario, the out-of-pocket cost would be much higher for the Profile school.

Finally, consider a student who’s interested in a specialized degree offered at a FAFSA school costing $46,000 for a nonresident (think flagship state university) and a Profile school costing $60,000. This student’s parents are married and both earn an income. The student and three younger siblings attend private school, and one family member incurs high medical expenses. FAFSA has calculated the family contribution at $36,000. Profile allows a credit for private school tuition and medical expenses and has calculated the contribution at $30,000. In this case, the Profile school would be the more affordable option.

Bear in mind that each college will use professional judgment to determine the components of a financial aid package. Scholarships and grants – free money requiring no repayment – are far more attractive than loans requiring repayment or work-study programs in which the student is employed on campus. However, a better understanding of how these financial aid methodologies are calculated will be valuable for families determining which colleges make the most financial sense for them.

Financial aid can be estimated in advance by using FAFSA4caster at studentaid.ed.gov, College Board EFC Calculator at bigfuture.collegeboard.org, or the Net Price Calculator on individual college and university websites.

Carrie L. Fellon is a financial strategist at Agili of Bethlehem and Richmond, Virginia, responsible for client financial strategy and counsel, comprehensive financial planning, and investment management. She can be reached at cfellon@agilipersonalcfo.com.

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