Each college or university that accepts your application uses a similar formula when determining your financial need and your expected family contribution (EFC, the amount a school expects you to kick in). This means your EFC is basically the same whether a school costs $4,500 or $45,000 or if it's a public, private, or elite institution.
Each financial aid package represents the difference between that institution's cost of attendance (COA) and your EFC. That aid package may be a mix of federal grants and loans, need-based scholarships, federal Work-Study jobs and, increasingly, "institutional aid" from the school.
Whether called institutional aid, an entrance award, a specific college-based grant, or a waiver, the school is offering you a tuition discount on your college bill. Tuition discounting is sometimes compared to the pricing of airline tickets. By charging full price to affluent students who can afford to pay, colleges can offer discounted fares to lower- to middle-income students who cannot. This way, the school maintains the full value of its published price and gets a student it wants—hopefully, you.
Colleges don't advertise tuition discounts. You must complete the application process, be accepted, and receive an award letter detailing your financial aid package.
The true differences between aid packages aren't always obvious. Before deciding which college is the best for you, evaluate each aid package carefully, check the fine print, then crunch the numbers for a true comparison. You can compare up to three award letters at a time with Nellie Mae's award letter calculator.
Are your perceptions limiting your aspirations? With constant media reports about sky-high college costs, students and their families, particularly low- and middle-income families, tend to overestimate the price of colleges in general and underestimate the existence and availability of financial aid for their student, according to a 2004 report by The Education Resources Institute (TERI).
The truth is that you can get a fine education at all price points. Only 5% of students attend colleges with annual tuition and fees of $33,000 or higher—and a large majority of those students receive aid including tuition discounts. What's more typical is that 65% of enrolled students in all four-year schools are charged less than $9,000 per year in tuition and fees, according to a 2007 College Board report.
Fifty-six percent of students attending four-year public institutions were charged between $3,000 and $6,000 in tuition and fees. Two-year public schools—which educate 41% of all undergraduates—offer average college costs of $2,272 and the average full-time junior/community college student receives about $2,200 in financial aid. Many two-year colleges have formal "feeder school" arrangements with public and private four-year colleges.
For more information about financial aid or to review your best borrowing options for covering your EFC, visit Nellie Mae's Loan Center.