The Money Maze
College Costs
Available Aid
The Needs Analysis Formula
Contribution Worksheet
Timelines and Aid Offers
Additional Articles

The Needs Analysis Formula


How do the college financial aid offices decide who is offered need-based aid? Every college in the United States uses what is called 'Federal Methodology' to determine need. The Needs Analysis Formula is below. Student and parent contribution are determined from income and asset information provided on the FAFSA form. For independent students (over the age of 24), parent information is no longer required. In the case of families where a separation or divorce has occurred, all parent data is provided by the custodial parent. The non-custodial parent is not required to provide any data on the FAFSA. If the custodial parent re-marries, the step-parent is required to provide financial information.

When the Estimated Family Contribution is subtracted from the total cost of education, any amount that remains is 'Indicated Financial Need.' The financial aid office is responsible to prepare and offer a financial package that meets financial need. It is important to ask college financial aid offices what percentage of financial need they are able to meet as some colleges meet less than 100 percent. Percentage of need met should be considered when selecting a college. It is also important to ask what percentage of the average financial aid offer is Gift Aid (grants and scholarships) and what percentage is Self Help (work study and loans). Ideally, colleges should offer 50% or more of the package in Gift Aid. One other issue relates to how private scholarships are treated. If a student receives a private scholarship it should always replace loans first. Other Gift Aid should never be replaced while student loans remain in the package.


Total Cost of Education   $6000.00   $12000.00   $23000.00

Student Contribution
 $500.00  $500.00  $500.00
Parent Contribution
 $2500.00  $2500.00  $2500.00
Estimated Family Contribution  $3000.00  $3000.00  $3000.00

Indicated Financial Need  $2000.00  $10000.00 $20000.00 

Federal Grants  $2000.00  $2300.00 $2300.00 
State Grants  $1000.00  $1500.00 $1200.00
Institutional Grants/Scholarships  $1200.00  $4500.00  
Private Scholarships
(need or merit)
Total Gift Aid  $3000.00  $5000.00 $10000.00 

College Work Study  $3500.00  $3500.00  
Educational Loans  $1500.00  $6500.00  
Total Self Help  $0.00  $5000.00  $10000.00

Total Financial Aid  $3000.00  $10000.00  $20000.00