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Student Loan

Student Loan Guide Step 4: How Much Money to Expect from Your Student Loan

    As much as we would all like the government to provide a student loan large enough to cover our entire college expenses, that rarely happens. The student loan privded by the government isn't allows enough to pay for what we need. When that happens students have to look for scholarships or an alternative student loan to help cover the costs of college. If you know how much money to expect from the government, you will be able to plan ahead and start budgeting your money or looking for an alternative student loan.

What Your Student Loan Doesn't Cover

    Your Expected Family Contribution, also known as EFC, is the main deciding factor in how much student aid you will receive. It is the estimate of how much a student and his or her family are expected to pay for college. Universities and colleges use your EFC to determine how much student aid to offer you.
    To get an EFC, you must fill out a Free Application For Federal Student Aid, also known as FAFSA, and submit it to the US Department of Education. The Department of Education processes your information and sends you and the schools of your choice your Student Aid Report, which contains your EFC.
    That leads us to the important question, how much will you be expected to pay? Well, that primarily comes down your Expected Family Contribution. The federal government's formula for EFC is based on the idea that you should pay a portion of the expenses. The government expects 35% of students' assets, 50% of students' incomes, 2.6% to 5.6% of parents' assets and 22% to 47% of parents' income to be used to pay for college (Opdyke). It is important to note that the EFC formula takes into account the fact that parents need to save money for retirement. It does that by excluding assets held in retirement accounts and decreasing the amount expected to be paid as the age of the parents increases (Opdyke).
    This example will walk you through the process of how your financial aid is calculated. Imagine you submitted your FAFSA and received an EFC of $6,000. That means you and your family are expected to pay $6,000-worth or your college expenses each year. Also, imagine that the college you are applying for has a cost of attendance - tuition, room, board and other related expenses - of $10,000. Now, the college financial office will take the difference between the cost of attendance and your EFC to find your financial need - $10,000 minus $6,000 equals $4,000. That $4,000 is your level of financial need, and the school uses it to determine how much student aid to offer you.
    Each school puts together its own financial aid package. The schools try to provide enough aid to cover your level of financial need (U.S. Department of Education). However, federal funding for student aid programs isn't strong enough to always provide students with enough money. When you don't get enough aid, you have to try other options. But don't worry. It isn't as painful as it sounds.

What to Do if Your Student Loan Isn't Enough
    If you receive your award letter and it doesn't provide enough aid to pay for college, your first step should be to appeal to the school's financial aid office. That doesn't mean you should hassle the financial aid office just because you want more money. You must have legitimate need, and you must be able to support your request for more aid with financial documentation ("Selecting a Financial Aid Package"). If you prefer to write an e-mail or letter, you can, but it will take longer to get a response. So, it is recommended that you first call the office. If the issue cannot be resolved in one phone call, you should make an appointment with the financial aid office to meet in person ("Dealing with the Financial Aid Office"). Bring supporting documentation, including income statements, expense records and other college's award letters if they offered more aid than the college you are appealing to ("Dealing with the Financial Aid Office").

    If you can prove to the financial aid office that you really need more money and the school has additional aid available, you will likely receive more student aid. However, if the school cannot offer you more aid, the financial aid office can still give you guidance about what to do next. You'll most likely be advised to apply for an additional student loan. Your options for a student loan include a PLUS parent loan from the federal government or an alternative student loan. To learn about federal loans for parents, read the next section of our Student Loan Guide Step 5: Get Extra Funding Through Parent College Loans.

The Rest of Our Student Loan Guide:


College Board. "Dealing with the Financial Aid Office." (accessed August 4, 2006).

College Board. "Selecting a Financial Aid Package." (accessed August 4, 2006).

Opdyke, Jeff D. The Wall Street Journal Complete Personal Finance Guidebook. (New York: Random House, Inc, 2006), 175.

US Department of Education: Federal Student Aid. "Funding Education Beyond High School."
StudentGuide.pdf (accessed August 3, 2006).