Let’s Dive into the Student Aid Index and the FAFSA

How is financial aid calculated?

If you have a child applying to college this year, you have almost certainly heard people talking about completing the FAFSA (Free Application for Federal Student Aid). You may also know that the FAFSA is used when the Federal Government and individual colleges determine how much financial aid to give a prospective student. The FAFSA calculates a student’s Student Aid Index or SAI. This number will be used by the government and schools to determine how much aid is needed. Demonstrated need is calculated by subtracting SAI from the school’s cost of attendance. Let’s dive deeper into how it all works. 

The first question to answer is how SAI is calculated. When you fill out the FAFSA, you will submit information about the student’s family size and parent’s education level and marital status. Parents will add information about income from their federal tax return. There are also places to add information about other circumstances, so your calculation isn’t strictly based on money. The government will use all the information on the FAFSA to determine a number between -1500 and 999,999 with -1,500 indicating the highest need and 999,999 being the lowest need. This is your SAI.

The government will subtract your SAI from your school’s cost of attendance to determine the maximum amount of need-based aid that can be given. The amount of aid given by the federal government is capped around $20,000 per year. This may leave a gap between a student’s need and the aid that they can receive. 

Some state governments will also supply some more attainable merit-based aid. In Georgia, the HOPE scholarship program helps a lot of families afford college. The state of Florida has a similar program called Bright Futures. Individual schools will also often provide some aid, with some schools like Duke and Vanderbilt University meeting 100% of demonstrated need. Some other schools offer automatic scholarships based on GPA or test scores.

Federal aid generally comes in three forms. First, Pell Grants are available to lower income students and can provide between $740 and over $7,000 in federal aid that doesn’t have to be paid back. Direct loans are available to any student. However, higher income students’ loans are not subsidized and will accrue interest while the student is in college. Lower income students’ loans will be subsidized up to $3,500 for a first year undergraduate and will not accrue interest while the student is in college. The maximum total direct loan for a first year student is $5,500. Lastly, the work study program is available to students with demonstrated need. The student will work a part-time job (usually on campus) to help pay for tuition. The hours will be scheduled flexibly to avoid conflicts with class and will pay at least federal minimum wage but not more than is stated on the student’s financial aid package.

Should you complete the FAFSA?

For most students, the answer is yes, especially if you don’t know whether you will stay in-state or if you don’t live in a state with a strong scholarship program. If you’re not sure whether you qualify for federal aid, you should fill it out. The Federal Student Aid website has an estimator tool that can be helpful for students and families trying to decide whether filling out the form makes sense.

For some students, it may not make sense to complete the FAFSA. For example, higher income students who qualify for merit-based scholarships in their state (HOPE scholarship in Georgia or Bright Futures scholarship in Florida) may prefer to fill out that state’s alternate form. In Georgia, the GSFAPP (Georgia Student Financial Application) form only has to be completed once in ten years, as opposed to annually for the FAFSA. So, if a student knows that they will not qualify for federal aid, their state scholarship form may be the better option. 

You don’t lose anything by submitting the FAFSA. If you are unsure about whether to do it, submit it.

Test Cases:

We recommend using the free financial aid estimator on the federal student aid website. It can be completed in less than 5 minutes. Here are a few test cases I created.

Note: These are not real people. I made them up.

Example 1:

Example 2:

Example 3:

If all three of these students went to a school that costs $70,000 and meets 100% of demonstrated need, here is how much aid each person would receive.

• Levi would not receive aid since his SAI is greater than his cost of attendance.
• Caleb would receive $45,256 (70,000 – 24,744 = 45,256).
• Annabelle would receive $64,487 (70,000 – 5,513 = 64,487).

Many Private Schools Require the CSS Profile

While the FAFSA is required for most state schools, some private schools require a different form to be considered for aid. The CSS Profile is completed through the College Board website. It is similar to the FAFSA in many ways, and will require you to enter much of the same information, but the calculations are different. Since many private schools are generous with funding, it makes sense for any student who may qualify for aid to consider completing the CSS Profile as well. There are cases where a private school can be more affordable than public universities when there is a demonstrated need. Just like with the FAFSA, there is no harm in completing it, and the reward could be significant!