Financial Need
What Is Financial Need?
Financial need is the difference between the Cost of Attendance (COA) at a school and the amount a student and their family are expected to contribute toward education expenses. Financial need is used by colleges and financial aid programs to determine eligibility for need-based financial assistance.
Many forms of financial aid, such as grants and work-study programs, are awarded based on financial need.
Why It Matters
Financial need determines how much financial aid a student may receive. Schools and financial aid programs use this measure to allocate resources to students who require additional financial assistance to attend college.
Understanding financial need helps families anticipate the types of aid they may qualify for.
How Financial Need Works
Financial need is calculated using information provided through financial aid applications such as the FAFSA.
The basic formula is:
Financial Need = Cost of Attendance − Student Aid Index (SAI)
Schools use this calculation to determine eligibility for need-based aid such as grants, scholarships, and work-study programs.
Example
A university estimates the Cost of Attendance at $30,000 per year. If the student’s Student Aid Index is $10,000, the student’s financial need is $20,000. The school may offer grants, scholarships, and other aid to help cover that amount.
Financial Need vs Merit-Based Aid
- Financial need is based on financial circumstances.
- Merit-based aid is awarded based on academic achievement, talent, or other accomplishments.
FAQs About Financial Need
How is financial need determined?
Schools use financial aid applications such as the FAFSA to calculate eligibility.
Does financial need guarantee financial aid?
Not always. Aid availability depends on program funding and school policies.
Can financial need change over time?
Yes. Changes in income or financial circumstances may affect eligibility.
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