Financial Literacy: Understanding Financial Aid & Merit Awards

The cost of college is the second largest expenditure besides owning a home in the United States. The average cost of college (direct costs, not including indirect costs) in the US is $35,551 per student per year, including books, supplies, and daily living expenses (Hanson, M. 2022). Unsurprisingly, this places parents and students today facing new fiscal challenges as the average cost of college has more than doubled in the 21st century, with an annual growth rate of 7.1% (Hanson, M. 2022).


Considering student loan interest and loss of income, an accepted alternative in our culture in the 1990s has led to the ultimate cost of a bachelor’s degree exceeding $500,000 (Hanson, M. 2022). One of the leaders in understanding higher education as a business industry was my colleague and friend from many years ago when I started my educational consulting career 15 years ago, Lynn O’Shaughnessy, founder of The College Solution


Lynn, a mother of two and a nationally recognized independent financial journalist, became personally aware of the financial web that haunts so many of us parents. Yes, even the most educated and knowledgeable, and those with 529 College Saving Plans needed help with college planning. When Lynn faced the inconsistencies and misleading language used to understand each college offer for her college-bound kid’s financial aid and merit aid awards, she refocused her financial journalist mission as a new voice to speak out about the truth for college-bound parents their kids paying for college. 


Lynn’s expertise with financial awareness and analyzing financial data, as well as her sense of humor, explains that shopping for college is like shopping for the best airfare for your family vacation. You will get to where you want to go, but what is the best value? Where can I thrive and get more for my dollar, and what is the long-term commitment and cost if I book this flight? Lynn is committed to her audience with a solution-focused agenda as she consults with parents nationwide through parent workshops, webinars, classes, and contributions with her books and blog postings for college financial planning. 


It is recommended that parents of sophomores (Class of 2025) and juniors (Class of 2024) should begin discussing their financial literacy plan for college now. In college planning, many conversations are happening within the dynamics of a family, but one most important conversation that always falls last is the accessibility and affordability of college. 


Today, there are many financial planning tools for parents and students to use to determine eligibility for financial aid and affordability with merit aid awards. Parents need to become familiar with the financial aid Expected Family Contribution calculator, or EFC, as it is determined through your FAFSA financial aid application, CSS profile, or other financial aid applications, which colleges use to determine how much financial aid you’re eligible for. It’s the amount you’re expected to pay to cover your college costs, including tuition, books, supplies, accommodation, transport, and other study expenses. This represents a measurement of your family’s financial strength. The EFC is how much the federal government believes your family can contribute to college costs – and this changes every fiscal year based on Congress. In addition, you can also use a college’s net price calculator to get a personalized estimate of how much you’ll have to pay after the college’s cost of attendance is discounted by grants and scholarships. The power of knowing these numbers ahead of time can support your college expectations, college research, and evolving college list to be mindful of “brand name” colleges that will not be as generous as other colleges who want to support the cost of attendance with the grace of merit aid awards for hardworking students – free money! 


Parents of seniors, the Class of 2023 now has formal notifications from all colleges and universities (the official deadline is notifications by April 1st), and these last few weeks of March will determine the narrowing of your enrollment based on the best financial fit or great value. One of my clients this year has a lot to celebrate as he took my financial literacy lesson to heart. 


In my IEC training, I have learned how to interpret data and direct students to colleges known to be generous with merit aid offerings that could be equal to in-state tuition or less for some ideal applicant matches. This is always a golden opportunity if a student is willing to expand their college placement options and look deeper into colleges offering more than what is “needed.” My client followed my guidance with his college research, knowing that having merit aid would be helpful (but not necessary to attend college in his case). We ensured that there were colleges on his list that fit his pillars for success but also were generous with merit aid offerings to students with his profile. On a college visit to the East Coast in late August of senior year, he found his first choice college! He knew this would be his next destination as the college met his criteria for success; it also happened to be a College That Changes Lives. CTCL is an established college cohort that believes in student-centered support and life-long learning. My client was awarded admittance to Early Decision with a bundle of sweet perks such as his own parking space, personal dorm room if needed, and $32,000 per academic school year to attend McDaniel College with a GPA minimum to maintain the scholarship, as he majors in psychology and American Sign Language (ASL). 


This student was not a financial need candidate, meaning his parents would not qualify for financial need eligibility requirements. Still, this hardworking high school student applied to the best-fit colleges for him, and they were also generous with merit aid awards and would be willing with the right match to meet the financial “gap.” This is one of the many examples in how The College Solution: A Guide for Everyone Looking for the Right School at the Right Price 2nd Edition by Lynn O’Shaughnessy (2012) encourages families to understand higher education, enrollment management, and financial literacy to support their family’s journey navigating college costs. Lynn’s two adult and grown children are proud graduates from CTCL colleges; she speaks personally about her family’s journey in her blogs and classes. 


As we look ahead this year, Congress passed the Free Application for Federal Student Aid Simplification Act on December 27, 2020, to make the system fairer and easier to navigate. The first reforms will take effect on July 1, 2023, as part of a phased implementation that will see all of the changes implemented by the 2024-2025 school year. 

One notable change is that the “Student Aid Index will replace the term EFC.” Other significant changes will include the following:

  • The FAFSA will be reduced from 108 questions to a maximum of 36.
  • The new formula will not divide the parent contribution by the number of children in college.
  • The parent and student income allowances will increase.
  • Students will not have to report certain types of untaxed income, including cash from grandparents, on the FAFSA.
  • More students will be eligible to receive the federal Pell Grant.
  • Parents who claim a student on their tax return should file the FAFSA (regardless of who the child lives with).
  • It may be easier for some families to appeal for federal financial aid.

Under the new legislation, the Student Aid Index (SAI) will replace the EFC. The Student Aid Index is a formula for calculating student financial needs virtually the same as the EFC. The one major distinction is that, while the EFC can only go to zero, the SAI can be as low as -$1500, allowing needy students to receive more financial aid.

The main reason for the change from EFC and SAI is to make the EFC number’s meaning more clear. The term “expected financial contribution” and EFC meaning can be misleading, as students and families may think this is the amount they’re liable to pay to cover their studies. Beyond this, the SAI is designed to make it easier for students with high financial needs to pay for college. 

Additional Resources: 

The College Solution -Lynn O’Shaughnessy, Mom of two, Financial Journalist, author, blogger, and speaker on college financial planning. She encourages families to have a “wider net” to diversify their financial opportunities. – Mark Salisbury “Share data, to see data” students can share award letters in the database and learn about other offers with the same EFC and GPA to determine financial aid and scholarship possibilities. 30K Bachelor degree and what is the ROI on the degree after college from your school. 


Cal Grant Income and Asset Ceilings 

Fastweb Scholarship Search 





Chegg Scholarships





Financial Aid and Scholarships Articles

11 Ways to Appeal for More Financial Aid or Merit Aid 

Why You Need to Use College Net Price Calculators 

CollegeData: Evaluating A College’s Financial Aid and Merit Scholarship

Tuition Fit: How to find better award offers in minutes 

Good News on paying for college: Four ways UC is helping families 

3 Strategies can get you more financial aid for college CNBC 2/27/2023 

Paying for College U.S. News NBC 2/21/2023


Other useful go-to sites:


CSS Profile 

Estimated Family Contribution (EFC) Calculator 

MyinTuition: Private College Cost Estimator 

Net Price Calculator 

Western Undergraduate Exchange (WUE)

College Factual (show tuition cost with interest, by the college)

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