Dec 28, 2004
Do you want the 10,000 foot view? Or the extreme closeup?
Posted in: Afford
So now it seems time to describe how the determination of your financial contribution happens here at MIT. Suffice it to say that I could write a book on the subject (and indeed, we have one that we use internally) and still not be done with the complete description of every case, but I figured I would at least give you a closer view than you might otherwise have into what we do. This blog entry presents part 1 of what I am sure will be a several blog entry.
So, first time for some definitions:
There in reality are several different ways of measuring ability to pay for college. There is the standard Federal Methodology (also known as FM) which is the process all colleges must use to determine what Federal financial aid for which you may be eligible (this includes Pell Grants, SEOG Grants, Perkins Loans, Federal Work Study, and Stafford Loans). When you file your FAFSA (all of you should be ready to do this VERY soon), you will get back an EFC (also known as Expected Family Contribution) which will provide you the number that the Federal Government determines is your family contribution.
By completing the Profile application (which you should already be working on now!), you give us another entry into a different type of analysis (one which we at MIT rely upon more heavily than FM for the distribution of our scholarship money). This is referred to as the Institutional Methodology (IM).
Both methods follow the same general rule. They consider income (of parents and students separately) then by using formulas subtract some allowances for non-discretionary expenses. They then look at assets (other than those in specifically determined retirement accounts) and allow for some protection of these assets based on other tables. The totals are then run through a conversion formula, and the student and parent contributions are added together to come up with a final expected family contribution (or EFC - for an example of how the formulas work where you can enter your data and run a sample needs analysis, see here).
Why are there two methodologies (or more)? Well, to answer that we need to look at some history. Several years ago (now more like many years ago) in 1996, the Federal government stopped considering home equity as an asset in the Federal formula. This combined with the fact that the tables on which the Federal method rely are very outdated pushed many colleges into developing a “loose” standard treatment for their own money. IM was born.
Since there is no real “standard” rule to determine a family’s ability to pay when giving away an institution’s own money, many colleges may make different adjustments to the IM for their own purposes (explaining why in some cases the contributions you may be expected to pay could vary widely from college to college). Several colleges (including MIT) joined together in the past several years to try to limit the number of differences that students and parent face in their EFCs, and started the 568 group. MIT practices its need analysis (the process by which we determine your EFC) using the 568 group principles, commonly known as the consensus approach.
Much more on all of this to come, but this ought to be enough to whet your appetite.
Now for your assignment! How much detail are you interested in when it comes to this process? Are you curious about the blow by blow or more concerned about the general parameters (in other words, would a blog entry specifically on how we handle home equity, say, bore you or excite you)? Please leave some feedback so I know where to go next.