Recently I met with a family regarding financial aid for the coming year for their daughter, who was going into her first year in college in the fall. The financial aid process can be confusing, to say the least. This particular family, on their most recent tax return, had an Adjusted Gross Income of over $200,000. The student hadn’t received very much of a financial aid offer, and the parents were incredulous that the school wanted them to contribute over $25,000 for their student’s first year of school. The parents maintained that they simply did not have the money the school thought they should be able to contribute.

With that situation in mind, I thought it would be a smart idea to examine how exactly a school determines what a family should be able to contribute.

All schools use the information provided on the FAFSA to determine a student’s financial aid package. (Some schools will require that families also fill out the Profile through the College Board website.) Once the FAFSA is submitted, there is a number called the Estimated Family Contribution, or EFC, that is generated. This is the number that schools will use, in part, to determine what a family is able to pay for the student’s upcoming year. Note that this number is for one year only.

The EFC is determined using lots of different information, but the basic gist is this: parents are expected to pay for part of their child’s college education. If you only made $30,000 in the previous year, if you had one dependent child, you would still be expected to contribute. If you made $50,000 in the previous year and had 4 dependent children, your EFC would still be approximately $1,800. At $100,000, with 4 dependent children, the EFC jumps to nearly $15,000. (Source) These are based on your AGI alone, and things like investments, businesses owned, tax-deferred pensions, etc. can increase the EFC significantly. Yes, if you are saving for retirement, the government views that money as available to pay for your child’s college costs.

The FAFSA doesn’t take into account outstanding debt, or the total of your family’s bills. They are, basically, concerned simply with how much money a family made and how many dependent children are in the family. The bottom line is this: if your family were to fall in the third category ($100,000 AGI, with 4 dependent children), you would be expected to pay the entire bill for the year for your child to attend a public university.

It’s important to understand that each college has to view each financial aid applicant in the same way and make award determinations accordingly. They will consider individual circumstances if they fall outside of the norm, but for the most part, if you are a parent, you will be expected to contribute to your son or daughter’s higher education.