Applying for Financial Aid? 3 Key Acronyms to Keep in Mind

Acronyms are everywhere: NFL, MLB, IRS, DOJ, PWM, TLC, TCB, TMI.* Most people use them and assume their audience knows what they mean. While that can be true, sometimes you’re better off addressing about what they really mean.

This is especially true in the context of college cost and financial aid. Along with buying a house and planning for retirement, paying for college is one of the most significant financial decisions most people make in their lifetimes. Whether you’re a parent or a student, understanding how college cost works could save thousands of dollars. Let’s look at a few financial aid acronyms in detail.

EFC: Expected Family Contribution

EFC is one of the most misleading acronyms in the financial aid world. Think about what it means in plain English: Expected Family Contribution. Most parents or college students would assume it means “the amount a family is expected to pay each year for college.” In most cases, however, the EFC is not even close to what a student pays for college.

In reality, EFC is a measure of a student’s and/or family’s financial strength. In other words: their deemed ability to pay for college, rather than how much they will pay. This figure is used to rank students according to their economic resources, as measured by income and assets. Families with few resources have a low EFC; families with relatively more income and/or assets have a higher EFC.

COA: Cost of Attendance

COA can also be misleading. It stands for Cost of Attendance, which is the published “total cost” for one year of college. When you hear someone say, “Did you hear an Ivy League college costs over $65,000 per year?” what they’re referring to is the published COA. For example, the COA for students entering Yale in the fall of 2016 is $68,175.

COA is defined as the total of four things:

  1. Tuition and fees (charged directly by the college),
  2. Room and board (charged by the college if living in a dorm, or an allowance if living off campus),
  3. Books and supplies (an allowance estimated by the college), and
  4. Transportation and other (also an allowance, usually for a minimal level of expenses).

Your real cost of college: the Net Price

Just as EFC is rarely the amount someone pays for college, students rarely pay the full COA. How much less? The answer is based on gift aid, which is financial aid that doesn’t need to be earned or paid back. The real cost of college is called the “net price” – which is defined as COA minus gift aid.

Gift aid generally comes in the form of grants (usually need-based) and scholarships (usually based on academic merit or talent).

The net price, how much you really pay for college, is based on four factors:

  1. The student’s financial need (which is defined as the COA minus the EFC),
  2. To what extent a given college awards gift aid based on financial need,
  3. The student’s merit profile based on academic performance and/or one of several talent factors (such as athletic, artistic, or musical talent), and
  4. To what extent a given college awards gift aid based on merit.

NPC: Net Price Calculator

So if neither EFC nor COA is likely to tell you the true cost of college, how do you estimate how much college will cost? The answer is to use an NPC, or “net price calculator.” Current law requires that these online estimators be available on the website of every college and university. The law says they should give users a personalized estimate of their institution’s net price for one full year of college.

Some NPCs are better than others. In general, the more questions an NPC asks, the more likely it is to give you an accurate estimate. It may seem like a pain in the neck to use them, but when you’re planning to spend tens of thousands of dollars on a college education, investing 10 or 15 minutes to use an NPC makes a lot of sense.

You can find colleges’ NPCs on their websites, usually within the admissions or financial aid sections. You can also use a link provided by the US Department of Education to find the NPC for any college: More information about NPCs and how to use them is available at:

Just remember: NPC results are estimates, but they are a big help in ball-parking the cost of college. Don’t rule out any college based solely on its NPC, but do use them to make sure that a student’s college list includes some affordable colleges.

About the author

Bill Smith is a financial aid expert in Portland Maine who helps families choose reasonably priced colleges, estimate the total cost of a degree, and make a college cost and debt repayment plan they can be confident they can afford. Contact him at 207-773-4142,, or visit his website:


Neither Bill Smith nor ScholarFITS LLC are affiliated with F.L. Putnam Investment Management Company.  This content is presented for educational and informational purposes only and has not been verified or endorsed by F.L. Putnam Investment Management Company or any of its affiliates.  F.L. Putnam Investment Management Company is under no obligation to provide updating information to this content as published.



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