Demonstrated need and colleges’ financial aid policies: a calculator

This calculator is designed to help you explore the impact of colleges’ need-based financial aid policies on your financial aid offers and out-of-pocket cost.

To use this calculator, it’s important to understand two fundamental concepts in need-based financial aid: 1) demonstrated need and 2) percent of demonstrated need met.

What is Demonstrated Need?

Your demonstrated need is the amount of need-based financial aid you may be eligible for given to two factors:

  1. A college’s cost of attendance.
  2. Your Student Aid Index (SAI) as calculated by either FAFSA or CSS Profile.

Colleges that only require FAFSA use the FAFSA Student Aid Index (SAI) to measure a family’s ability to pay and determine the student’s eligibility for institutional need-based aid. Colleges that require the CSS Profile calculate a custom Student Aid Index (SAI) using that application to measure a family’s ability to pay and determine the student’s eligibility for institutional need-based aid.

How to know your Student Aid Index?

You can calculate your FAFSA SAI using the College Money Method SAI Calculator. You can calculate your CSS Profile SAI (currently referred to as Expected Family Contribution, or EFC) using the College Board’s EFC Calculator. Hint: When using the College Board’s Calculator, choose “Institutional Methodology”, which will provide you with the CSS Profile calculation for SAI.

Every college determines your demonstrated need, or financial aid eligibility, at their college using this fundamental equation:

College’s Cost of Attendance
– Student Aid Index (calculated either by FAFSA or CSS Profile)
= Your Demonstrated Need (or Your Financial Aid Eligibility)

So, your demonstrated need is the remaining money needed to pay for college after deducting your Student Aid Index, or the amount you are able to pay according to the respective financial aid application.

What is the Percent of Demonstrated Need Met?

While you may have a certain amount of demonstrated need at a college, this doesn’t necessarily mean that you will receive a financial aid package to equal that need. Many colleges don’t have the ability to provide a financial aid package that can meet a student’s full need. Luckily, colleges publish data on a yearly basis that tell you what percent of demonstrated need they meet on average. You can know ahead of time just how generous a college is with their need-based financial aid offers.

Let’s take an example. Butler University meets 70% of demonstrated need on average. If your FAFSA SAI is equal to $22,000, given their cost of attendance of $62,700, your demonstrated need is equal to $40,700 ($62,700 – $22,000). However, because, on average, Bulter offers a financial aid package that meets 70% of that need, you should expect a financial aid offer of about $28,500 (70% of $40,700). This leaves you with a gap in the financial aid offer of $12,200, which is an additional out-of-pocket cost beyond your Student Aid Index of $22,000.

It’s essential to understand which colleges “gap” your financial aid, and by how much, so that you can plan for these additional costs. You can use this calculator to explore colleges’ financial aid policies and their impact on your expected ability to pay.

2024-25 Student Aid Index (SAI) Calculator

What is the Student Aid Index?

For the financial aid award year 2024-25, FAFSA (Free Application for Federal Student Aid) is making several changes to determine a dependent student’s aid eligibility, starting with the calculation of a family’s ability to pay for college.

The new Student Aid Index (SAI) will replace Expected Family Contribution (EFC) as the calculated amount a family is able to pay for college for a given year. Colleges will use SAI in place of EFC in the fundamental equation to determine need-based financial aid eligibility.

Cost of Attendance – Student Aid Index = Financial Need

Your financial need is the same as your need-based financial aid eligibility, but rules on federal student aid plus a college’s own institutional need-based financial aid policies determine your financial aid package.

How is the Student Aid Index calculated?

Your family size, parent’s marital status and state of residence, along with four primary financial inputs – 1) Parent 2022 Income, 2) Parent Assets as of filing date, 3) Student 2022 Income, 4) Student Assets as of filing date – will still determine your SAI, or family’s ability to pay. One significant change is the number of students in college will no longer be used in the SAI formula.

Parent Income

FAFSA will rely on 2022 federal tax returns for all parent income, eliminating the reporting of any non-taxed income not reported on your returns. Notably, for parents making pre-tax contributions to employer retirement plans, these contributions amount will no longer count as part of parent income. There will also be a first step to determine whether your student qualifies for an SAI = $0 and the maximum Pell Grant. If your Adjusted Gross Income (AGI) is below a multiple of the Federal Poverty Level income for your state and family size, then your student’s SAI = $0. And, if a parent is not required to file federal tax returns, then SAI = -$1,500. This step is incorporated as part of this calculator.

Parent Assets

FAFSA will continue to include all assets a parent owns outside of retirement accounts, a primary home, and life insurance policies. These include checking, savings, CDs, brokerage accounts, 529 or college savings plans, and equity value of second properties.

Two new amounts will be counted as parent assets for the calculation of SAI.

  1. Child support received. A parent needs to report any child support received in 2022 as an asset at the time of application. It was previously reported as non-taxed income.
  2. Net worth of business or farm. In prior-year applications, if your business or farm employed less than 100 full-time employees, you were not required to report its net worth. Going forward, the net worth of a business or farm of any size will be reported as a parent asset.

Student Income

FAFSA will provide income protection for students equal to $9,400. In other words, there will be no expected contribution from student income if 2022 is $9,400 or less. For every dollar over this amount, the contribution rate is 50%. Note, if the student qualifies for SAI = $0 based on their parent’s AGI, then any student earnings will not push the SAI over $0.

Student Assets

All assets held by the student outside of retirement are reported. These could include checking, savings, CDs, and brokerage accounts for most students. 529 or college savings plans owned by the student are always reported as a parent asset. The contribution rate for student assets is 20% of every dollar. Again, if the student qualifies for SAI = $0 based on their parent’s AGI, then any assets held by the student will not push the SAI over $0.

2024-25 Student Aid Index Calculator

This calculator is based on the draft SAI formula published by the Department of Education in November 2022. To calculate your Student Aid Index, you can use values from your 2021 tax returns or estimated values from 2022.

Financial aid application process for single, separated or divorced parents

The rules and requirements for single, separated or divorced parents are different for submitting financial aid applications. The information below clarifies the rules for both FAFSA (Free Application for Federal Student Aid) and the CSS Profile.

Rules for FAFSA

Which parent completes the FAFSA?

If the student’s parents are 1. Never married, 2. Separated or 3. Divorced, only the custodial parent submits information on the FAFSA, unless the parents still live in the same household. In this case of living under the same roof, both parents will be required to submit their information regardless of marital status.

Who is the custodial parent?

FAFSA has its own criteria to determine who is the custodial parent, which are independent of your legal custodial arrangement or which parent claims the student on his/her taxes.

The criteria for determining who is the custodial parent are as follows:

  1. The parent with whom the student has lived the most days for the 365 days prior to the application submission date.
  2. If the student has lived equal time with both parents for that time period, then it’s the parent who provides greater financial support to the student.
  3. If both parents provide equal financial support to the student, then it’s the parent with the higher income.

The custodial parent needs to create a Federal Student Aid (FSA) ID to complete and electronically sign the student’s FAFSA. Watch this short video tutorial on how to create an FSA ID.

What if the custodial parent is remarried?

A custodial parent who is remarried reports income and asset information for both herself/himself and their spouse. This is true even if the new spouse has not adopted the student. FAFSA requires the entire household’s financial information for financial aid consideration.

Rules for CSS Profile

Which parent completes the CSS Profile?

Most CSS Profile colleges will require both biological parents to submit their information, even if the parents are 1. Never married, 2. Separated, or 3. Divorced. Both the custodial parent and the noncustodial parent submit their information separately and securely into a single student application that is received by the college. Information submitted by each biological parent is never shared with the other parent.

Who is the custodial parent?

CSS Profile follows the same criteria as FAFSA to determine who is the custodial parent. The custodial parent submits her/his information in the primary application submitted by the student. This application is completed using the student’s College Board login, so no additional login needs to be created by the custodial parent.

How does the noncustodial parent submit her/his information?

The noncustodial parent creates a College Board login to submit her/his information. The parent links the information that s/he is submitting by using the CSS Profile Financial Aid ID aka “CBFinAid ID” associated with the student’s primary application. This ensures the information is combined into one application for the college. No access to this information is granted to either the student or non-custodial parent.

What if either parent is remarried?

If either parent is remarried, the remarried parent reports financial information for both herself/himself and her/his spouse. This is true even if the new spouse has not adopted the student. The CSS Profile requires the entire household’s financial information.

What if the noncustodial parent cannot or will not submit the application?

CSS Profile colleges do not consider a parent’s unwillingness to participate and submit her/his information as sufficient reason to not collect this information. Non-submission by either parent prevents a college from processing the student’s financial aid application.

Colleges do provide a formal waiver process for a student to petition for the noncustodial parent information to be omitted or waived. The waiver must be submitted separately to each college’s financial aid office, and each college uses its own evaluation process and discretion in granting a waiver.

The standard waiver request form clearly states circumstances that will and will not be considered for the waiver, often requiring “no contact” with the noncustodial parent. However, each college can create its own criteria for which circumstances to consider. Colleges may also require documentation to support your waiver.

Excerpt from CSS Profile Waiver Request for the Noncustodial Parent

You can review the entire standard waiver request form using the link below. Remember, to check with your specific college’s financial aid office, as they may have created their own institutional waiver request form.

Resource center for divorced or separated parents on the CSS Profile website

The CSS Profile Info for Divorced or Separated Parents resource center includes several resources, including:

How to create your FSA ID

Your Federal Student Aid or FSA ID is required to submit your FAFSA (Free Application for Federal Student Aid) and access your Federal Student Aid account. You’ll use this same FSA ID to reapply for financial aid every year and manage all of your federal aid, like Pell Grants and Direct Federal Student Loans.

Watch this quick, 5-minute video to create your FSA ID.

2023-24 FAFSA EFC Estimator

The FAFSA EFC Estimator gives you an estimate of your Expected Family Contribution (EFC) for colleges that use the Free Application for Federal Student Aid (FAFSA) to award need-based financial aid for the 2023-24 school year. This interactive tool is for a dependent student eligible to submit the FAFSA.

I created the FAFSA EFC Estimator so that in 3 steps you can understand if you may qualify for need-based financial aid. The easy-to-use inputs also allow you to run scenarios for changes in income or assets. Importantly, it will help you see how each area of your finances – income versus assets – impacts your EFC.

For a more detailed FAFSA EFC, or to calculate the EFC as determined by the CSS Profile, you can use College Board’s EFC Calculator.

*If Parent Taxed Income or AGI is less than $50,000, the EFC Estimator assumes the student qualifies for the Simplified Needs Test, which would exclude any assets you report on the FAFSA from the EFC calculation. To qualify for the Simplified Needs Test, you must meet additional criteria beyond an income below $50,000. You can review those criteria here.