College price tags vary, but consider aid before crossing a school off your list.

Clinch a Great Financial Aid Package

Know how colleges calculate need, and then speak up.

College price tags vary, but consider aid before crossing a school off your list.
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You've drawn up a list of public and private colleges that are a good fit based on everything from academics to ambiance. The price tags vary widely, but don't automatically cross colleges off the list if they seem too expensive. Just because some schools are pricey doesn't mean you can't afford them.

Most institutions determine their financial aid packages depending on the size of their endowment, a family's financial need, and how much the school wants a particular student. Financial aid can become so generous, in some cases, that the most expensive private school may end up being cheaper to attend than a state university.

Yet how these institutions determine their awards packages can seem mystifying. The same student can apply to colleges with similar tuition rates and yet receive award letters that differ by thousands of dollars. Families "just don't know where to start," says Manuel Fabriquer, president of College Planning ABC, a San Jose, Calif.-based consulting firm. "They don't really understand what happens on the back end."

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Basically, colleges all want to attract as many top-notch students as possible, but they have only so much money to go around. Each institution uses its own criteria to determine a family's financial need and adjusts the proportion of grants versus loans in the package depending on how desirable the student is.

According to the nonprofit College Board, the yearly average for tuition and fees for in-state students at public institutions is $8,244. That's an increase of about 42 percent since 2006, while the average annual tuition at private schools has increased 28 percent over the same period. So, even an extra $1,000 in grant money can go a long way. By educating themselves, families can navigate the system effectively and obtain the best possible financial packages.

When offering financial aid, many college and university officials claim to meet a student's "full need." This means that the total package offered to prospective students—which can be a combination of grants, federal and private loans, and work-study money—will fill the gap between the family contribution and the cost.

But exactly how need is determined, and how much schools will offer in grant money versus loans, is based on several factors. To start, most secondary institutions rely on one of two tools to help determine the "expected family contribution," or EFC.

Anyone applying for federal student aid will need to submit the Free Application for Federal Student Aid, or FAFSA, which asks detailed questions about family income, investments, savings, and other financial matters. The FAFSA form includes questions based on the family's tax returns for the previous year.

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The second tool, the College Scholarship Service (CSS) Profile, created by the College Board, is more detailed. It's used widely, primarily by private colleges. The form asks about income and liabilities, including family assets, veterans benefits, and child support payments.

The application also includes a blank form for applicants to provide "explanations and special circumstances," such as a family's high medical bills or unemployment issues. Schools utilize the data to compute the EFC for each prospective student. They then take this baseline information and, using their own internal criteria, weight different factors more than others.

For example, some universities might allow families to deduct the cost of K-12 private school tuition, while others pay greater attention to the "special circumstances" section. All this, of course, means offering more or higher "merit" grants to desirable applicants, such as an accomplished pianist or a top lacrosse player.

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Financial aid also helps different institutions gain an advantage over their rivals when trying to attract the most diverse, talented, and well-rounded students, says Sandy Baum, an independent policy analyst for the College Board and a senior fellow at George Washington University. On the flip side, students deemed less desirable are asked to foot more of their tuition bill from loans or work-study. "They just don't have enough dollars to go around, and somehow they have to ration it," Baum says.