Federal Methodology (FM)
Because individual schools are required to use the federal methodology when awarding money from the federal government, many colleges and universities (especially public schools) also use the federal methodology when handing out their own financial aid funds.
The basic form used under the federal methodology is the Free Application for Federal Student Aid—more commonly known as the FAFSA form. On the FAFSA, you will be asked questions about wages, investment income, the value of checking and savings accounts, ownership interests in businesses and more.
The federal methodology is also noteworthy in what it omits: Financial data concerning home equity, retirement assets accumulated during prior years, cash-value life insurance policies and the income and assets of non-custodial parents are not considered.
Institutional Methodology (IM)
Several hundred U.S. colleges and universities (usually private schools) use the more stringent institutional methodology when distributing their own funds.
Many of these schools ask families to complete the College Search Service (CSS) Profile form. Although similar in structure to the FAFSA, the CSS Profile is longer and asks more detailed questions.
Unfortunately, some families discover that their EFCs under the institutional methodology may be many thousands of dollars more than under the federal system. Why might this be the case? It is often due to the fact that the institutional methodology adds home equity as a measurable asset, includes the financial resources of non-custodial parents and features a less favorable treatment of families with multiple kids in college.
Consensus Approach (CA)
The brand new kid on the financial aid block is the consensus approach—used by more than two dozen of the nation’s selective private colleges including Duke, Cornell, Georgetown, Notre Dame and Vanderbilt.
The consensus approach modifies questionable elements of the institutional methodology so that families receive somewhat reduced EFCs and enhanced financial aid awards. Because the consensus approach doesn’t have its own form, it uses the same core data as collected on the CSS Profile.
The hallmarks of the consensus approach include capping home equity at 2.4 times income, making cost of living adjustments for families residing in more expensive areas and including an advantageous allowance for a family’s existing student loan payments.