Institutional Methodology (IM) is the formula used by about 200 schools to decide how much grant or scholarship funding (discounts) a student is eligible to receive from the school.
Most schools that use IM are private colleges that award large amounts of grants (discounts) based on the student’s financial need. The money to provide these discounts typically comes from tuition paid by students, specific alumni donations and the schools’ endowed assets.
Why do schools that use IM require a separate financial aid application? Why not use the information from the FAFSA application?
The information collected on the FAFSA is used primarily to calculate a student’s eligibility for federal grants and unsubsidized student loans. Students who qualify for these education benefits are typically from families with incomes of less than $50,000, who do not own a home or business and do not have many assets. There are also sources of income that are not reflected on tax returns. Therefore, the financial information collected by the FAFSA does not include home or business values and is not an accurate indicator of financial strength for many families.
Schools that provide grants or scholarships (discounts) from their own funds require families to provide more information than schools that base much smaller need-based awards solely on the FAFSA. At most “IM” schools students must complete the CSS Profile Application in addition to the FAFSA. They must also submit copies of parent and student tax returns, including all schedules and W2’s, to the financial aid office.
The IM Family Contribution is not the same thing as the amount you are expected to pay for college (Net Price). But in many cases, the grants and scholarships (discounts) awarded by these colleges are large enough reduce their Net Price to levels that are similar to or less than the Net Price of an in-state public university.
Colleges using IM also tend to have more accurate Net Price Calculators, as they ask many more financial questions in order to provide families with a very accurate estimate of Net Price.
Students with parents who are divorced or separated, or who have a family business, are usually required to provide additional information.
IM Family Contribution
IM Family Contribution almost always includes both a Parent Contribution and a Student Contribution. Sometimes it includes a Non-Custodial Parent Contribution as well. The Student Contribution is usually the sum of a college specific Summer Earnings Expectation plus 20% of reported student assets.
The IM formula is much more flexible and nuanced than the Federal Methodology (FM). Because it is highly customizable, there are almost as many variations of IM as there are schools using it. This means that even though you report exactly the same information to all IM schools, you shouldn’t be surprised when each school calculates different amounts of grant or scholarship discounts for your family.
School A is an in-state public university. They awarded no grants or scholarships, resulting in a Net Price for the family is $25,000. The total financial aid package is comprised of $5,500 in federal student loan – the maximum amount a first year Dependent Undergraduate student can borrow.
If the student attends School A and accept the full $5,500 student loan, then the family will be left with $19,500 of the $25,000 Net Price that must be paid from other Family Resources.
School B is a private college. Their sticker price is high but not quite as high as the most expensive schools. They awarded $18,000 in need-based grants, resulting in a Net Price for the family of $34,000.
School B is very generous but they do not have the funding to meet 100% of calculated need for every admitted student. So, they have provided a total financial aid package of only $26,000 despite calculated need of $35,000.
Like all colleges that award mostly need-based aid, School B has met the first dollars of calculated need with student loan & work-study. In college jargon, the portion of a financial aid package that is comprised of student loan & work-study is called “self-help.” After self-help is awarded, School B meets 67% of remaining need with $18,000 of grant aid.
If the student attends School B and accepts the full $5,500 student loan and earns the full $2,500 in work-study during the school year, then the family will be left with $26,000 of the $34,000 Net Price that must be paid from other Family Resources.
School C has a higher sticker price than School B but they have enough resources to meet full need for all admitted students.
After self-help is awarded School C meets 100% of remaining need with grants.
If the student attends School C and accepts the full $5,500 student loan and earns the full $2,500 in work-study during the school year, then the family will be left with $17,000 of the $25,000 Net Price that must be paid from other Family Resources.
School D has the same high sticker price as School C and they also have enough resources to meet the full need for all admitted students. But unlike School C, School D is one of a small number of colleges that is able to meet full need with a financial aid package that replaces the student loan with additional grants.
So, the self-help portion of the financial aid package awarded by School D includes only a $2,000 work-study award.
If the student attends School D and earns the full $2,000 in work-study during the school year, then the family will be left with $17,000 of the $19,00 Net Price that must be paid from other Family Resources.
Unlike in the School C scenario this student has no incurred student loan debt at this point. But they are still eligible for a federal student loan and may choose to borrow any amount up to the $5,500 limit, thereby reducing the amount that must be paid from other family resources to as low as $11,500.