More than 66% of all full-time undergraduate students receive some kind of financial aid. Even if you think your family will not qualify for aid, take the time to apply. You can only receive aid if you apply for it. How much you receive is determined by the federal government's financial aid analysis and the college financial aid office.

The government states that there is no formal income or savings cutoff for families, and that a number of different factors, in addition to income, are used to determine eligibility for need-based financial aid. In addition to income, details such as family size, family members attending college, assets, and parent's age are all considered when determining a family's ability to pay.

If you and your family need assistance, apply for aid, no matter what you believe your chances of getting it are.

To qualify for financial aid, a student must meet the following basic requirements:

The government expects students and their families to contribute to the cost of college to as much as they can. If you're unable to pay for the entire cost of college, financial aid is available. The difference between the total cost of college and your Expected Family Contribution (EFC), calculated using a special formula, is considered your financial need, and the amount of aid you're eligible to receive.

It helps to understand how the EFC works and to calculate your contribution. When you do this exercise, you can get a better idea of how much you will need to save.

The formula for determining eligibility for federal aid programs is generally the same for all colleges. When you apply for financial aid, expect to answer questions about your family's income and savings. Most of this information is found in your tax returns, paycheck stubs, and bank and other financial account statements.

Once a financial aid application is processed, your family receives a student aid report, which contains the official EFC figure. The same information is also sent to the schools your child listed on the FAFSA. Next, a financial aid administrator at each school will determine financial need. Need is defined as the difference between the cost of attending college and your EFC. If there is a difference, your family may be eligible for aid.

Cost of Attendance - Expected Family Contribution = Financial Need

Based on your financial need, the school administrator prepares a financial aid package. The financial aid award letter tells how much financial aid is available through federal, state, and college-based programs if you accept admission at a particular college.

To calculate EFC, use a calculator on the web, or fill out the Free Application For Federal Student Aid (FAFSA) form and submit it to the financial aid office of the colleges you are applying to.

http://apps.collegeboard.com/fincalc/efc_welcome.jsp

Typically, the lower the student's EFC, the more financial aid the student receives.

If parent's combined adjusted gross income is $15,000 or less, and they are all eligible to file an IRS 1040A or 1040EZ, the EFC is automatically zero. An EFC of zero means that your child may receive a financial aid package that covers up to 100% of college costs.

File the correct tax form. If the adjusted gross income is less than $50,000 and a 1040EZ or 1040A form is filed, assets are excluded from the financial aid calculation. If another tax form is filed, the regular 1040 for example, the shelter assets may be included. Consult your tax advisor for more information.

The financial aid formula also shields a portion of your assets based on your age or that of your spouse, whomever is older.

Under both federal and institutional calculations, retirement accounts are not considered assets that can be used to pay for college. Additionally, under current tax laws, you can withdraw money from these accounts to pay tuition without a penalty.

Most planners and financial aid experts say parents should invest in their names rather than in custodial accounts on behalf of children. The financial aid formula presumes a greater contribution from students' investments than from yours. Under the formula, students are expected to contribute at least 35% of their assets, while parental contributions are capped at 5.6%. These are universal thresholds used to determine federal aid eligibility at every college and university.

Borrowers often wonder whether they can attain more aid from by appearing to have fewer financial resources than they actually do. We don't recommend you do this. Most changes will have an impact on your personal income, assets, and taxes and will affect your EFC.

The Free Application for Federal Student Aid (FAFSA) is the starting point for most student financial assistance programs. Most states and schools also use the FAFSA as part of their application process for non-federal aid. Filing the FAFSA on the web is the fastest and easiest method of applying and offers advantages. See http://www.fafsa.ed.gov.