There are two formulas for need analysis. The first is conducted by the federal government to determine eligibility for its programs. The second is sometimes conducted by colleges and universities to determine how they will distribute their own institutional aid. The federal formula typically expects a family contribution of approximately 5 percent of net worth. The amount of financial aid an undergraduate qualifies for is determined by subtracting expected family contribution from the total price of attending the institution.
Total price includes tuition, fees, room and board, and other expenses.
The gap that exists between a family's expected contribution and the price of attending may be filled by a number of federal and state grant and loan programs, aid provided by institutions, and private sources of aid. The federal grant programs are aimed at the neediest students, and provide aid that does not have to be repaid. They are often combined into a single financial aid package by institutions. The Pell Grant program provides grants to low-income undergraduates to help them pay for college. The SEOG program provides grants to low-income students, and generally helps supplement the aid they receive from Pell Grants and other sources.