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What is Demonstrated Financial Need?

By Kayla Korzekwinski
Kayla Korzekwinski is a Scholarships360 content writer. She earned her BA from the University of North Carolina at Chapel Hill, where she studied Advertising/PR, Rhetorical Communication, and Anthropology. Kayla has worked on communications for non-profits and student organizations. She loves to write and come up with new ways to express ideas. Full Bio
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and Cait Williams
Cait Williams is a Content Writer at Scholarships360. Cait recently graduated from Ohio University with a degree in Journalism and Strategic Communications. During her time at OU, was active in the outdoor recreation community. Full Bio
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Reviewed by
Annie has spent the past 18+ years educating students about college admissions opportunities and coaching them through building a financial aid package. She has worked in college access and college admissions for the Tennessee Higher Education Commission/Tennessee Student Assistance Corporation, Middle Tennessee State University, and Austin Peay State University. Full Bio
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Annie Trout
Updated: September 11th, 2023

Many forms of financial aid require a student to demonstrate financial need. Finding out about demonstrated financial need is one way that schools determine how much financial aid a student is eligible for. Continue reading to learn more about demonstrated financial need, how it’s calculated, and how it’s used!

Related: What is need-based financial aid?

What is demonstrated financial need?

Simply put, demonstrated financial need is the difference between a school’s cost of attendance (COA) and the student’s expected family contribution (EFC). A student demonstrates financial need if their EFC does not equal the COA. You can also use the equation below to visualize how these three things relate.

Cost of attendance – expected family contribution = demonstrated financial need

Demonstrated financial need is not a static number–it can change from year to year. Typically, a school’s COA will increase annually, raising a student’s demonstrated financial need. Additionally, the demonstrated financial need will change as a family’s income and assets change. These factors are what help determine the EFC.

A student’s demonstrated financial need shows that they have a valid need for financial assistance. However, your demonstrated financial need is not a guarantee of how much aid you will receive. It’s the job of the financial aid office to compare your EFC to their institution’s COA and apply any grants, scholarships, and student loans to try and meet the student’s financial need.

How is it calculated?

To determine your demonstrated financial need, subtract your EFC from the school’s COA. A student’s demonstrated financial need will vary from school to school, because some schools have a higher COA than others. 

You can use the example equation below to see how you can calculate your need. 

$20,000 (COA) – $8,000 (EFC) = $12,000 demonstrated financial need

How is it used?

Demonstrated financial need is used by colleges to determine a student’s eligibility for need-based financial aid. Examples of need-based federal aid are:

These programs are for students who demonstrate significant financial need. Demonstrated financial need can also be used to calculate how much a student may receive in school- or state-specific financial aid.

A few colleges promise to cover 100% of a student’s financial need. The colleges below meet all of a student’s demonstrated financial need with grants, scholarships, work-study, and loans.

In the example above, each of these schools would provide $12,000 in aid to the student. 

However, most schools are not able to meet all of a student’s demonstrated financial need. Many students will have to turn to private scholarships, part-time employment, and personal savings to cover the costs of their education.

Final thoughts

Remember, it’s always important to go through the financial aid process at a college before it’s written off as “too expensive.” Sometimes colleges with the highest price tags have the best ability to meet the student’s demonstrated financial need through institutional grants and need based scholarships. To find great scholarship opportunities that can make any school affordable, check out our free scholarship search tool, which custom-matches you with vetted scholarships!

Key Takeaways

Key Takeaways

  • A school may feel out of reach because of the price tag on it, but we urge you to not be dissuaded from applying simply because of cost without knowing available financial aid 
  • Check with each school you apply to about what their financial aid policies are concerning how much of your financial need they will help cover
  • You can calculate how much money you will need to attend a school by subtracting your family’s contribution from the estimated cost of attendance
  • Don’t forget about the other ways that you can receive aid for school as well, such as scholarships, work-study, and grants
Key Takeaways

Frequently asked questions about what demonstrated financial need is

What does 100% demonstrated financial need mean?

A school that meets 100% of demonstrated financial need means that whatever amount is left after you subtract your estimated family contribution from the cost of attendance will be covered in full. This means that some students may receive more than other students as everyone has a different level of demonstrated need.

What is considered financial need?

Financial need is calculated by looking at the cost of attendance and subtracting your expected family contribution. Cost of attendance is the total cost of tuition, fees, books, room and board, and any other academic expenses that you will have to pay in order to attend school.

How do you write a letter demonstrating financial need?

A letter of financial need, also referred to as a statement of financial need, includes your family’s background, what your financial situation currently looks like in your household, and other pertinent details. If you currently need to write a statement of financial need, we recommend that you check out our article about that topic where we go in depth about how to write your statement from start to finish.