In addition to subtracting the future value of your investments from the future cost of college, you’ll also need to subtract your expected financial aid. The result is the total amount that you will be short when college begins.
To continue with the example, the student with fifteen years until college will need approximately $83,200 total to pay for four years of school.
The student’s existing college fund will be worth $15,850, reducing their total future shortfall to $67,350 ($83,200 total cost minus $15,850 future savings value).
The student also expects to receive $30,000 in financial aid, further reducing their shortfall to $37,350 ($67,350 remaining cost minus $30,000 in financial aid).
Thus, this student’s unmet need, also referred to as their “shortfall”, is $37,350. This is the amount that needs to be planned for if a parent wishes to avoid the financial crunch associated with college.
