What Is Financial Aid? - COLLEGEdata - Pay Your Way

What Is Financial Aid?

After "Will I get in?" your next question may be "How will I pay for it?" One answer is financial aid. Here's what it is and how to get it.

The first step toward getting financial aid is becoming well informed on how to qualify and how to apply for it. Once you understand these basics, you will be off to a good start.

The Types of Aid Available

College financial aid comes in several forms: grants, scholarships, loans, and jobs. Some aid is "need-based," which means colleges award it solely based on your and your family's ability to pay for college. Other aid is "merit based," which means colleges award it based on other factors, such as academic achievement.

Some Types of Aid Reduce College Cost and Some Don't

The great divide in financial aid is "gift aid" vs. "self-help aid." Only gift aid actually reduces your college cost. Self-help aid doesn't. Instead, it helps you pay for college using your own resources.

  • Gift aid includes grants and scholarships. Grants, which colleges usually award based on financial need, reduce your college bill dollar for dollar. Scholarships and merit aid, which colleges award based on a wide range of criteria, also reduce your college bill dollar for dollar.
  • Self-help aid includes work-study and loans. Work-study is a part-time job, usually on campus. Your wages go directly toward your college bill. Loans also reduce your college bill, but eventually you must pay the loans back.

How to Qualify for Financial Aid

  • Qualifying for aid based on financial need. Colleges award the lion's share of aid to students with financial need. To be eligible, a student must prove that he or she doesn't have enough financial resources to pay for college.
  • Qualifying for aid based on merit. To qualify for merit aid, you must show academic achievement, high test scores, extraordinary or unique talents or accomplishments. Financial need may be an additional factor.

How to Get Need-Based Aid

You and your family must submit your financial information to colleges via the government's Free Application for Federal Student Aid (FAFSA). Some colleges ask for an additional aid application called the CSS/Profile.

Using the information from one or both of these applications, colleges calculate your Expected Family Contribution (EFC), which is how much you and your family will be expected to pay out-of-pocket for one year of college. Colleges calculate your financial need annually, so you will need to reapply for aid every year of college.

How to Get Merit-Based Aid

Colleges that offer merit aid generally offer it to students whose GPAs and test scores put them in the top third of the current freshman class. But other factors, such as strength in the arts or sports, may also lead to awards. The application process may be as simple as checking a box on the admission application or may require filling out a separate application.

What's Next?

  • Use College Match to look up any college and see its track record for need-based and merit-based gift aid.
  • Use the Net Price Calculator to estimate your out-of-pocket costs at any college, based on your EFC and the college's history of providing aid.
  • Take a look at Finding Financially Friendly Colleges for tips on identifying colleges likely to offer you generous gift aid.

Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.

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