A college offers financial aid to help you pay college expenses. Aid includes scholarships, grants, loans, and work-study. But only some of this aid actually reduces your total cost. Find out which aid is best!
If you spend any amount of time investigating how to pay for college, you are bound to hear about financial aid. Almost every college offers it. Once you are accepted to a college, and have filled out the required paperwork, the college will offer you a "package" of various forms of financial aid designed to help you pay for college.
The Main Types of Financial Aid
The first thing to know about financial aid is that only some aid actually reduces your college cost—grants and scholarships. This sort of aid is called "gift aid" because it reduces what you pay, dollar for dollar. "Self-help aid" simply helps you pay for college out of your own pocket. Loans and work-study are self-help aid.
Grants. Grants are money for college, free and clear. Getting them is based on your financial need. The federal government offers the Pell Grant, plus a few other grants. States, colleges, and private organizations likewise offer grants.
Scholarships. Similar to grants, scholarships give you money for college. They are awarded based on a broad range of criteria, such as academic merit, financial need, affiliation with a group, or athletic talent. Some scholarships are awarded by the college itself (sometimes this is called "merit aid"). Other scholarships are awarded by outside sponsors.
Loans. Loans that appear in financial aid packages come from the federal government, your state government, or possibly your college. Some federal loans may be subsidized, meaning the government pays the interest on the loans while you attend college. Generally, these loans have better terms, interest rates, and fees than private loans.
Work-study. A work-study award means you work part-time while attending college. Usually part of your salary is subsidized by the federal or state government or the college itself.
Becoming Eligible for Aid
There are two basic ways to be eligible for aid. You prove that you need the money or you show why you merit the money.
Your need is figured by first determining what your family will be expected to pay for a year of college. That amount is deducted from the cost of attending a particular college. The resulting number is the additional amount of money you need to attend that college.
Your merit is usually based on your academic achievement, but may include a need component. Some merit aid requires applicants to meet other criteria, such as employment of one of your parents by a scholarship sponsor.
Applying for Need-Based Aid
The FAFSA. If you are not familiar with the federal government's Free Application for Federal Student Aid (FAFSA), read on. It is the primary nationwide method of applying for need-based financial aid, whatever the source. A new FAFSA is issued every January 1, and you should submit it as soon as possible after that date—and certainly no later than the earliest financial aid deadline of the colleges you're applying to. Access the FAFSA online at fafsa.ed.gov.
Your EFC. The government analyzes your FAFSA data to determine what it expects your family to pay for a year of college. This amount is called your Expected Family Contribution (EFC). A Student Aid Report (SAR) containing your EFC will be sent to you and to any colleges you list on the FAFSA. (To get a head start on estimating your EFC, use CollegeData's EFC Calculator.)
Other forms. Some colleges will require you to submit other forms and documents, sometimes with deadlines that differ from the FAFSA's. Some colleges require an additional form called the CSS/Financial Aid PROFILE to help them allocate their own aid. This form digs deeper into your finances. Always check early with the college's financial aid office to find out about extra forms and their deadlines.
Many students don't bother applying for need-based aid because they assume their family's income is too high. Or they have a great need but assume their grades are too low to qualify. However, assumptions can be misleading. Every college-bound student should apply.
Applying for Merit-Based Aid
Merit aid from your college. Each college has its own application process for merit aid. Check with the admissions or financial aid office. Applying for scholarships and other forms of merit aid from a college is often as simple as filling out the college application.
Outside scholarships. Scholarships offered by sponsors outside the college have their own application process. Use CollegeData's Scholarship Finder to locate awards and find out how to apply.
Merit aid can also take financial need into account. Colleges and sponsors may want to see your FAFSA or PROFILE results.
College loans are available from private lenders such as banks. These loans are not based on need or merit, but on your credit rating. They are not considered to be part of your aid package.
It is important to apply for government loans first since the interest rates and terms are usually better. Plus, any student can get an unsubsidized federal Stafford loan regardless of need.
Anticipating How Aid Might Impact Your Cost
Most colleges offer students a combination of gift aid and self-help aid. Some schools offer more gift aid while others offer more self-help aid. Some schools offer most students aid but cover only a portion of each student's need. At other schools, fewer students may receive aid but the award covers more of their need.
So how do you anticipate what a college might actually cost? CollegeData's Net Price Calculator can help. It estimates your true out-of-pocket cost to attend a college by looking at the college's cost of attendance, your financial aid eligibility, and data on recent financial aid awards by the college. It includes estimated amounts of need-based gift aid, loans, and work-study.
CollegeData's College Profiles show you how much gift and self-help aid a school has awarded to students who have recently attended. Use CollegeData's College Match to look up a college's Profile and then view the Money Matters tab.
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.