Financial aid is a common way to fund a college education. Seventy-five percent of college students receive financial aid.
- How financial aid works
- How need is determined
- Financial aid timetable
- Federal work-study
There are three potential sources of financial aid: the schools themselves, the states and the federal government. To apply for federal financial aid, you need to fill out and submit the Free Application for Federal Student Aid (FAFSA). (Other forms may be required to receive loans, grants or scholarships from individual schools and state governments.) The school that has granted your student admission then puts together your aid package based on your family's financial need.
The information reported on the FAFSA is used in a formula established by the federal government to determine your Expected Family Contribution (EFC). The EFC is an amount the family and student are expected to contribute to the student's education. The EFC is based on several factors, including the family's income and assets, the age of the older parent and the number of members in the family. The formula does not consider certain assets you may have, including any equity you have in your home, the cash value of any life insurance policies or tax-deferred annuities you own, or your investments in IRAs or employer-sponsored retirement plans such as 401(k)s.
To apply for financial aid, you must take several steps during the months following acceptance to college. In January of your senior year of high school, pick up a FAFSA, which is the only form you need to apply for federal aid. (Some schools require what is known as the Profile form or their own institutional application before considering your student for non-federal aid.) Submit the forms as early as possible, based on the instructions on the form. Respond to any requests for additional information (for example, tax returns) in a timely fashion. Also note that different schools have different deadlines for receiving information. By April or May, the school will send you an award letter telling you how much aid, if any, you are being offered for the next school year.
Several grant programs are sponsored by the federal government, the best-known are Pell Grants and Supplemental Educational Opportunity Grants (SEOG), which are need-based programs designed to help the neediest families pay for part of a college education. Unlike federal loan programs, these funds are awarded with no expectation of repayment. Eligibility for a Pell Grant is determined with a simple calculation.
Supplemental Educational Opportunity Grants are awarded at the discretion of each college's financial aid office. SEOG funds are limited, so not all deserving students receive such grants.
Additional grants may also be available through Department of Education (link to site)
Need-based financial aid is money offered to you based on your financial situation. Most scholarships, on the other hand, are based on merit.
Many foundations, corporations, institutions, trade associations, religious and ethnic organizations and other groups offer scholarships. These awards are based on a wide variety of qualifications, including need, academic and athletic achievement or special talents.
This form of federal financial aid provides qualified students with funds in exchange for performing work for the school. The federal government provides a limited amount of work-study funds to colleges, and the schools have discretion as to which needy students get this aid. Better students have a better chance of receiving work-study money.