First, you should remember that federal financial aid (which is awarded based on the FAFSA) comes in several forms: grants, loans, and work-study. Only grants are “free money”; you have to pay back loans, and you have to work to earn work-study.
The primary federal need-based grant is called the Pell Grant. The maximum Pell Grant is $6,095 for the 2018–19 award year (July 1, 2018 to June 30, 2019). Most Pell Grant recipients make less than $50,000 per year.
But even if your family does have greater resources, you should still submit the FAFSAⓇ. For one thing, the Pell Grant is not the only form of federal aid - federal loans, for example, can carry lower interest payments for borrowers. Here’s why you can’t rule out help from the government, even with a high net worth:
There is No Such Thing as an Income Limit.
The FAFSA does use income and net worth to help determine how much financial aid you are eligible to receive, but there is much more to it than that.
The formula that the U.S. Department of Education uses to determine aid is simply:
Cost of Attendance (COA)
- Expected Family Contribution (EFC)
But, let’s break this down.
Expected Family Contribution (EFC)
EFC is the amount of money your family will be expected to pay for a year of higher education.
As discussed, your income and assets are calculated into your final EFC. But these aren’t the only factors. Family size and the number of family members who will attend college or career school during that aid year are also contributing factors. Check out the EFC Formula Guide to see exactly how your EFC is calculated.
Cost of Attendance (COA)
Not to be confused with tuition, COA is the total amount it will cost you to go to school. This, of course, includes tuition, but it also accounts for room and board, books, supplies, and a lot more. Colleges alter their COA yearly.
To learn more about COA, visit the FAFSA website.
How Pell Grants, Work-Study, and Loans Are Awarded
Each school you apply to will have a different COA, so you could see different awards for different schools. Here’s the table the government uses to map your EFC with COA and determine your Pell eligibility, for example.
Federal loans, whether subsidized or unsubsidized, are awarded by the school based on your level of need as calculated from your EFC - though there are caps to how much you can borrow.
Work-study funding varies by institution, so the overall pot of money will impact how much you receive as a single applicant. In addition, the financial aid office will determine how many hours they think you can work given your class schedule. The rate you are paid depends on the job and the institution.
Institutional vs. Federal Aid
The numbers we cited above apply to grants and aid from the federal government - but remember that schools award money of their own also. And for institutional aid, there is no set formula. They are likely to be more generous than the federal government with grants, in fact.
Always Submit the FAFSA
Regardless of your income or net worth, Edmit experts recommend that you complete the FAFSA application every year, no matter what. You never know for what you’ll be eligible. College tuition is getting higher and more people are finding that they qualify for more aid than ever.
You might also need to submit the FAFSA for other reasons. Some schools require the FAFSA submission to consider you for merit-based aid. Also, if you decide to take out loans, federal loans tend to have lower interest rates and have more lenient repayment options than private alternatives.
The COA and your EFC will likely alter every year. College is expensive and the FAFSA application is free. It is worth the submission every year to see if you qualify even for a little federal aid.