Financial Aid 101
The average total cost of attending college continues to rise at a much faster rate than that of U.S. household incomes, leaving students with often crippling debt.
To help pay for college, students can apply for financial aid. There are several different types of financial aid, including need-based aid such as loans and work-study jobs and merit-based aid such as grants and scholarships.
Need-based aid is awarded to students based on their financial means. Need-based aid is provided when a family does not have sufficient financial ability to pay for the total cost of college. Merit-based aid is need-blind and awarded based on students’ achievements, which may be academic or related to a hobby or other community activity.
Starting in the fall of your senior year of high school, it is time to fill out financial aid applications in accordance with the relevant deadlines. Submitting financial aid applications sooner can help you to receive the greatest amount of aid possible.
What is Financial Aid?
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Financial aid enables students to pay for college, even when they don’t immediately have the money to cover the total cost of attending a higher education institution.
Financial aid can cover expenses such as tuition, fees, room and board, books, and transportation.
Aid is awarded by federal and state agencies, colleges and universities directly, high schools, and other entities such as foundations, corporations, and nonprofit organizations.
How Do I Apply for Financial Aid?
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Students can apply for financial aid starting with a general application to the U.S. Department of Education known as the FAFSA. However, the FAFSA cannot be completed until you are a senior in high school and will be attending college the following year.
Filling out the FAFSA is the first step to apply for federal financial aid. This form is used to determine your family’s financial need and which types of financial aid for which you may qualify.
The College Board is the nonprofit organization that administers the CSS Profile. Some colleges use the CSS Profile in place of or in addition to the FAFSA to determine students’ eligibility to receive financial aid.
Even if you don’t think that you’re eligible for financial aid, you should still apply. A FAFSA application is often required to receive merit-based aid.
To ensure a smooth process when applying for financial aid, follow these steps:
- Create an FSA ID. FSA IDs are required for both parents and students. The FSA ID allows you to log in quickly and makes it easy to edit and complete your application.
- Collect the required documents. The FAFSA requires various information from both you and your parents, such as Social Security numbers and tax return information. Collecting all this information prior to beginning the application will make the process easier.
- Know your deadlines. The FAFSA application is available starting October 1 and remains available for almost nine months, although each school has different FAFSA application deadlines. Submit your FAFSA as early as possible for the best financial aid results.
What are the different types of financial aid?
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Financial aid can take a few different forms. The two main types are need-based aid and merit-based aid. As a senior, now is the time to start understanding the different types of financial aid available.
Students can qualify for need-based aid in the form of grants, scholarships, loans, and work-study jobs, based on their financial profiles.
Merit-based aid is not awarded based on financial need. Federal and state governments, colleges and universities, businesses, religious groups, civic associations, high schools, and nonprofit organizations award merit-based grants and scholarships. Many grants and scholarships are awarded on a competitive basis. Merit-based aid can be awarded in the form of one-time gifts or may be disbursed over multiple years.
Grants and scholarships, which can be need-based or merit-based, are considered “free money” that does not need to be paid back. Student loans, by contrast, constitute borrowed money that will need to be repaid (with interest) after graduation.
Work-study positions on campus are a great source of income for many students. These jobs may be related to students’ majors; in any case, the money earned from work-study jobs can be put toward both education and living expenses.
Federal student loans are generally divided into the following two categories:
- Subsidized: Subsidized loans do not accrue interest between the date of disbursement and the time after graduation when repayment is required to begin; the interest during this time period is subsidized by the school.
- Unsubsidized: Unsubsidized loans do accrue interest between the date of disbursement and the time after graduation when repayment is required to begin; the interest accrued during this time period is not subsidized by the school.
Private student loans are also available. Granted by private institutions such as banks and credit unions, private loans can be used for living and education-related expenses.
What Financial Aid Deadlines Should I Be Aware of?
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The FAFSA releases its application for current high school seniors annually on October 1. The federal deadline is not until June 30, although each school may have its own, earlier deadline. Be sure to keep track of the specific financial aid deadlines for each of your target schools. The earlier you complete the FAFSA, the more aid that you are likely to receive.
How Do Schools Decide Who Gets Financial Aid?
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Each college individually determines your family’s financial need by subtracting your Expected Family Contribution (EFC) from the school’s cost of attendance. Each school sets its own cost of attendance figure on an annual basis.
Your EFC will be calculated by the Department of Education after you submit the FAFSA. Your EFC is the amount of money that your family is expected to contribute; generally, this is the amount not covered by financial aid.
Is There a Limit to How Much Financial Aid I Can Receive?
Your eligibility to receive financial aid is calculated annually as the difference between your school’s cost of attendance and your Expected Family Contribution. Not only does the total amount of aid that you are eligible to receive change each year, but also the time period during which you are eligible for need-based financial aid extends longer than the length of time that you are enrolled in school. Students are permitted to borrow money in the form of subsidized federal loans for up to 150 percent of the length (in years) of their degree programs.
When Will I Receive My Financial Aid Award Letter?
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After you’ve submitted the FAFSA, the colleges to which you have been accepted will review your FAFSA information to offer a financial aid package with one or more types of assistance.
Your financial aid award letter will explain how much money the school is offering and in what form, such as grants, loans, scholarships, or a work-study position.
While there isn’t a specific date on which financial aid award letters are mailed, most colleges send financial aid letters at around the same time that they send admittance letters. This is normally in March or April of your senior year, for regular decision applicants.
How Do I Appeal a Financial Aid Award?
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Believe it or not, you actually can ask for a better financial aid package. If you are not satisfied with the offer in your financial aid award letter, then you can call the school’s financial aid office to appeal your award. The financial aid office will then request additional information from you and provide specific instructions on the next steps.