Financial Aid Essentials
Financial aid packages are designed to level the playing field, when it comes to education. By providing students with a bit of a financial boost, the administrators of financial aid packages hope to ensure that even students from the poorest families can get a good education, so they can get the opportunities that allow them to change the fortunes of the family for good.
Types of Financial Aid
When people think about financial aid programs, they tend to think about full-ride academic scholarships offered by colleges to needy but gifted students. While these programs do exist, there are many other types of financial aid programs, including:
Awarded on need basis
Don’t require repayment
Awarded for merit
Don’t require repayment
Based on need
Based on need
Work is required
Some of these financial aid products require students to enroll for a specific number of credits each term or complete a certain number of tasks on a weekly basis. Others require students to pay back a portion of the money a student receives for school. Understanding the details of each product is vital, as it can help students to stay in compliance and avoid financial penalty.
While the federal government is the source of the majority of aid provided to students, there are other entities that also provide aid.
Source: As reported by the College Board.
Amount of Aid Received
Source: U.S. News and World Report
Source: Brookings Institute
While financial aid can certainly help students to attend school and get the education they both want and need, it’s not uncommon for these programs to contain a significant gap. In other words, it’s not uncommon for students to take out unsubsidized or private loans, even while they’re accessing financial aid.
As this graphic makes clear, students who get financial aid tend to borrow even more than their counterparts who don’t get aid. Their financial needs are just greater, and they must access more sources of funding in order to make ends meet.
Source: U.S. Department of Education
Getting the Most Aid Possible
Almost all sources of financial aid rely on the Free Application for Federal Student Aid (FAFSA) in order to determine a student’s financial need and eligibility for aid. Filling this form out is the first priority for almost all students when the new year rolls around, but as this chart from the U.S. Department of Education demonstrates, some students wait far too long before they begin their work.
- Schedule a meeting with the financial aid officer, and bring all pertinent financial documents to that meeting.
- Be polite, but firm, about the family’s need for additional aid.
- Show documentation from other schools, if the student’s been provided a more generous financial package at a different institution.
- Follow up the meeting with an email message, reiterating key points.
- Fill out formal appeal paperwork, if applicable.
While smaller schools may not be able to play ball on financial packages, some larger schools may be open to negotiation, so discussing the issue diplomatically could deliver big results.
In this video, Monisha Perkash talks about the proper role of private student loans in the paying-for-college process. Private loans should only be used once all other financial aid options have been exhausted, so make sure that you’ve explored federal and school-specific options before turning to a private student loan. If you do need a private student loan, be sure to compare carefully and borrow only what you need – no more.
College on the Cheap’s street team interviewed some college students and asked them a few questions about loans, including what the difference is between subsidized and unsubsidized loans, whether you should take out a private student loan or federal student loan first, and some basics about Stafford Loans. Their answers weren’t always spot-on, but definitely entertaining.
In order to qualify for student financial aid, your financial information must display a serious financial need. As one might expect, applicants with the highest need for finances are awarded the most financial aid. Others who demonstrate less need are awarded a smaller portion according to their need. Other than that, you need to make sure that you are a legal U.S. citizen with a SSN, have not defaulted on any other loan, and have completed a minimum of high school education.
What are the different types of financial aid?
The various types of financial aid programs include federal financial aid, institutional financial aid, and private financial aid. Federal financial aid is the most sought after source of funding for students since federal loans have the lowest interest rates and the most lenient terms and conditions. Institutional aid is mostly awarded to students with outstanding academic achievements or with extreme financial need. Private financial aid programs are stringent in terms and conditions and often have high interest rates. It is recommended that students utilize federal financial aid first, and if it does not fully cover the applicant’s need, only then should students look to other types of financial aid.
When should I file the financial aid forms?
The earliest you can file the FAFSA is January 1st of senior year in high school, so you will want to file soon as possible after that date. The PROFILE can be sent in at any time, so filing early – before January 1st – is advisable.
If you anticipate qualifying for need-based financial aid, you must file no later than March 1st. Many states and most colleges use the March 1st filing deadline to close eligibility for state and campus-based aid. By missing that date, you may be ineligible for those kinds of aid, your need notwithstanding. Do not miss this deadline.
How can I complete a financial aid form if my taxes aren’t done?
Make a reasonable estimate based on last year’s tax return, and send the form(s) in as early as possible to stake your place at the front of the financial aid line. You can update your form with more accurate information later without losing your place in line, so there’s no harm in filing early.
Is it better to file electronically or by regular mail?
We urge you to file the FAFSA electronically; for those of you who have to complete the CSS/PROFILE, that form must be filed electronically. Electronic filing is faster, more responsive, and easier for the colleges to process. If you file by regular mail, be sure to make a copy of the form and get a Certificate of Mailing at the post office to verify the mailing date. Don’t lose the certificate, and do not use Certified or Registered Mail or anything that requires a signature at the point of destination.
I just received something from IDOC. What is it?
A growing number of colleges use a service called IDOC. Using tax return data, it informs the college principally about actual cash flow by looking for “phantom losses” on the tax form. The IDOC tends to discount things like depreciation and carryover losses from stock sales and other transactions.
What happens if my family owns a business or farm?
The relevant information will be included on the FAFSA, but if you file a PROFILE, you will be asked to complete a Business/Farm supplement similar to a multi-year Schedule C on your 1040.
What if the current year’s income is going to be different from the one (last year’s income) I reported on the financial aid forms?
If your current income goes up, wait until the end of the calendar year to report it on the next FAFSA and PROFILE. If your income goes down, once the student gets admitted, contact the college’s financial aid office to discuss the EFC given your new, lower, income. They will guide you through the appeal process.