About Student Financial Aid
Financial aid is a term used to describe all sorts of different forms of monetary support given to students to help them afford a college education. Financial aid can include loans, scholarships and grants, as well as federal and private student loans.
With college costs constantly rising, there has been a groundswell in the number of students applying for and receiving financial aid to pay for college.
Depending on the sort of financial aid a student qualifies for, his/her education costs could be completely or partially covered; if he/she is lucky, that student may qualify for certain grants or scholarships that will not need to be repaid. Financial aid is often essential for students to attend college and the benefits of financial aid are many.
If you are sending your child off to college, first you have a real careful discussion about responsibilities; who’s going to pay what and second that you have a four year plan. I have seen many families that just put it together, the schools, the student’s dreams, you work so hard to get there, you want to make it possible and after the first year, they sense they have just run out of money. And you really have to have a four year plan and know how it’s going to be financed each year and also, a good open conversation with the student as far as who is responsible for what part of the bill. One year for example if the student is going to work, how much money that you can contribute. A lot of students now for example, the summer before are going away to college , I know and it’s nice to have a good time there, but they could work that summer and maybe bring some money with them to school to help with the personal expense allowances. So I think that a good conversation and a four year plan and a careful adherence to a budget will be the most important things.
Financial aid programs help students pay for their education, or parents who want to contribute funds to their children’s college education. For so many students, financial aid is the gateway to college. Financial aid has given millions of students the opportunity to receive higher education and realize their educational goals. Subsidized federal loans, a common form of financial aid given to students who demonstrate a degree of financial need, save students thousands by not accruing interest while the student is in school; Pell Grants, another form of need-based financial aid, can cover thousands of dollars towards tuition that never need to be repaid.
Should I apply for financial aid?
Everyone should apply for financial aid, regardless of the family’s wealth.
There are three strong reasons why you should complete the federal financial aid form, called the FAFSA (Free Application for Federal Student Aid):
- To qualify for need-based financial aid. Need-based financial aid consists of grants, student loans, and federal work-study jobs.
- Grants are “free money” that you don’t have to pay back, such as scholarships and awards.
- Student loans (that have to be paid back eventually) carry with them the advantage of low-interest rates that don’t start accruing interest until after the student has graduated.
- Federal work-study, which are on-campus jobs often involving community service or work related to the student’s field of study.
- To automatically establish a line of credit with the federal government that will allow the family to borrow as much low-interest, unsecured money as it needs to help with all college costs not covered by financial aid. If you don’t get enough financial aid from the college, you can turn to this reliable source of money.
Low interest loans from the government provide some significant benefits:
- You can use them to enable you to re-direct out-of-pocket “college money” to pay off higher-interest debt you might have.
- If you have investments growing at 8% (for example) and can borrow relatively low-interest loans you can use these long-term government loans instead of cashing out your long-term investments to pay for college (and getting hit with capital gains taxes). Using “cheap” government money often makes good financial sense.
- To hedge against the unforeseen. Jobs get lost, marriages fail, earthquakes and hurricanes happen, and our bodies sometimes fall victims to debilitating illness. In the event that any of these unpleasant and often unexpected events occur, if a financial aid form is on file at the college, you can call the financial aid officer at the school and discuss this “special circumstance.” The law allows the college to recalculate the family’s ability to pay based not upon past income but on the projected income and asset picture created by this new condition. College personnel are usually very willing to help families in distress to continue with college. But the key to getting their help is having a FAFSA on file at the college the student is attending.
What types are available?
Financial aid comes in all shapes and sizes. It can be given out by the federal government, as well as state and local governments, businesses, individuals and private organizations. Financial aid is an umbrella term that includes scholarships, grants, work-study programs and both federal and private student loans.
What are merit and need based scholarships?
Merit based scholarships are awarded based on academic performance and may cover all or a portion of a student’s college and living expenses. Need based scholarships, on the other hand, are awarded on the basis of a student’s financial need and involves a complete evaluation of the family’s income and expenditures.
What other options are available?
Work-study programs provide funds to students to help them pay for tuition and other expenses by providing students with part-time jobs while they are in school.
The last form of financial aid a student should explore is student loans. Federal student loans should be taken out before private student loans and as their name suggests, are disbursed by the federal government. Federal student loans generally have lower interest rates than private student loans, thought they have lower borrowing limits and shorter repayment periods. Private student loans should only be considered after federal student loans are exhausted and it is essential to compare your private student loan options before applying. A good final form of financial aid, you can search, compare and apply for private student loans by using our Student Loan Comparison Tool above.
Analyzing Your Student Aid Report
Once you file your FAFSA, you’ll soon receive your Student Aid Report (SAR). In your SAR, you will find summarized data outlining your Expected Family Contribution (EFC) towards your total cost of education. Read on for tips on what to expect from your SAR and what steps you should take once you receive it.
What to Do Once You Receive Your Student Aid Report:
- Review it Carefully – Since the EFC listed on your SAR will determine the amount of financial aid you will receive, make sure you check it carefully for mistakes and compare it to your FAFSA.
- If you Find Mistakes – Immediately contact your financial aid office to see if the school can send the corrections electronically or mail the form to the address designated on the SAR.
- Selected for Verification - If your SAR has been selected for verification, page one will have a message that says, “you will be asked by your school(s) to provide copies of certain financial documents.” In other words, you will be expected to provide supporting documentation for the information on your FAFSA.
- Review Your Choice Schools’ Cost - Since you now know what kind of aid you can expect to get, review your top schools and determine which of these schools fit into your budget and what, if any, extra steps you’ll have to make to raise money.
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 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 than 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.
All About the FAFSA and CSS Profile Forms
Should I take out a private student loan? SimpleTuition’s Monisha Perkash explains.
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.
Do you know what kinds of student loans you have?
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.
Financial Aid Basics
- Analyzing Your Student Aid Report
- Current topics & admissions and aid
- Do you know what kinds of student loans you have?
- Financial aid advice for college students
- Financial aid advice for parents
- Video Workshop
- Financial Aid: Should You Apply?
- I am divorced; do I have to enter my former spouse's financial data on the financial aid forms?
- International students & financing college
- Multiple Children In College
- Should I take out a private student loan? SimpleTuition's Monisha Perkash explains.
- The Cost of Attendance, Part II
- What if my parents refuse to pay for college? Can I apply as an independent student?
- What is Self-Help Aid?
- What is Student Financial Aid?
- What is the cost of attendance (COA)?
- Financial Aid Applications
- Crunch Time for College Finances
- Do I have to apply for financial aid every year?
- Financial Aid Advice
- Financial aid advice for grad students
- Financial aid: all about the FAFSA and the CSS Profile
- How can I complete a financial aid form if my taxes aren't done?
- I am divorced, but I have remarried. Does my current spouse's financial information have to be entered on financial aid forms?
- I just received something from IDOC. What is it?
- If the college asks for financial data on their application for admission, do I still have to complete the PROFILE?
- Is it better to file electronically or by regular mail?
- Starting All Over with Financial Aid
- Starting the New Year and Starting the Financial Aid Process
- Tips on evaluating your financial aid award
- Understanding the Financial Aid Application
- What happens if my family owns a business or farm?
- What I've Learned About the Financial Aid Application Process
Financial Aid Awards