How Does Financial Aid Work?
For most students, the process of applying for financial aid is the second most important step after applying to colleges. Fortunately, students do not need to separately apply for financial aid at every college they attend. The Free Application for Federal Student Aid (FAFSA) provides a one-stop process for students to apply for all sources of available federal aid, which includes:
- Federal student loans (including Direct Loans and the Perkins Loan)
- Federal grants
- State grants
- School scholarships
- Private loans
Students can access the FAFSA online and will need the following information to complete the application:
- Personal information, including the student’s Social Security number
- A FSA ID (allows the application to be signed in electronically)
- The most recent federal income tax returns, and other information about income earned (such as a W-2 from work)
- As applicable, bank statements, investment records, and information on any income not included in tax filings
The FAFSA is an easy and comprehensive process. Students do not have to send the information to schools of interest. Rather, the FAFSA application allows students to list up to 10 schools (and the schools will then access the student’s financial information). Students will need to list the school’s FAFSA code on the application. Students should list the school codes on the FAFSA in accordance with the preference (i.e., the number one school choice should be the first school code listed on the FAFSA). Students may have their information released to more than 10 schools and will need to follow the process to add more school FAFSA codes.
Schools that offer admission will prepare a financial aid package for the lucky student. This package will include the school’s calculation of the amount of aid awarded. Students will usually not be able to adjust these amounts (although colleges will sometimes work with a student on a case-by-case basis). For instance, a student does not request to borrow a certain amount of federal loans; rather, the school determines the amount and makes an offer to the student. After reviewing a financial aid package, students can accept or decline any of the offers (the student is best advised to talk to the school directly about the consequences).
It is important for students to understand the Expected Family Contribution (EFC), an amount that the school may calculate that the student or parent can contribute to tuition and fees. Most students are dependents of their parents. The EFC does not reflect whether or not a parent will actually make the contribution, and some parents will not have the funds to make any contribution (and in those cases, the EFC may be zero). If there is an EFC that the student or parent cannot cover, private loans or other financial resources (including outside scholarships) may be a good option.
Based on information that has been reported to the school, students will either receive a financial aid package that includes or excludes housing and a meal plan (some dormitories require a meal plan). The school will receive the financial aid funds directly from the lending sources (such as banks, and the federal and state government) and apply the aid to the student’s account. In some cases, there may be funds remaining, and the school will either disburse these extra monies to the student or return them to the source (students should inquire with the school about their policy).