The Ultimate Guide to Financial Aid for College

Have you ever spent hours digging for ways to fund your education? You might have looked for scholarships and loans.

Sorting through all that info can be pretty overwhelming. So, where do you even begin when you need a hand?

Understanding financial aid for college is super important. Making wise choices now can save you a bunch of stress and confusion down the road.

You have to take your time when applying for financial aid, it’s not all about paperwork. It’s about grasping how it can save you a hefty sum. Getting the lowdown on scholarships, grants, and loans can make college more affordable.

In this guide, we’ll take you step by step through the whole process of financing your college journey. We’ll cover applying for financial aid and managing your student loans.

Tip: You should note down your financial aid options in your college list. Download the college list spreadsheet template.

What is financial aid?

Financial aid refers to various forms of assistance provided to students and their families to help cover the costs of higher education.

The primary goal of financial aid is to make public or private college education be more accessible and affordable, ensuring that financial constraints do not hinder students from pursuing their academic aspirations.

The top three factors most important to me when selecting a college is location, financial aid, and academic quality.

– Isabell Blackwell
(Read the essay)

How does financial aid work?

Financial aid is designed to help students and their families pay for higher education expenses.

Here’s a general overview of how financial aid works:

1. Application process

To apply for financial aid, students must complete the Free Application for Federal Student Aid (FAFSA).

The FAFSA collects information about the student’s and their family’s income, assets, and other relevant financial factors.

The information provided on the FAFSA is used to determine the student’s eligibility for federal and sometimes institutional financial aid programs.

2. Expected family contribution (EFC)

Upon completing the FAFSA, a student receives an Expected Family Contribution (EFC) calculation.

The EFC is a measure of the student’s family’s ability to contribute to their education expenses.

It is used by schools to determine the amount of financial need the student has.

3. Financial need

Financial need is the difference between the cost of attending a specific college or university (including tuition, fees, room, board, and other expenses) and the student’s expected family contribution.

Financial aid programs aim to bridge this gap between the cost of attendance and the student’s ability to pay.

4. Financial aid package

Once a student is accepted to a college or university, they receive a financial aid package outlining the types and amounts of aid they are eligible to receive.

The package includes a combination of scholarships, grants, loans, and work-study opportunities based on the student’s financial need and available funding.

Types of financial aid

There are two main categories: need-based aid and merit-based aid.

These categories determine the criteria by which students are considered eligible for different types of financial assistance.

Financial considerations become a focal point of my college planning. The dream of higher education in a Hispanic household is often impossible due to financial concerns. I researched institutions that offered financial aid options, scholarships, and part-time employment opportunities. 

– Maria Gomez
(Read the essay)

Here are a different categories of financial aid:

1. Need-Based Aid

Need-based aid is awarded to students based on their demonstrated financial need.

Financial need is determined by evaluating the student’s or their family’s financial resources and the cost of attending college.

This assessment is typically done through the completion of the Free Application for Federal Student Aid (FAFSA) or other institutional forms.

Examples of need-based aid include:

• Need-based grants: These grants, such as the Federal Pell Grant, are awarded to students based on their financial needs and do not need to be repaid.
• Need-based scholarships: Some scholarships take financial need into account as one of the criteria for eligibility. These scholarships can be offered by colleges, universities, private organizations, or government entities.

2. Merit-Based Aid

Merit-based aid is awarded to students based on their exceptional academic achievements, talents, skills, or other specific criteria unrelated to financial need.

Merit-based aid recognizes students’ accomplishments and potential for success in their academic pursuits.

Examples of merit-based aid include:

• Scholarships: Many scholarships are merit-based and are awarded to students with outstanding academic records, exceptional athletic abilities, artistic talents, leadership qualities, or other notable achievements.
• Academic awards: Some colleges and universities offer academic awards or merit scholarships to attract high-achieving students.

Moreover, there are other 4 types of common financial aid available for students. They are:

1. Scholarships

Scholarships are a type of financial aid that is awarded to students based on their academic achievements, talents, skills, or other specific criteria.

Scholarships are often provided by colleges, universities, private organizations, or government entities and are designed to support students in pursuing their educational goals without the requirement of repayment.

They can either be need-based or merit-based, depending on the specific criteria for eligibility.

Here are some key points about scholarships that you must keep in mind:

Eligibility

Scholarships have varying eligibility criteria, which can include

• Academic performance
• Standardized test scores (such as the SAT or ACT)
• Extracurricular activities
• Community service
• Leadership abilities
• Artistic talents
• Specific career goals, or other unique attributes.

Scholarships may be available for students at different stages of their educational journey, from high school seniors to graduate students.

Application process

To be considered for scholarships, students typically need to complete an application, which may involve submitting essays, recommendation letters, academic transcripts, and other supporting materials.

Each scholarship program or institution sets its own application requirements and deadlines, so it’s important to carefully review and follow the instructions provided.

Award amounts

Scholarship awards can vary significantly in terms of the amount offered.

Some scholarships cover full tuition and fees, while others may provide a partial amount towards educational expenses.

Scholarships may also be one-time awards or renewable for multiple years, depending on the terms set by the scholarship provider.

Sources of scholarships

Scholarships can come from various sources. They may be offered directly by colleges and universities as part of their financial aid packages.

Additionally, private organizations, community foundations, corporations, government agencies, and nonprofit organizations often provide scholarships to support students in specific fields of study, underrepresented groups, or individuals with unique backgrounds or circumstances.

Searching for Scholarships

Students can explore scholarship opportunities through various channels, including

• Online scholarship databases
• College and university websites
• Local community organizations
• Professional associations
• Guidance counselors

It’s important to research and apply for scholarships that align with your qualifications, interests, and goals.

Scholarship renewal and requirements

Some scholarships have specific requirements for renewal, such as maintaining a certain grade point average (GPA) or participating in certain activities.

Students should carefully review the terms and conditions of the scholarship to understand the expectations and responsibilities associated with it.

2. Grants

Grants are a type of financial aid that is awarded to students based on their financial need.

Unlike loans, grants do not need to be repaid, making them a valuable form of assistance for students seeking to fund their education.

Grants are primarily need-based, meaning they are awarded to students based on their demonstrated financial need.

The determination of financial need is typically based on factors such as the student’s or their family’s income, assets, and other financial circumstances.

Here’s some basic information about grants:

Funding sources

Grants can be provided by various sources, including the federal government, state governments, colleges, universities, and private organizations.

The U.S. Department of Education is a significant provider of need-based grants, such as the Federal Pell Grant, the largest federal grant program for undergraduate students.

The maximum amount of Pell Grant for the 2022-23 academic year is $6,895.

For the 2023-24 academic year, the maximum amount will be estimated to be $7,395, which is a $500 increase from the previous year.

Application process

To be considered for grants, students must complete the Free Application for Federal Student Aid (FAFSA) or other institutional forms.

The FAFSA assesses the student’s financial need based on information provided about their family’s income, assets, and other relevant factors.

The application process also involves submitting additional documents or forms required by specific grant programs or institutions.

Award amounts

The amount of grant funding awarded can vary depending on the student’s financial need and the availability of funds.

Some grants cover a significant portion of tuition and fees, while others provide a smaller amount towards educational expenses.

The award amounts may also be influenced by factors such as the student’s enrollment status (full-time or part-time) and the cost of attending the institution.

Renewal and its requirements

Grant eligibility may require renewal on an annual basis.

Students may need to reapply or submit a renewal application each year to demonstrate their continued financial need.

Additionally, certain grants have specific requirements for renewal, such as maintaining a certain grade point average (GPA) or making satisfactory academic progress, just like scholarships.

Impact on financial aid package

Grants, as a form of need-based aid, can impact a student’s overall financial aid package.

The grants received are typically considered when determining the remaining financial need and may influence the amounts of other aid awarded, such as loans or work-study opportunities.

3. Federal or private loans

Federal and private loans are types of financial aid that students and their families can use to help cover the costs of higher education.

However, unlike scholarships or grants, loans are funds that need to be repaid, typically with interest.

Federal and private loans are not typically categorized as need-based or merit-based aid since they are loans that need to be repaid.

Here’s some basic information about federal and private loans:

Federal loans:

A. Types of federal loans

The U.S. Department of Education offers several federal loan programs for students, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.

These loans have specific terms and conditions set by the federal government.

B. Interest rates and subsidization

Federal loans have interest rates that vary based on the loan type and the academic year the loan is disbursed. These interest rates are adjusted annually on July 1st. Please refer to our detailed analysis for insights into how the latest interest rate adjustments impact repayment amounts.

Direct Subsidized Loans are based on financial need and have interest subsidies, meaning that the government pays the interest while the student is in school or during certain deferment periods.

C. Borrowing limits

Federal loan programs have specific borrowing limits, which vary depending on the student’s year of study, dependency status, and whether the student is considered a dependent or independent student.

D. Repayment options

Federal loans offer various repayment options, including standard repayment, extended repayment, income-driven repayment plans, and loan forgiveness programs for certain professions or public service work.

E. Application process

To apply for federal loans, students must complete the Free Application for Federal Student Aid (FAFSA) to determine their eligibility for federal financial aid programs, including loans.

Private Loans:

A. Source of private loans

Private loans are offered by banks, credit unions, and other financial institutions.

Unlike federal loans, private loans are not provided or guaranteed by the government.

B. Terms and conditions

Private loans have varying terms and conditions depending on the lender.

Interest rates, repayment options, and borrower protections can differ significantly among private loan providers.

C. Credit and cosigner

Private loans often require a good credit history and may also require a cosigner, such as a parent or a guardian, who shares the responsibility of loan repayment.

The creditworthiness of the borrower and cosigner impacts loan approval and interest rates.

D. Borrowing limits

Private loan borrowing limits vary by lender and may be influenced by factors such as the student’s school, program of study, and creditworthiness.

E. Repayment options

Private loans may have different repayment options and terms, including fixed or variable interest rates and various repayment periods.

4. Work-study programs

Work-study programs are a type of financial aid that comes under the “need-based aid” category as they provide students with part-time employment opportunities, typically on or near the campus where they are enrolled.

These programs allow students to earn money to help cover their educational expenses.

The average hourly rate for work-study students is $11.82 per hour.

Here’s some basic information about work-study programs:

Eligibility

Work-study programs are typically available to undergraduate and graduate students who demonstrate financial need.

Eligibility is determined through the completion of the Free Application for Federal Student Aid (FAFSA) or other institutional forms.

Funding sources

Work-study programs are funded by the federal government, state governments, or individual colleges and universities.

The funds are allocated to participating institutions, which then provide job opportunities to eligible students.

Work hours and flexibility

Work-study jobs are part-time, allowing students to balance their employment with their academic responsibilities.

The number of hours worked per week is determined by the program guidelines and the student’s class schedule.

Institutions generally prioritize students’ academic commitments and accommodate their course requirements.

Application process

To be considered for work-study, students must indicate their interest in the program on the FAFSA.

If eligible, the financial aid office at the institution will include work-study as part of the student’s financial aid package.

Students typically need to apply for specific work-study positions or access job listings through their institution’s career services or financial aid office.

Impact on financial aid package

The wages earned through work-study programs do not count as income when calculating the student’s expected family contribution (EFC) for future financial aid assessments.

This means that work-study earnings do not negatively affect a student’s eligibility for other forms of financial aid.

How to apply for financial aid?

Now, let’s learn how to apply for financial aid and make your educational dreams a reality!

In order to get financial aid, you can either apply using the Free Application for Federal Student Aid (FAFSA) or the College Scholarship Service Profile (CSS Profile).

To apply for financial aid through the FAFSA, follow these steps:

1. Complete the FAFSA (Free Application for Federal Student Aid)

The FAFSA is the primary application for federal, state, and many institutional financial aid programs.

The application becomes available on October 1st of each year and usually closes on June 30th.

For instance, the 2023-2024 FAFSA, which will open on Oct. 1, 2023, is due June 2024.

It’s recommended to submit it as soon as possible to meet priority deadlines.

2. Gather the required documents

Before starting the FAFSA, gather the necessary documents such as your

• Social Security number
• Driver’s license (if you have one)
• Federal income tax returns (yours and your parents if applicable)
• Bank statements
• Records of investments

3. Create an FSA ID

Both the student and one parent (if dependent) need to create a Federal Student Aid (FSA) ID at fsaid.ed.gov.

The FSA ID serves as your electronic signature and allows you to access and sign the FAFSA electronically.

4. Start the FAFSA application

Begin the FAFSA application and enter your personal information, demographic details, and financial information based on the documents you gathered.

5. Include school codes

On the FAFSA, list the school codes for the colleges or universities you are interested in attending.

You can find these codes on the FAFSA website or by contacting the schools directly.

6. Review and submit the FAFSA

Carefully review your FAFSA entries for accuracy and completeness.

Once you’re confident with the information provided, sign and submit the application.

You can choose to sign electronically using your FSA ID.

7. Review the student aid report (SAR)

After submitting the FAFSA, you will receive a Student Aid Report (SAR) via email.

Review the SAR to ensure all information is accurate.

Make any necessary corrections or updates, if required.

8. Receive financial aid notifications

Each college or university listed on your FAFSA will receive your information and use it to determine your financial aid eligibility.

You will receive financial aid award notifications from the institutions you’ve been accepted to, outlining the types and amounts of aid you are eligible to receive.

9. Compare and evaluate aid offers

Compare the financial aid packages from different colleges to understand the types of aid being offered, including grants, scholarships, loans, and work-study opportunities.

Consider the costs of attendance, your financial need, and the terms and conditions of the aid packages before making a decision.

10. Accept or decline aid

Follow the instructions provided by each college to accept or decline the financial aid offered.

Some aid may be accepted automatically, while other forms of aid, such as loans, requires a separate acceptance process.

College scholarship service profile (CSS Profile)

The College Scholarship Service Profile (CSS Profile) is an additional financial aid application used by some colleges, mostly private colleges or universities in the United States.

While the Free Application for Federal Student Aid (FAFSA) is the primary application for federal aid, the CSS Profile helps institutions assess a student’s eligibility for non-federal financial aid, institutional scholarships, and grants.

Here’s some information about the CSS Profile:

1. Purpose

The CSS Profile provides a more detailed and comprehensive view of a student’s financial situation compared to the FAFSA.

It gathers information about a student and their family’s income, assets, expenses, and financial circumstances to determine their financial need for institutional aid.

2. Application Process

The CSS Profile is administered by the College Board. Students must complete the CSS Profile online at cssprofile.collegeboard.org.

The cost of submitting the CSS Profile varies depending on the student’s family income and the number of schools they are applying to.

• For domestic undergraduate students whose family income is up to $100,000, the CSS Profile is free for the initial application.
• For all other students, the fee for the initial application is $25.
• Additional reports cost $16 each.
• The total cost of submitting the CSS Profile to multiple schools can add up quickly. For example, if a student needs results sent to five schools, the total cost is $89.

Students who cannot afford the fees may be eligible for a fee waiver.

The College Board automatically determines if a student qualifies for a waived application fee based on their responses.

3. Eligibility

The CSS Profile is usually required by private colleges and universities, particularly those with large endowments or institutional scholarships.

Some state scholarship programs and certain scholarship foundations also use the CSS Profile.

It’s important to check with each college or program to determine if they require the CSS Profile.

4. Information required

The CSS Profile collects detailed financial information beyond what is asked on the FAFSA.

This includes information about income, assets, investments, home equity, medical expenses, and more.

The application also considers the financial circumstances of both custodial and non-custodial parents, in cases of divorce or separation.

5. Institutional aid consideration

Colleges and universities use the information provided on the CSS Profile to evaluate a student’s financial needs and determine their eligibility for institutional aid.

This can include scholarships, grants, work-study programs, and other forms of non-federal financial aid offered by the institution.

6. Deadlines and requirements

Each college or university sets its own deadlines for the CSS Profile, which may differ from the FAFSA deadlines.

It’s crucial to check the specific requirements and deadlines of each institution to which you are applying.

7. CSS Profile vs. FAFSA

While the FAFSA is required by all U.S. colleges and universities for federal aid, the CSS Profile is only required by certain institutions for non-federal aid.

The CSS Profile delves deeper into a student’s financial situation, often considering factors not accounted for on the FAFSA.

However, both applications play a role in determining a student’s overall financial aid package.

Comparing different forms of financial aid

Not all forms of financial aid are equal, so it’s important to make wise decisions about the types of aid you accept.

Here’s a recommended order to maximize your aid:

1. Gift Aid

Gift aid includes grants and scholarships that do not require repayment.

This is the most desirable form of financial aid because it doesn’t accumulate debt.

Seek out and maximize opportunities for grants and scholarships, as they can significantly reduce your overall college expenses.

2. Earned aid

Earned aid refers to money you earn through work-study programs.

These programs offer part-time jobs on campus, allowing you to earn income to help cover your educational expenses.

Take advantage of work-study opportunities to offset your costs while gaining valuable work experience.

3. Borrowed federal aid

After exhausting gift aid and earned aid options, federal loans from the Department of Education should be considered.

Federal loans often come with more favorable terms, such as fixed interest rates, income-driven repayment plans, and forgiveness programs.

Explore federal loan options and consider utilizing income-driven repayment plans if needed.

4. Borrowed private aid

Private loans from banks or other financial institutions should be considered as a last resort.

Private loans typically have higher interest rates and fewer flexible repayment options compared to federal loans.

If you must borrow, carefully review the terms and conditions of private loans, considering factors such as interest rates and repayment terms.

In summary

Navigating financial aid for college can feel overwhelming. However, with this guide, it can be manageable.

We have looked at the different types of financial aid, such as scholarships, grants, work-study programs, and loans. Each type has its own advantages and things to consider.

Scholarships and grants are attractive options because you don’t have to pay them back. They are usually awarded based on merit, need, or specific criteria set by the provider.

Work-study programs allow you to earn money and gain work experience at the same time. Loans require repayment, but they can be crucial for covering the costs of higher education.

The application process for financial aid is a critical step. We emphasized the importance of starting early and being thorough in your applications.

The FAFSA is an important form for students in the US. It helps students get financial aid from the government, state, and schools. We also talked about how finding scholarships takes careful attention and hard work. We want students to explore popular and lesser-known opportunities.

Each student’s journey to receive financial aid is different. To get aid, students must be persistent, plan carefully, and take proactive steps. Students can access educational opportunities that may seem unattainable by learning about aid types and mastering application processes.

Tip: If you need help with your college list, you can download our college list spreadsheet template.