Financial Aid 101 FAQS: What Every Prospective College Student Should Know
How many college students get financial aid?
About three-quarters of full-time undergraduate college students receive some type of financial aid, whether it is in the form of grants, scholarships, loans or work-study.
A student who is not "low-income" shouldn’t bother applying for financial aid, right?
No. Every student who isn’t paying cash for their college education should submit the Free Application for Federal Student Aid (FAFSA). The most common mistake students and parents make is taking out private loans when they could have taken out less costly federal loans. Almost everyone can qualify for a federal loan regardless of financial need, but they must submit the FAFSA in order to get one.
What is the FAFSA?
The Free Application for Federal Student Aid (FAFSA) is the primary application that schools use to award federal, state and often, school aid. It is the only application used to award federal aid.
What other financial aid applications are there?
The College Board’s CSS/PROFILE® application is used by many schools to award school-based aid. Some schools also have their own financial aid applications and outside scholarships each have their own applications as well.
When does a student have to start thinking about financial aid?
Students should start learning about financial aid before they even start college applications since financial aid can impact what colleges students apply to. Review the financial aid timeline to learn the timing of each financial aid step.
What types of financial aid are available?
A major source of student aid is the federal government. They offer grant and work-study aid which don’t have to be paid back and loans, which do. Grants, work-study and subsidized loans are awarded based on financial need. Unsubsidized loans are available to almost any student and their parents regardless of financial need.
State financial aid may include scholarships and grants and sometimes loan and work-study aid. Most awards are based on financial need but scholarships often have additional eligibility criteria. What is offered and how much money is available varies from state to state with most money going to students who attend in-state schools.
School-sponsored aid is usually available as grants or scholarships. Eligibility is typically based on financial need and/or academic performance. There is a lot of variability between schools in how much financial aid is offered. The more expensive schools will often try to make themselves affordable to low-income, high achievers by offering generous financial aid packages.
Billions of dollars in scholarship money is awarded by companies, foundations and other organizations. Scholarships are awarded based on any number of factors including financial need, academic success, ethnicity, religion, specific talents, civic involvement and many other criteria.
Private loans available through banks are available if there is still an unmet financial need. Terms for private loans are more costly than federals loans so the maximum limits on federal loans should be reached first. Private loans also have tougher requirements for credit-worthiness.
Those who have served in the military or have a family member in the military can benefit from the military’s financial aid programs available to them through the Veterans Administration or a branch of the Armed Forces.
Tax deductions and tax credits are available which can help reduce the financial impact of attending college.
Should a low-income student only apply to the least-expensive schools?
The least expensive schools are not necessarily the least costly since financial aid packages can alter how much the student actually pays. Schools strive to have diverse student bodies and may offer substantial financial aid to meet this goal.
How much should a student borrow?
Experts recommend students not borrow more than eight to ten percent of their expected future income. However, Income Based Repayment(IBR) plans make federal loan repayments manageable even if the borrower works in a low-paying field and has borrowed more than they can afford under traditional loan terms. Certain public servants may even qualify for additional deferment and forgiveness benefits under IBR plans.
Resources
Free Application for Federal Student Aid (FAFSA) - Starting point for completing the FAFSA.
College Board’s CSS/PROFILE® - Starting point for completing the PROFILE® application.
U.S. Department of Education: Student Aid on the Web - Provides information about all federal financial aid programs.