When it comes to financial aid, you don’t need to be an expert, but you need a basic understanding of college expenses and how it can help. As college expenses and tuition costs have risen over the years, many families can’t afford the whole bill on their own. Financial aid can help fill in the gaps. Keep reading as we discuss the details of financial aid and what types are available.
What is Financial Aid
College financial aid assists students and their families by covering higher education expenses, like tuition and fees, room and board, books and supplies, and transportation.
There are four types of financial aid:
- Federal or private loans
- Work-study and other programs
How Does Financial Aid Work?
Different types of aid are provided through various sources, such as state and federal agencies, colleges, high schools, foundations, corporations, and many more. The amount of aid that each student receives depends on state, federal, and institutional guidelines.
Keep in mind the way federal financial aid works is a student applying for the aid is required to answer a series of questions used to determine their ability to pay for college.
Aid is then awarded based on the application, and from there, the student has a choice to accept or reject the offered assistance. The type of aid provided determines whether it has to be repaid or not. In some cases, students must complete additional applications to be considered for other scholarships or private aid.
How Do I Apply for Financial Aid?
The first step is filing for the Free Application for Federal Student Aid, also known as FAFSA, an application used by many state agencies, colleges, and universities. Families can begin applying as early as October 1. For the following school year. The deadline for FAFSA this year is June 30. However, this deadline is only for federal financial aid. Dates for other forms of financial assistance are determined by the specific type or determined by a school.
What Are the Different Types of Financial Aid?
There are two different types of aid: merit-based and need-based. Merit aid can be awarded by an institution, college, or private organization to a student for a talent, athletic ability, or academic ability. On the other hand, need-based aid is determined by a family’s ability to pay for college, as calculated by FASFA. According to the Department of Education, most students qualify for some type of federal financial aid, whether it be loans, grants, or work-study.
The types of federal financial aid:
- Federal student loans: These are fixed-interest-rate loans from the government. Each academic year’s rate is set on July 1, and that rate is secured for the life of the loan. The main program set for student loans is the direct loan program. This program states that undergraduate students can borrow direct subsidized or unsubsidized loans up to $31,000 in total if they’re dependent. And an undergraduate student classified as an independent can borrow up to $57,500 in total.
- Federal Grants: Grants are money that doesn’t need to be repaid. The most well-known higher education grant is the Pell Grant. This is based on a family’s expected family contribution, also known as EFC, and is calculated from FAFSA. Most Pell Grant recipients have an adjusted family income of $40,000 or less. The maximum Pell Grant for the 2020-2021 school year was $6,345. The amount for 2021-2020 has yet to be announced.
- Work-study: The work-study program provides part-time work, typically on campus, to assist students that need call-related expenses covered. Not all students qualify for federal work-study and must be eligible through the FAFSA with a demonstrated financial need.
Beyond state, federal, and institutional aid, a few other programs to consider serve specific student groups, such as Peace Corps volunteer benefits and the Reserve Officers’ Training Corps program, known as ROTC. Students who participate in ROTC can study and train at the same time while receiving scholarships that can cover tuition and fees, board and room, books, and more. There are also military benefits through which veterans can pay for their tuition, such as GI Bill benefits that cover all or some costs along with their immediate family.
How to Find Out What Financial Aid You’re Awarded
After you’ve filled out the FAFSA, you’ll receive a financial aid award letter from each school that has accepted you. Award packages will likely vary and include a mix of federal, state, and institutional aid. If you’re applying for fall 2021, you will more than likely receive a financial aid award letter in winter 2020 or spring 2021, depending on the school and when you submitted your FAFSA.
Next Steps: Complete the FAFSA
If you haven’t done so already, fill out the FAFSA. From there, you can begin checking your FAFSA status to make sure the Department of Education processed it correctly, review your Student Aid Report and correct any mistakes you made on your application. And before you know it, your award letters will arrive, and you can start choosing a college that’s best suits your budget needs.