Financial aid is awarded in many forms, and as a student, it is important to know all of your options before deciding which awards to accept. You’ll want to compare the aid and calculate the remaining costs of all the schools you are considering. Eligible students may receive an award letter or a financial aid package.
The Financial Aid Process
Submitting your Free Application for Federal Student Aid (FAFSA) is an important first step to ensure your financial aid eligibility is considered. You will first need to be accepted for admission, complete your FAFSA and submit any other information your school requires. To be in the best position, complete all steps on or before each school’s published deadlines. When schools receive your FAFSA information, your family’s Estimated Financial Contribution (EFC) is calculated. Your family’s actual financial contribution and the composition of your award letter may differ among schools. Your EFC is deducted from the total Cost of Attendance (COA) to determine your financial need. If you are eligible for financial aid, your award letter will contain all of the aid programs you are eligible to receive, the steps you need to take, and the deadlines for responding to the award letter.
Note: Although you will see your EFC on the Student Aid Report you received after filing the FAFSA, it is probably not the amount you and your family will actually pay for college. For more information, review the article I Submitted My FAFSA – Is the Expected Family Contribution What I Have to Pay for College? While reviewing your award letter, be sure to read all information, understand each program, and know what is required of you to ensure you receive the funds. You will need to select the awards you would like to accept and respond to your award letter by the date indicated.
Types of Financial Aid
There are several different types of financial aid including grants, scholarships, federal work-study, and loans. The terms of each type of aid vary, so it is important to understand the differences.
Grants are typically based on financial need and do not need to be repaid. They may include funds from federal, state, and institutional sources. Grants are applied to your college bill.
Scholarships are based on academics or other performance criteria, financial need, or a combination of both and do not have to be repaid. Scholarships usually come from institutional or private sources and are applied to your college bill.
Federal work-study may be listed on your award letter, but in order to receive the funds, you must obtain a qualifying job and work to earn this type of financial aid from federal and institutional sources. Your financial aid office will post eligible jobs that are open to qualifying students. Once the job is secured, you’ll receive paychecks throughout the year for your hours worked. This type of aid is not applied to your bill.
Loans are funds you borrow now and pay back with interest after you finish or leave school. They may come from federal, institutional, or private sources. For most loans, you will be required to take additional steps to secure the funds. If you receive a loan, it is applied to your bill. Many loans also charge fees, which are deducted from your loan amount. Be sure to read all of the loan terms before you borrow.
Determining the Amount You Owe After Financial Aid
Remember, you will be billed for some college costs prior to the start of each semester. The bill typically includes tuition and fees plus room and board charges if you live on campus. You will also have additional expenses such as books, transportation, and personal expenses that will not be included in your bill. Schools factor in all of this criteria when determining your overall cost of education. The total for each type of expense will be included in your award letter.
To determine the amount you will pay at each school, first deduct your grants and scholarships, then loans (minus fees) from your estimated college bill. Most aid will be divided evenly and credited to each semester’s bill.
You will also need to consider the cost of books and supplies at the beginning each semester, and any personal and transportation expenses you may have throughout each semester. If you have financial aid left after funds are applied to your bill, you can use it to help with these expenses. Obtaining a work-study job can also help with personal expenses. As a general rule, it’s best to have additional funds set aside to help with personal expenses as well.
To continue to receive aid, you will need to make satisfactory academic progress toward your degree. Scholarships may require that you achieve a certain grade point average or meet other performance criteria. Renewal information is also included with your award letter.
Additional Funds to Help Cover College Costs
In addition to the financial aid listed above, there are alternate sources that can help cover the cost of college.
There are a number of private scholarships available, which you can search for with Peterson’s College Scholarship Search. Your guidance counselor can also be a great resource for private scholarship information. Private scholarships can help offset the amount you need to borrow.
Direct PLUS Loans
These are federal loans that some schools may include in an award letter. Direct PLUS Loans are subject to certain eligibility requirements. Typically graduate or professional degree students or parents of a dependent undergraduate student are eligible to receive these loans.
Private loans can also assist with covering college expenses. Private student loans, sometimes known as alternative loans, are made by private lenders such as banks, credit unions, and financial institutions. Private student loans are based on credit and are most often used to fill the gap between the cost of attending college and family savings, grants, scholarships, and federal student loans.
Paying for school can feel like an overwhelming process. It’s crucial to meet all of your deadlines to be considered for eligibility. Mapping out your deadlines on a calendar can help keep these details organized. Make sure you consult the available resources and fully understand each step of the process to get the most out of financial aid.