What Does Financial Aid Mean?
College is an investment. The increased earning potential of college graduates more than makes up for the tuition over a lifetime’s work – with your new degree it is likely that you will make back far more than you have to spend to earn that degree – but the investment still needs to be made upfront. Fortunately, for first-time or returning students, there are systems in place to help you cover the cost: student financial aid refers to funding that can be applied to tuition and other fees, room and board, books and supplies or almost any other cost associated with your education.
Navigating the different types of financial aid available to you, though, can be tricky. Here are answers to some of the most common financial aid questions to help you get a better understanding of how the system works and how to get the most out of it.
What different types of financial aid are available?
There are several different types of financial aid available to students and it is important to know the differences between them. The first distinction to make is between merit-based aid and need-based aid. Merit-based aid includes scholarships, grants and fellowships that do not need to be paid back and are typically awarded to a student by the college or university they are attending or an outside organization for outstanding achievements and potential. Merit-based aid is typically awarded without considering the financial needs of an applicant as opposed to need-based aid, for which that is the primary consideration.
Like merit-based aid, need-based aid can also be awarded in the form of scholarships, grants and fellowships, but there are two additional forms of need-based aid: Federal Work Study (FWS) and loans, of which there are a wide variety. At almost every school, the student must complete the Free Application for Federal Student Aid (FAFSA) to be considered for need-based aid. Some private schools might require that additional forms be submitted, but they are all similar and used solely to determine your eligibility for financial assistance.
What is the difference between scholarships, grants, fellowships, loans and Federal Work Study (FWS)?
Scholarships, fellowships and grants are free monetary awards that do not need to be repaid. Scholarships are awards that are usually offered independently or semi-independently to qualifying students based on merit, major, ethnicity, talent or some other criteria set by the awarding institution or agency. Fellowships are simply a form of merit-based scholarship that are traditionally reserved for students pursuing graduate degrees. Grants tend to be part of the funding packages offered by colleges and universities during the admissions process; they may be offered with service or research requirements.
Loans can be awarded through the federal government or an independent bank or agency and they must be repaid with interest. Sometimes, though – as with the Federal Stafford Loan – no interest will accrue while you are attending school at least half-time. Federal Work Study is a program that is partially funded by the federal government and partially by the university or college you will be attending. Basically, it is a program that allows students to work part-time jobs on campus to help cover the cost of their education. The number of positions vary widely from school to school, but many colleges have thousands of work study-positions available that range from working at campus cafes and restaurants to assisting in laboratories and libraries.
What is the FAFSA?
The Free Application for Federal Student Aid (FAFSA) is an application which must be filled out by all students seeking to receive need-based financial aid. By examining an individual’s or their family’s ability to pay for education – called the Expected Family Contribution (EFC) – and comparing it with the cost of attendance at a particular educational institution, the FAFSA allows the Department of Education to officially document the amount of financial aid a student will need to receive.
The FAFSA is a prerequisite for most kinds of loans and grants, and many scholarships as well. The FAFSA is generally filled out after an admissions decision has been made, when the student knows which school he or she will attend. You can complete the FAFSA online – the recommended route to take – or complete and mail in a paper copy that can be printed from your home computer or you can have sent to you by calling the Federal Student Aid Information Center.
When do I have to submit financial aid forms?
As loan money is often parceled out on a first come, first serve basis, it is generally a good idea to submit the FAFSA as soon as possible. The new forms is made available on January 1 of each year and can be completed and submitted at any date after that and before the official deadline of June 30.
Do I need to resubmit financial aid forms every year?
Yes, the FAFSA must be completed for every year that you will be attending school and wish to receive financial aid. If you complete your FAFSA online, though, the forms can be accessed each year using a specific PIN number that is assigned to you. This method will save all of your information and require only that you update a few items.
How do student loans work?
Student loans are offered by both the federal government and other institutions, such as banks or private lending companies, under various terms. The three different types of loans offered by the federal government are Perkins, Stafford and PLUS. The Perkins loan is a low-interest loan provided only to students – both undergraduate and graduate – that demonstrate exceptional need.
The Stafford loan comes in two forms, subsidized and unsubsidized, and is also available to both undergraduate and graduate students, but there is a limit to how much a student can borrow under this type that varies depending on the level of study. With subsidized loans, the government pays the accruing interest while you are attending school at least half-time and during a set deferment period after your successful graduation; unsubsidized loans accrue interest during your education that must eventually be paid back.
PLUS loans, the third and final type of federal loan, is awarded to parents of undergraduate students. While PLUS loans are never subsidized, there is typically no limit to the amount you can receive if the parent being awarded the loan has strong credit. [PLUS loans are available to grad students as well?]
Is financial aid available to graduate students?
Yes. Students pursuing a graduate degree are eligible for many forms of financial aid, but not all of the options we have discussed on this page: Several government grants are not available to graduate students, but loans, fellowships and Federal Work Study (FWS) are.
Are older students eligible for financial aid?
Absolutely. Age is not considered when determining who does or does not receive financial aid from the government. (This can be a factor for certain scholarships or grants, but the criteria for those awards are determined by the awarding institution or organization.) To be eligible for federal aid, students must fulfill basic legal and educational requirements. The legal requirements, generally, for a student seeking federal financial aid are that they must have a valid social security number, be a citizen or eligible noncitizen, and comply with Selective Service registration (for males ages 18 to 25).
The educational requirement is that you must prove that you are qualified to enroll in a college, university or other postsecondary education by fulfilling one of the following: earning a high school diploma or General Educational Development (GED) certificate, complete a high school education in a homeschool setting, or pass an ability-to-benefit (ATB) test, which is used to determine whether you can benefit from the education offered at your school of choice.
I’ve been accepted, but I’m worried I won’t be able to secure enough money to go where I want to go.
As you can see from all of the options that we have covered here – grants, scholarships, loans, fellowships – securing financial aid for your education can be a tricky process. Research and learn about all your options. If you have already been admitted to a school and awarded a financial aid package that isn’t enough, talk to a financial aid administrator in the admissions office.
