How Does Financial Aid Work?

Financial Aid is getting any form of financial assistance to pay for the education without having to repay it back in some cases. Learn more about how the financial aid works and different types of aid that you could get.

Updated by Sreelekha R K on 23rd March 2020

What is Financial Aid?

It is the monetary support and help given to the learners either by the state government or by the college in order to pay for their schooling.  It is given in the form of scholarships, grants, and other programs. It is given not only to pay for tuition but also for rooms, books, and other necessary supplies.


What is the Difference Between Need-based and Merit-based Financial Aid? 

Need-based Aid

Merit-based Aid

It is funding given to the students based on their ability to afford for the college.

It is funding given to the students based on exceptional performance in their academics or activities.

It is given in the form of scholarships, grants, and loans.

It is given in the form of scholarships or grants.

It is determined by a standardized formula.

Criteria vary with respect to college rules and regulations. 


How does it work?

The following are a few factors that are involved in the process of financial aid.

Plan on how much is required

It is important to make a thorough strategy in order to fulfill all the needs. Here needs in the sense, we mean not only about the tuition fee but also the room, transportation, books and all the expenses related to the college. Then you can calculate the expenses you can afford and how much extra money you will need in order to lead a peaceful college life.

Fill out FAFSA

Once you decide to apply for a few colleges, you will have to deal with the most crucial, filling out the Free Application for Federal Student Aid (FAFSA). 

It provides you information on a wide range of financial aid that includes determining eligibility for federal Pell grants and work-study. It takes less than half an hour to fill out this form but in turn will help you in a million ways. 

Plenty of scholarships look at your FAFSA results to determine whether you are eligible or not. You will have to re-apply for it every year since your eligibility with every academic year may change and also it is free to apply for FAFSA.

However each school and state has its own FAFSA deadline, you will have to fill the application out as early as possible. It can always be changed later if the information is altered.  

You will need to have a Social Security number, records of your parents’ assets (to calculated Expected Family Contribution), your driver's license, authorized recognition, enrollment in a standardized college and also you will have to be a part of selective service. Once you are done with all of these, filling out the application on FAFSA will be an easy task. 

Fill out CSS

College Scholarship Service abbreviated as CSS is another important form you will have to fill out to allocate non-government financial aid from those institutions.

Submit it if the college or university you are planning to join practices CSS as part of its financial aid method and also apply to this at the same time you submit your FAFSA and every year on the same date (if required).

According to most of the students, it is said that $25 is the fee to submit their initial CSS Profile ($16 for each added college). You will be eligible for this if: 

  • You are a first-year undergraduate student.

  • You must have received an SAT.

  • Your parents' income is less than $45,000 for a family of four.

  • Your parents live in the U.S.

  • You are an orphan.


Types of Financial Aid I get?

Different types of aid are provided through different sources such as federal agencies, colleges, high schools, organizations, and more. The amount of aid a student receives depends on federal, state and institutional guidelines. Basically there are 4 types which are as follows:

Grants

It is the funding given by the government to the students to help them pay for college, but the positive note for this is they do not have to repay it. The most commonly given is the Pell Grant. Eligibility for a Pell is based on a family's EFC and is calculated on the FAFSA. Most families who earn less than $50,000 will basically qualify for some amount of Pell. The maximum Pell for the 2019-2020 school year is $6,195. 

Scholarships

These are the monetary funds that are given for the students based on their academic excellence in various fields such as education, sports, cultural and more during the year. An important consideration when you are applying for scholarships is that many schools ask you to report your scholarships, and whatever amount of money you receive from scholarships will be subtracted from your grants in a process called "scholarship displacement". 

Student Loans

Student Loans are the funds given by the government in order to give funds to the students which they will have to repay later. Basically there are 4 types of students loans which are as follows:

  • Direct Subsidized Loans

  • Direct Unsubsidized Loans

  • Direct PLUS Loans

  • Direct Consolidation Loans

Work-Study

It basically refers to a federal work-study that involves working as a part-timer or off-campus work while you are registered for an institution. These jobs are not sponsored by the government, earnings may vary, and funding comes from the department that hires.