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Ten Things to Know About College Financial Aid

Many students desiring to continue their education by attending college need financial aid. Different types of financial aid are available, all with their own set of eligibility requirements and guidelines. Students and parents should know the characteristics of financial aid so they can choose the option that works best for them.

  1. Types of Financial Aid

    • The most common forms of financial aid include federal and state grants, government and private loans, scholarships and work study. The Pell Grant is the most commonly issued federal student grant. Eligibility requirements differ for each type of financial aid.

    Completing FAFSA

    • Students must complete the Free Application for Federal Student Aid (FAFSA) to receive federal and state financial aid. The U.S. Department of Education recommends completing the FAFSA as early as possible after Jan. 1. Completed tax returns provide the most accurate information when completing the FAFSA. However, if your required tax forms are not completed early in the year, estimate the amounts needed on the FAFSA.

    Applying for a PIN

    • Students must apply for a federal PIN number with the U.S. Department of Education to complete the FAFSA (www.pin.ed.gov). The PIN serves as a way to identify students when checking financial aid status online or by phone.

    FAFSA Calculates EFC

    • The federal government uses the FAFSA to calculate your expected family contribution (EFC). This is the amount the federal government expects your family to contribute toward your education.

    Federal Work-Study Program

    • The Federal Work-Study Program offers financial aid to eligible students by providing part-time jobs. Students may work on or off campus. The U.S. Department of Education limits the number of hours students can work, averaging around 20 hours a week.

    How Colleges Use EFC

    • The U.S. Department of Education sends your EFC to every school listed on your FAFSA. The school uses your EFC to create your financial aid package, which is also based on the cost of attendance. Your EFC remains unchanged no matter the school but your financial aid packages may differ per school because of the differences in cost of attendance.

    Financial Aid Qualifications

    • Although most government grants are need-based, most students who complete the FAFSA qualify for some form of financial aid. The U.S. Department of Education does not regard income when giving students federal loans.

    Merit-Based and Need-Based

    • Financial aid typically comes in two forms -- merit-based and need-based. Schools and organizations grant merit-based financial aid based on academic achievement. The federal government and private organizations base need-based financial aid on household income. Low-income students typically qualify for need-based financial aid.

    Nature of Government Loans

    • The most common government loan program is the Direct Stafford Loan Program. Under this program, student loans are classified as subsidized and unsubsidized. Subsidized loans do not accrue interest until after the student's grace period, which is typically six months after the student is no longer enrolled in college at least half time. Unsubsidized student loans accrue interest immediately.

    Private Loans

    • Students who did not receive enough federal financial aid to cover education costs can apply for private education loans. Students may possibly face higher interest rates when taking out private student loans. Most loans are based on creditworthiness, so some students need a co-signer to qualify.

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