Along with the stress of applying for college comes the complexities of navigating the financial aid process. Unless you have a robust college savings fund or scholarship, financial aid is a common route for an abundance of college students. For those who are unfamiliar with how financial aid works, the process may seem complicated and confusing. However, this simple outline can help you get through the process, step by step, to get as much assistance as possible with tuition and other college expenses.
Sources of Financial Aid
Before applying for financial aid, it’s important to understand where the funds are coming from. You will need to fill out different applications and meet varying requirements depending on the funding source.
• Federal – This type of aid is offered by the federal government through the US Department of Education in various forms of assistance.
• State – Similar to federal financial aid, state aid is awarded through the state government in which the educational institution is located.
• Educational Institution – Individual universities and colleges sometimes offer financial assistance typically in the form of scholarships, grants, and work-study programs.
• Private Sources – Most commonly offered by corporations and other professional organizations and agencies such as cultural, religious, or philanthropic foundations, this type of aid is typically in the form of scholarships.
Types of Financial Aid
Now that we’ve explored where financial aid funds come from, we’ll take a look at what types of financial aid are available. Depending on eligibility requirements and qualification factors, applicants may be able to receive several types of financial aid at the same time.
• Grants – Characterized by not having to be repaid, grants are offered by the federal and state governments and some educational institutions. These are often awarded based on student-specific accomplishments, financial needs, or group affiliation. Some popular examples include federally funded Pell Grants and TEACH Grants.
• Scholarships – Also not requiring repayment, scholarships are mainly offered by individual institutions or private foundations. Common factors taken into consideration when awarding scholarships include academic performance, athletic ability, group affiliations, community involvement, and distinctive accomplishments. Individual applications, essays, and sometimes interviews are required for consideration.
• Loans – Both government and private loans are available for college students. Federal loans include subsidized and unsubsidized loans, depending on financial need and eligibility. Private loans are offered by financial institutions such as banks and credit unions.
• Work-Study – Funded by the federal government or individual institutions, work-study is a program that provides students with jobs to help pay for tuition and other college expenses. These jobs are most commonly on-campus positions in university bookstores, student centers, or student residence facilities.
How to Get Started
The first thing you’ll need to do is apply for a federal student aid identification (FSA ID) through the US Department of Education website. This ID number is what you’ll need to complete the Free Application for Federal Financial Aid (FAFSA) and other financial aid forms. You’ll also be able to electronically sign these forms using your FSA ID.
Once you have your FSA ID, the next step is filing your FAFSA. This provides your family’s financial information to the federal government and determines how much aid is needed. Based on your expected family contribution (EFC), which includes college savings accounts, this application will calculate how much financial aid will be offered. Although this process is often time-consuming, it’s important to complete the entire FAFSA in order to be eligible for any form of aid. The official FAFSA website has helpful tools and instructions to assist you when filling out the forms.
Done with FAFSA… What’s Next?
Most individual institutions will also use the information provided through the FAFSA to award financial aid to applicants, though some schools will also require people to file a CSS Profile. Additionally, individual scholarships often require separate applications and have specific instructions outlined in order for an applicant to be considered. It’s important to make sure you know all the requirements and deadlines for each school and scholarship program so you don’t miss out on potential financial aid opportunities.
After all the forms are filled out, signed, and submitted, a financial aid award letter will be sent from each of the schools to all applicants that qualify for aid. This is a broad explanation of the financial aid package that is being awarded and may include grants, work-study, scholarships offered by the school, and federal loan options. Take into consideration, first and foremost, how much free money is being offered to you. If this is enough, avoid taking out any loans if you can to prevent substantial student debt after graduation.
What Affects Financial Aid Eligibility?
As mentioned earlier, your EFC, which is based on income level and any funds in a college savings account, will greatly impact your eligibility for financial aid. Certain types of college savings accounts will weigh more heavily than others based on who has ownership of the account. If parents own the account, which is the case for most 529 plans or Coverdell Education Savings Accounts, it’s not weighed as heavily as student-owned accounts, such as UGMA/UTMA custodial accounts, but will still affect the amount awarded.
When setting up a college savings account for your child, it’s crucial to know what types of accounts will affect your child’s ability to receive financial aid. A College Savings Trust, by Prime Trust, is a unique and beneficial way to save for college because it has no effect on a person’s eligibility for financial aid. This is incredibly beneficial if you’re hoping to maximize financial aid assistance while still having a college savings account. You no longer have to choose between building a strong college savings account or relying exclusively on financial aid. You can now save for your child’s college education without jeopardizing eligibility for financial aid with a secure and flexible College Savings Trust.