By Linda Williams
Most American parents cannot afford to pay their children’s college fees out-of-pocket. As a result, they often resort to financial aid to fund their aspiring college student’s education. With so many loans, scholarships, and grant options available online and through your university, it’s common to feel torn between financial aid options. To make a well-informed decision regarding your child’s college education, you should be able to answer the question “What is financial aid?” with ease. Well-prepared parents will also weigh each type of financial aid’s pros and cons.
What is college financial assistance?
College financial aid is a general term that encompasses all the financial resources a student can use to finance higher education. The most common forms of financial aid are grants, work-study, scholarships, federal aid, and private loans. It’s important to note that you don’t need to repay grants and scholarships following graduation, while you must repay loans immediately after receiving your degree.
Why seek financial assistance?
The average tuition cost for an in-state student at a public college is $10,230. Tuition costs rise to $26,290 for students who study outside their home states. Meanwhile, the average cost for private universities is $35,830. Sadly, only a small percentage of American families generate enough income to cover these education-related expenses, which means financial aid is a non-negotiable for most American households sending their children off to college.
How to apply for financial assistance
Start by filling the Free Application for Federal Student Aid (FAFSA) form available through the Department of Education website. Applications for the next academic year start in October and end in June for those seeking federal aid.
Most colleges have earlier deadlines, so you need to confirm with the respective college to avoid penalty fees. Note that most private colleges use the College Scholarship Service Profile (CSS) form to determine applicants’ financial needs. The form is available at the College Board website and serves around 250 institutions.
Categories of financial aid
Financial aid can be merit-based or need-based. Need-based aid assesses applicants based on their family’s ability to finance their college education. In contrast, universities and other third parties award merit-based financial aid to students with above-average athletic or intellectual ability. Merit-based scholarships don’t take a family’s financial capabilities into account, meaning that students from all socioeconomic backgrounds are eligible for application.
All students qualify for government and institutional financial assistance. Federal and state aid is determined through FAFSA calculations, while institutional assistance depends on the college or donor’s internal policies. Federal aid comes in the form of loans, work-study, or grants.
Federal loans are financial packages with a fixed interest rate. The loan amount a student can receive depends on whether they’re financially dependent or independent. Dependent students can get up to $31,000, while independents can get up to $57,500 in financial aid.
Grants are funds that don’t require repayment upon graduation. The most popular grant in this category is the Pell Grant, which bases eligibility on the expected family contribution (EFC). Families that make less than $50,000 annually can qualify for this grant. The maximum amount a student can receive is $6,195. This figure applies to all families that have an EFC of zero.
A work-study program is an arrangement where a student is employed by their college of enrollment to earn income that covers education-related expenses, such as tuition, textbooks, access codes, supplies, etc. The college in question pays students a minimum of $7.25 per hour. According to USnews.com, on average, students on this program earn about $1,808 per academic year. Qualification for this program depends on FAFSA calculations.
Most states restrict their financial aid to local students, meaning that students can only qualify if they reside in a particular area. With these restrictions in mind, students who go to a college in their home state have a higher chance of receiving state-based aid than those who relocate out-of-state for their college education. States base their needs assessment on FAFSA forms.
Merit aid is attractive to many students because this financial aid option doesn’t factor in their family’s financial status. Students can maximize their potential by performing well academically and participating in a series of extracurricular activities that set them apart from other candidates. However, only 15% of the college population receives merit-based financial aid, meaning that you have to perform exceptionally to qualify.
Methodologies of awarding aid
Every college has a unique way of processing applications and awarding financial aid. Before accepting their offer, research the methodology your first-choice college uses to award financial aid. Additionally, avoid universities that load students with burdensome loans as part of the financial package.
Most students receive their financial aid letters by mail between December and April. Some arrive together with college acceptance offers, while others are delivered a few weeks after the acceptance letter.
Don’t let rising tuition costs discourage you from supporting your child’s dream to earn a college degree. With financial aid opportunities aplenty, families from all walks of life can send their children to college without fearing crumbling financial stability.