As I’ve grown older and gone through college, financial aid has been a topic that has been greatly discussed, but also confused many. My goal writing this blog is make financial aid more clear.

What is Financial Aid?

Financial aid is usually need-based, meaning, based on you or your families income. (This is not to be confused with merit-based, which is based on academic performance.) Forms must be submitted each year to be considered for financial aid. Forms may be filled out online, or through a guidance counselor’s office at your college/university.

To apply for need-based financial aid, you’ll need to complete the Free Application for Financial Aid (FAFSA). The FAFSA is an application for federal funds and is required by all institutions of higher learning. To apply, you will need complete copies of your most recent tax and W-2 forms. You’ll be asked a series of questions to help determine what amount, if any, of financial aid that you’ll receive.

It is important to note that if you are listed as a dependent on your parent’s tax return, the numbers will come from your parent’s tax returns. If you are applying as an independent, then you will use your own tax returns. The FAFSA website provides this worksheet to help you determine your dependency status.

If you or your family plans on contributing any money, you will have to report it. That number is known as the “Expected Family Contribution (EFC). The general formula used looks similar to:

Cost of tuition – EFC = Aid Eligibility

For example, if annual tuition of your college is $13,000 and you are able to contribute $7,000. 13,000-7,000=6,000. Your Aid Eligibility will be for $6,000.

Now remember, tuition may include on-campus costs such as rooming, meal plans, and if you opt-in to health insurance. (This is generally what financial aid covers, keep in mind that you’ll need to research what financial aid covers at your school. This may not be for every college/university). Financial aid MAY cover the cost of a computer or laptop, it depends upon your school. It’s best to consult your school’s financial aid office if you wish to purchase a computer or laptop.

However, financial aid does not pay for off-campus rent, off-campus food, books and supplies, personal expenses, transportation and insurance.

Who is eligible to receive Federal Financial Aid?

To see if you are eligible, the FAFSA website has a list of requirements.

Types of Financial Aid

As stated on the FAFSA website, not all schools participate in all types of financial aid. Again, it is important to check in with the school that you’re interested in attending to see what federal aid is available to you.

There are three categories of federal student aid: grants, loans, and federal work-study. Keep in mind that you may additionally be able to get financial aid from your state government, school, or private scholarships.


Grants do not have to be repaid. Federal Pell Grants are usually only available to undergraduate students. Also, there is a program called the Academic Competitiveness Grant (ACG). There are other types of grants, and if you would like to explore these options or other grants in further detail, the FAFSA website has a convenient PDF.


Federal loans must be repaid and are available to both undergraduate and graduate students. Need-based loans do not have to be repaid until you leave school and they typically carry lower interest rates than other kinds of loans. Financial aid preference is given to people with the greatest amount of financial need.

Remember, loans are money that you borrow temporarily. Once you start repaying your loan, you must pay interest on the money that you borrowed.

Subsidized Stafford Loan

A subsidized stafford loan is awarded on the basis of financial need. This is when the US government pays (or subsidizes) the interest on a loan while enrolled in school and for six months after you leave. The subsidized loan usually has a fixed interest rate for the life of the loan.

Unsubsidized Stafford Loans

This loan is awarded regardless of need. There is an interest rate charged on the amount disbursed from the date of disbursement and you may either make or defer interest payments while you are in school and during the six-month grace period.

You can receive both subsidized and unsubsidized loans for the same academic year. So it’s important to find out which type of loan you have.

PLUS Loans (for parents)

This loan provides low interest loans to parents of eligible undergraduate students. Repayment typically beings 60 days after loan is fully disbursed. In addition, parents may have to be approved based on their credit and these loans are not based on financial need.

Federal Work-Study

Federally funded program that provides employment opportunities to students with the highest financial need. Most schools will award a student working part-time during the Fall and Spring semesters money. The average FWS award is $2,500 per academic year. This provides jobs to undergraduate and graduate students, allowing them to earn money to pay education expenses.

There are more ways to help pay for your school costs, so be sure to look at both state and school resources. It’s important to talk to a financial aid administrator or guidance counselor at the school you wish to attend or that you’re currently attending.

It’s important to start early when applying to financial aid. They have strict deadlines.

You may also contact the US Department of Education by writing:

U.S. Department of Education

Federal Student Aid Information Center

P.O. Box 84

Washington, DC 20044-0084