Financial aid is the most misunderstood and complex part of the college planning process, hands down. Why is college becoming so unaffordable and why is figuring out how to finance it so complex? If you thought doing your taxes was daunting, you must not have ever filled out a FAFSA form. It seems as if there is a conspiracy going on, between schools, government and banks, with purpose of maximizing income for all of these parties while draining families of every last dollar of savings and income, not to mention forcing upon them enormous loans. Let us take a look at what is happening out there right now:
- Very few families understand the financial aid system, and if they do, it is usually too late to do anything about it.
- Upon college age, children with gifts and savings are penalized heavily by the financial aid system, and are thereby forced to pay full tuition out of pocket.
- Whatever families cannot pay, they must take out loans to cover, which on top of mortgage bills and the rest, are no piece of cake to pay off.
- Those that did not save are not penalized, but still must take out loans to cover college costs, unless they are among the less than 2% of applicants who are privileged enough to receive some form of scholarships.
- Many students typically leave college with $25,000+ in debt, giving banks a slew of young newly wage-earning customers every year.
So how is a family to deal with this dilemma? Well, they can start by understanding the process at least several years in advance. Getting a grasp on the basic concepts, forms of aid, and rules of thumb for maximizing eligibility, is critical to a family's ability to take control of the education financing. 401kid outlines the various components of financial aid as well as the criteria taken into account for determining award amounts. Financial aid may be received in one or all of the following forms:
- grants, which do not have to be repaid
- student loans, interest on which is usually deferred until graduation
- work-study jobs that allow students to pay tuition & expenses
It should be noted that campus-based grants are finite, meaning that each school has a pool of funds available for the school year to allocate to eligible students.
How to apply
It is recommended that students apply every year, especially since financial circumstances and eligibility certainly change.
Families are granted financial aid based primarily on their Expected Family Contribution (EFC), a calculation performed by the Free Application for Federal Student Aid (FAFSA), which students must submit in order to apply for the following types of federal financial aid:
- Pell Grant
- Perkins Loan
- Stafford Loan and work-study
- All state schools
- Many non-state school
The College Boards' CSS PROFILE form is required by some private colleges and universities in addition to the FAFSA, for additional information.
Read about the different types of financial aid
Receive Financial Aid Optimization (FAO) services via ESP Wizard college planning software.
Top 3 FAQs on Financial Aid
- How can I project how much Financial Aid I or my students will be eligible for?
- How can I maximize my Financial Aid awards?
- How do my savings and income effect the level of Financial Aid that my students are offered?