Simply put, financial aid is money that helps you pay for college. This funding comes from a variety of sources but does not include money from family or personal savings or earnings. For many students, financial aid is essential to making college affordable. An important key to understanding financial aid is to recognize the vernacular used by colleges, admission and financial aid officers, and financial aid award letters. Before determining how financial aid is calculated, let’s take a look at some key terms.
Key Definitions of Financial Aid terminology
Cost of Attendance (COA) – This is the total cost to attend a particular college and will include both the direct and indirect costs.
Direct Costs – these are the fixed costs of attending college. Tuition and fees, on-campus room and board. These costs will appear directly on your college bill.
Direct PLUS Loan – A federal loan provided to parents of dependent undergraduate students to help pay for college. Parents can loan up to the cost of attendance, minus any other aid provided. Repayment begins 60 days after the final disbursement for that academic year and a typical repayment timeline is 10-25 years.
CSS Profile – College Scholarship Service Profile – an online application used by colleges and scholarship programs to award institutional (their own) aid.
Expected Family Contribution (EFC) – Determined by the data and figures you enter on the FAFSA, this figure is used to determine how much a family should plan to contribute toward college costs.
FAFSA – Free Application for Federal Student Aid. This is a required application for anyone seeking financial assistance to pay for college. The FAFSA will use family income, assets, and other personal information to arrive at an EFC.
Federal Loans – Money borrowed, in the student’s name, from the federal government to assist with college costs. This money will be repaid after graduation.
Financial Aid – Defined as ANY financial assistance received to attend college, including scholarships, grants, loans, work-study, and other monies.
Grants/scholarships – this “free” money is provided by the government, colleges, foundations, or outside sources to assist with college costs. This aid does not have to be repaid but may come with certain stipulations, like maintaining a specified GPA.
Indirect Costs – These are estimated costs associated with attending college. These could include books, spending money, travel costs, food, etc.
Loan – Money borrowed from the federal government or private source like a bank, and must be paid back with interest.
Meet full need – The college pledges to meet 100% of a student’s demonstrated need – which is the difference between the COA and EFC. COA minus EFC = need.
Merit scholarship – Financial assistance provided for academic, extracurricular, or other achievements.
Need-based aid – Aid that is provided on the basis of a family’s financial circumstances.
Need-blind – A college that does not consider finances when making an admission decision.
Need-aware – A college that may consider a student’s financial situation when making a final decision.
Pell Grant – A federal grant for students who display exceptional financial need. This money is not repaid.
Work Study – Paid employment for a student on campus.
How is financial aid calculated?
After you complete your FAFSA, you will receive a summary of your application details on a Student Aid Report (SAR). Your EFC, derived from the information on the FAFSA, is a number that financial aid offices use to determine how much need-based financial assistance you will receive if you attend their school.
Your expected family contribution is a measure of your family’s financial strength. The higher the EFC is, the more your family is expected to have the resources to contribute toward the cost of college. The EFC is not the amount you will pay out of pocket. The amount you pay will depend on the amount the college charges minus any financial aid provided.
What happens after I apply for financial aid?
Once you submit the FAFSA (and CSS Profile if required), you will receive a financial aid offer from each school that has admitted you. The financial aid offer will show all of the financial aid you are eligible to receive. As costs between colleges and financial aid offers will vary, each should be examined carefully.
The bottom line
Planning for college – and its cost – can never start early enough. Financial aid is often what makes college affordable, so it is important to apply for financial aid early and look into all of your options to lower your college costs. And, if you are going to borrow, please know what is realistic for your family.
In conclusion, the college financial aid process can be stressful, but by preparing yourself and understanding the requirements and process, you can increase your chances of making college affordable. Make sure to ask for help if you need it—the consultants at Solomon Admissions Consulting are experts in the admissions and financial aid processes and can guide you through all of your questions. Contact us today!