Parents of school-age children have a common stressor: college tuition. Should I save for college? Am I saving enough? Am I saving the right way? As high school graduation draws nearer, those questions often shift to, how do I apply for financial aid?
These are understandable concerns. Tuition costs seem to keep climbing, and paying for college can be challenging when it competes with our everyday financial obligations. And while costs can be high, college students and their families have access to billions of dollars in grants, scholarships and government student loans. How? Through financial aid.
Types of financial aid
There are many types of college financial aid, from federal and state grants to institutional grants, scholarships, work-study jobs, and military and veteran education benefits.
Grants, loans and scholarships are the most common types of financial support. It's helpful to understand the differences:
- A grant usually doesn't have to be repaid and is usually based on financial need. Applying for grants means filling out the FAFSA®, which is used to determine eligibility for federal grants like the Federal Pell Grant.
- A loan does have to be repaid, just like the loan on your home. An offer of federal student loan could be part of your school's financial aid offer resulting from when you fill out the FAFSA form. To learn more about loans and other ways to pay for college, check out our article 5 ways to pay for college.
- A scholarship usually doesn't have to be repaid and is usually based on the student's merit. Scholarships are typically awarded when a student meets or exceeds certain academic or athletic standards set by the scholarship giver. Sometimes scholarships cover the full tuition, but more often, they simply help offset the cost.
When eligible, service members can also find tuition support through the Post-9/11 GI Bill or even pass on their benefits to their children. Learn more about the Post-9/11 GI Bill and other VA education benefits Opens in a New Window. See note 1
What is the FAFSA?
It stands for Free Application for Federal Student Aid, and it's the most important form you'll complete and submit to apply for financial aid.
Schools use your FAFSA results to determine your eligibility for federal aid. They also use FAFSA results to determine where they'll award their own aid. In addition, some schools, mostly private colleges, use the CSS Profile, or College Scholarship Service Profile Opens in a New Window. See note 1 It has slightly different considerations and is worth understanding. But FAFSA is the most common, so let's focus on that.
Once you complete the FAFSA and submit it for review, you'll receive a FAFSA Submission Summary or FSS. It's important to understand that while the FSS isn't your official financial aid offer, it provides basic information about your eligibility for federal student aid. Review it carefully to make sure it's correct as it directly impacts the financial aid you may or may not receive.
After a student is accepted to a college or university, the school will send an official financial aid offer that tells the student how much aid they're eligible to receive for that school.
How financial aid is calculated
Since the cost of attending each university can be different, your aid amount can vary from school to school. The formula used to determine financial need is:
Cost of attendance – Student aid index – Other financial assistance = Financial need
or
COA – minus SAI – minus OFA = Financial need
The COA that begins this formula is why financial aid can vary from school to school.
The SAI is a calculation that measures a family's financial ability to pay for college. What goes into this calculation can be complex, but the FAFSA form will collect all the necessary information and calculate it automatically.
Complete the FAFSA online.
It's easy to apply for financial aid. If you have trouble completing the form, get help from a reputable free service. Avoid organizations that ask for money. Submit your form as soon as possible after the submission window opens Oct. 1 of each year. Don't delay as you may find that funds have been used up for other students.
Make a note of the Federal Student Aid ID, or FSA ID, you're assigned during application because you'll use it throughout your educational career. Every contributor who's required to provide information on FAFSA will also require their own FSA ID to complete their section of the form.
Gather the documents you need to apply.
To file your FAFSA, you'll need some information. Examples include:
- The student's name as it appears on their driver's license and Social Security card.
- All contributors' Social Security numbers.
- All tax return information that will automatically be imported from the IRS into FAFSA once consent is given by the appropriate individual, whether a student or contributor. It's important to note that failure to provide consent to allow federal tax information to be imported into the student's FAFSA by a contributor will result in a SAI not being calculated. This makes the student ineligible for federal student aid.
You'll also need financial information on any 529 plans of which the student is the beneficiary, cash, savings, CDs and any annual child support received.
One good piece of news for veterans is that noneducational veteran benefits aren't considered income in the SAI calculation. The same goes for housing and food allowances paid to members of the military and clergy.
Take note of your finances.
Certain financial situations can change the financial aid you're eligible to receive. The SAI is calculated according to a formula that considers your family's taxed and untaxed income, assets, and benefits. So, for example, if a parent loses a job or experiences a change in salary, it could change your family's SAI.
Keep in mind that FAFSA considers the prior-prior year for tax information. For example, if you are applying in 2034, they will consider the W2s and assets from 2032. If your family situation has changed, you can request a review from your institution. While they can't change the financial aid formula, they are the ones who can change the inputs after you've submitted.
But in general, be aware of the following:
- Assets listed in a child's name generally have a greater impact on the amount of financial aid you're eligible to receive than parental assets.
- If the parents aren't married, the FAFSA asks for the financial information on the parent who provides the most financial support for the student, not the parent they lived with the most as it has been in the past. If parents are remarried, information on the stepparent will be collected in the FAFSA form.
- Unusual financial circumstances, like unreimbursed medical bills, disability or death in the immediate family can be considered by each individual school, so don't hesitate to reach to the school to inquire if additional support can be provided.
And remember to submit the FAFSA every year you attend college. Even if you don't qualify for need-based aid one year, the results may change if your financial situation changes.
Adopt a well-rounded approach.
The FAFSA is an important starting point when applying for financial aid, but don't forget to research scholarships and institution-based financial aid.
When many people think of scholarships, they imagine the full-ride experience that includes tuition, books and housing. In fact, few students receive scholarship money that covers the full cost of college. Every bit helps, even that $100 scholarship from the local tractor supply company designed to promote future farmers makes a dent in your overall costs.
As you apply for financial aid and scholarships, remember that a multipronged approach is best to keep your options open and limit the amount of debt you face after graduation. To begin filling out your FAFSA form, visit studentaid.gov/fafsa Opens in a New Window. See note 1
Learn if a 529 Education Savings Plan can help you save for education expenses.