Paying for college can be overwhelming. Knowing the options and identifying sources of money for your family to pay the college bill is half the battle and there’s no time like the new year to get a handle on the details, especially with financial aid season on the horizon.
For most families, the options to pay for college boil down to:
- Saving – Saving is a great way to pay for college but often not enough.
- Borrowing – Student loans should be the last resort and not the first option to pay for college.
- Getting financial aid – A great financial aid package can make all the difference in filling the gap between how much you have and how much you need, without borrowing too much.
Parents can help their children by staying organized and knowing the financial aid lingo. This article will explain the basics and identify resources you’ll need to participate in the financial aid process.
Need-based vs. Merit-based aid
The federal government, individual states, as well as colleges all offer need-based financial aid awards based on financial information students provide on the Free Application for Federal Student Aid (FAFSA®). High school seniors can file a FAFSA® form after October 1, and this process must be repeated on an annual basis to receive funding for subsequent academic years. The FAFSA® heavily weighs student and family income so that lower income families are generally eligible for more need-based aid than higher income families. Some colleges, primarily private four-year colleges, also require students to file the CSS Profile in addition to the FAFSA®. The CSS Profile requires more detailed information about a family’s assets than the FAFSA®.
Merit-based scholarships, on the other hand, are awarded to high-achieving students based on a variety of criteria identified by each individual college. A college may seek intellectually-gifted students with superior test scores, athletes, artists, actors, or perhaps a student from a part of the country that is underrepresented on their campus. Colleges may provide merit aid as an incentive for students who will diversify the incoming class and may also offer substantial merit aid to students who do not qualify for need-based aid.
What is FSA?
FSA is an acronym for Federal Student Aid, an office of the U.S. Department of Education. The FSA site is a tremendous source of information for families and includes links necessary to start and complete the FAFSA® process. Students are required to register on the site to get a secured FSA ID. The FSA ID is essential for filing for federal student aid as it offers access to various parts of the student aid process including filling out the FAFSA® and e-signing federal financial aid documents.
TIP: Students are required to change the FSA ID password at least every 18 months. Changing it each year as part of the next year’s financial aid process year will avoid reminder prompts.
What exactly is the CSS Profile?
The CSS Profile is administered by the College Board for colleges seeking more information to distribute nonfederal financial aid, to the tune of a collective $10 billion or more. The College Board charges families a fee to file their CSS Profile with a college (although waivers are available). The form asks for more detailed information about your family’s financial status than the FAFSA®. Currently, these colleges require a CSS Profile in addition to a FAFSA® form.
TIP: Those who took the PSAT or SAT tests have most likely already registered and have an account with the College Board.
What are the deadlines to apply for financial aid?
There are potentially three different deadlines:
- The federal deadline, which is usually June 30 for initial filing with a short period to file corrections or updates only through early September.
- Your state’s deadline, which may precede the federal deadline. Check the FAFSA® website to determine the specific deadline for your state.
- Your college’s deadline, which may precede the state and/or federal deadlines. Check with the college(s) you’re interested in attending to identify their deadlines for submission.
TIP: Pay attention to these important deadlines, as missing one could substantially reduce the amount of aid a student receives. And because most states and colleges distribute financial aid on a first-come, first-serve basis, it’s best to complete the FAFSA® as soon as possible after the form becomes available.
How will I know what financial aid I’m getting?
In addition to an acceptance letter, colleges will also send potential students a financial aid award letter. There is no uniform format for such award letters, which can make it difficult to compare college awards in a helpful manner. Generally, however, any award letter will outline:
- The cost of the college
- The aid being offered usually in the form of:
- Grants and scholarships
- Loans
- Federal Work-Study
What is included in the definition of “cost” may vary widely from school to school. Some schools:
- May not include the full “cost of attendance”
- May give one total cost; others may itemize expected expenses
- May include living costs, such as room and board, while others may not
- May include books, supplies, fees, personal expenses, transportation costs, and other expenses; while others may not
TIP: Create a small chart showing all the costs for each school you’re considering so you can account for any costs that might not be mentioned in the award letter.
Understanding a Financial Aid Award Letter
Be sure you understand what financial aid the school is actually offering. It is important to differentiate between:
- Grants and scholarships that don’t require repayment
- Loans that will need to be paid back with interest
- Federal loans
- Loans from the college
- Federal Work-Study that guarantees a job for the student [NOTE: Work-study does not reduce the amount of each semester’s college bill, but rather the money shown in the award letter may be earned throughout the semester]
Most financial aid award letters will also include some indication of how much your family will need to contribute. Simply put, your family’s expected contribution is the cost of the college less the financial aid offered.
Comparing Financial Aid Award Letters
To compare financial aid awards, create a simple table or chart so you can clearly see for each school:
- The total cost of the school. In addition to tuition and fees plus room and board (living expenses), include costs for books, supplies, as well as an estimate of travel expenses and other expenses that you may incur.
- The total amount of grants and scholarships offered. This is the free money that does not have to be repaid. True financial aid.
- The total amount of loans offered.
- Federal Work-Study.
- What your family is expected to contribute.
This simple but thorough analysis will shed some light on which college is most affordable for your situation. Ideally, a college will offer 100% grants and scholarships to cover financial need. But that rarely happens.
For a college that shows a required family contribution after aid, families have a few options to fill the gap:
- Use savings.
- Consider a tuition payment plan. These plans split the college bills into equal monthly installments for a nominal up-front fee and no interest.
- Find scholarships offered by third parties, such as those in this free scholarship search.
- Borrow from private lenders. This is where families sometimes get into trouble by borrowing an amount beyond what they need and where they incur excess interest to pay back as a result.
What if we’re denied financial aid or the award isn’t big enough?
Few things can be as disheartening as expecting a large financial aid award and receiving less. Here are seven steps for appealing a financial aid decision.
- Ask for more aid, politely and courteously — don’t be confrontational.
- Frame communications as a request for reconsideration.
- Don’t use the word “negotiate”.
- Know the process the school uses to reconsider aid.
- Odds for a successful appeal are better at colleges with larger endowments.
- Review your FAFSA® and CSS Profile submissions.
- Check for mistakes that may have been made during the rush to file.
- Perhaps you overstated assets or lost significant assets since filing.
- Ask a financial aid administrator if your tax deductions were counted as income.
- Some schools do not accept all tax deductions and view some as untaxed income.
- If you know which deductions the school converted to income, it may be possible that your true financial need is greater than they originally thought.
- Write a letter documenting “special circumstances” and any changes to your family’s situation since filing your FAFSA® and CSS Profile forms, such as:
- Divorce
- Death of a wage earner
- Unexpected, unreimbursed medical bills or costs associated with caring for children with special needs
- Tuition for private elementary or secondary schools
- One-time retirement distribution in the tax year which the FAFSA ® used to calculate your aid
- Necessary major home repairs, such as roof, heating, or windows
- Schedule a follow-up meeting or phone call to make an appeal directly to the financial aid administrator.
- If first-year students are comparing financial aid award letters, let the college know that another school offered a more generous financial aid package. It may be possible to leverage such information to get schools to compete.
TIP: Financial aid administrators want to be helpful, but there is only so much they can do, so be reasonable in your approach.
What current college students need to know about financial aid
Current college students must continue to apply for financial aid every year and should refile even if they were unsuccessful the year before. Also, be sure to keep the forms updated as life circumstances change.
The Last Word
The financial aid process can be stressful because so much is on the line. To be successful in the process:
- Know the basics in this article
- Use the knowledge of high school counselors
- Get to know the financial aid administrators at the college
- Find credible online resources such as the FSA website
Finally, be your own best advocate. Many people want to see you succeed, including the professionals in the Financial Aid Office. Help them help you – by asking for guidance with things you don’t fully understand, by being accurate when filling out forms, by meeting deadlines, and by being polite and courteous.