Financial aid helps students attend college, university, or professional school, so they can specialize in a career they love. Most students combine several types of financial aid to cover as much of their postsecondary education as possible; few people use savings or their family’s income alone to attend school.
Sources of Financial Aid
Most institutions offer multiple forms of financial aid to current and incoming college students. The federal government, state governments, colleges and universities, nonprofit organizations, and other private sources also offer financial aid.
One of the major sources of financial aid is student loans. Both federal and private student loans have helped millions of people across the United States get the best possible education. There are also other types of financial aid, like grants, scholarships, and work-study programs.
Understanding all these options will help you get the maximum amount of financial aid for your education.
The Top 5 Tips and Tricks to Maximizing Your Financial Aid
- Fill out the FAFSA. The Free Application for Federal Student Aid (FAFSA) is an application submitted to the Department of Education (DOE) each year that you are in college or professional school. The FAFSA is easy to find online, but if you need a hard copy, you can request a printed version to fill out and mail in.
The DOE uses the FAFSA to understand your current financial situation and how this impacts your eligibility for financial aid at your current school or the schools you are applying to. The FAFSA uses a calculation starting with your expected family contribution (EFC), then subtracts the cost of attendance (COA). If you are currently in a school, the COA is for the institution you attend. If you are applying for undergraduate or graduate programs, you can ask for the FAFSA to be sent to up to 10 schools that will then use their own COA in the calculation.
The number after the COA is subtracted from the EFC will be used to determine the types and amounts of financial aid you are eligible for.
You or your family may assume that there is too much income from one or both parents for you to qualify for financial aid. Fill out the FAFSA anyway. Even if you do not qualify for need-based help, there are other types of scholarships and student loans available that you could use. The FAFSA will tell you which you qualify for.
The deadline for the FAFSA is in June. For the 2019–20 school year, the deadline is June 30, 2020. Some forms of financial aid are first-come, first served. If you make errors on the FAFSA or need to leave some spaces temporarily blank, you can log into your online account or call the DOE to make corrections.
When you submit your FAFSA online, you can check the status anytime after you submit it to see which schools have responded. If you submit the document through the mail, it takes seven to 10 days for it to be processed.
- Clarify where assets belong. If your family put money aside to help pay for your education, you have a great start to attend the school of your choice. This help will be included in the EFC calculation, but you can still qualify for more financial aid if the education fund is in your parents’ names rather than your own.
Whether you are a dependent or independent student, the FAFSA assumes you will contribute more of your personal assets to your education than your family will. Your contribution as the student will be 20% of your current assets. For families, that amount maxes out at 5.64% of assets. Rates for personal income are higher for both categories.
When your parents set up a college fund, it should be in their name. You can also ask them to transfer that money to a 529 college savings account or a Coverdell Education Savings Account (ESA). Both are treated by the FAFSA and the Internal Revenue Service (IRS) as family assets, not student assets, as long as you qualify as a dependent for tax purposes.
- Address family savings. If you are a dependent student, your family’s savings will be considered part of the assets they can contribute to your education. If your parents or guardians reduce those savings (by making a large mortgage payment, paying off credit card bills, or making a large household purchase at the start of the year), the amount of EFC will be lower, at least for your first year of college.
The FAFSA formula shelters about $50,000 in assets for your family, although the exact amount can depend on your parents.
Realized capital gains are treated as income. These should be spent down before the child’s junior year in high school. Retirement accounts, however, are protected savings and not considered part of the EFC. Your family may wish to make a contribution to their retirement funds as part of spending down savings.
- Request aid packages from several different colleges. The FAFSA can be sent to 10 different schools at once. If you want to send your information to more than 10 schools, wait until the first 10 have received your FAFSA and then add the new schools online.
Since your financial aid qualification partially depends on each school’s COA, the amount of aid you receive from each school could be different. For example, if you apply to a local public university that costs $20,000 per year, your financial aid package may be less than that offered by a private Ivy League school costing $50,000 per year. Some schools offer financial aid on a “need-blind” basis, with scholarships or loans based on the merit of your application rather than your financial need.
Do not avoid applying to schools because you think they are too expensive; you may qualify for more financial aid than you expect. However, financial aid packages may be more geared toward student loans than scholarships, so look through each offer carefully.
- Apply for state and private financial aid. States want you to remain in the state for your college education. To incentivize this decision, they provide a significant amount of financial aid to students who choose public or state-based schools.
Many states have set up scholarship and grant funds for students who have significant financial need or who meet specific meritorious qualifications. If you have lived in a state for more than five years, you are considered a resident for educational purposes and can qualify for a large amount of financial aid. However, each state has a different process to apply for this money, so ask your state’s grant agency for more information.
You can also start applying for scholarships through private institutions. Do not overlook small scholarships, like $1,000 awards, because they can pay for your books or other school supplies in your first year.
Private student loans help fill in financial gaps in a similar way, although these will need to be repaid.
You Do Not Have to Take the First Financial Aid Award Package Offered
The FAFSA is one step toward getting the money you need to go to college. Finding state and private scholarships, grants, and loans is another step to getting financial aid.
If you receive a financial aid package from a school you wish to attend but it is not enough to cover what you need, you can appeal the award letter. Many schools reserve about 20% of their funds specifically for students who appeal financial aid award letters. Schools want as many students as possible to attend, so if you have been accepted to a school but you cannot afford to go, be clear about this problem to the financial aid office for that college or university.
During the appeal, you must provide more information on your specific financial situation. This may include information on your parents’ finances, like high medical bills or a recently lost job. If there has been a major change in your family, like a sudden death or divorce, this may also help the school decide how they can help you.
Be sure to reiterate how excited you are to go to that specific college or university, so they look forward to having you at their school and try their very best to help you attend.