How Do I Qualify for Need-Based Financial Aid?

Written by: Kristyn Pilgrim
Updated: 6/26/20

Pursuing higher education can be expensive, and need-based financial aid is there to help you with this journey. To determine if you qualify for need-based financial aid, it is important first to determine if you are eligible for federal student aid.


To be eligible for federal student aid, you either have to fulfill the following requirements:

  • You must be a citizen or eligible noncitizen of the United States
  • You must have a valid Social Security number
  • You must have a high school diploma, a General Education Development (GED) certificate, or have been homeschooled
  • You must be enrolled in an eligible program as a student seeking a degree or certificate
  • You must maintain satisfactory academic progress
  • You must register, or already be registered, with the Selective Service System if you are male and not currently on active duty in the U.S. Armed Forces
  • You must not have a conviction for the sale or possession of illegal drugs for an offense that occurred while you were receiving federal student aid
  • You must not owe a refund on a federal grant
  • You must not be in default on a federal student loan

Next, you need to fill out your Free Application for Federal Student Aid (FAFSA) form. You will need the following documents to refer to when filling out your FAFSA form:

  • Your driver’s license, if you have one
  • Your Social Security number
  • Your parents’ Social Security numbers, if you are a dependent student
  • Your Alien Registration number, if you are not a U.S. citizen
  • For your parents (if you are a dependent student) and you (as well as your spouse, if you are married):
    • Federal tax information
    • Tax returns
    • Records of untaxed income
    • Information on account balances, investments, and real estate
    • Information on business and farm assets

The college or career school will use the information provided from your FAFSA to determine how much need-based aid you will receive. 

Need-based aid is calculated using the following formula:

Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need

The cost of attendance is a calculation made by your school that reflects the total cost of attending for the school year. It includes tuition and fees, room and board, the cost of books, supplies, transportation, loan fees, expenses, child/dependent care, reasonable costs for eligible study-abroad programs, and/or costs related to a disability.

The EFC determines your eligibility for different types of financial aid and is calculated based on the information you provide when applying for federal student aid. 

It takes into account:

  • Your family’s taxed and untaxed income, assets, unemployed, or Social Security benefits
  • Your family size
  • Family members who attended college or career school during the year

Following the formula, for example, if the cost for attending your chosen school is $30,000, and your EFC is $25,000, then your financial need is $5,000. As a result, you are eligible for no more than $5,000 in need-based aid.

Need-Based Federal Student Aid Programs

There are four active need-based federal student aid programs designed to help students with financial need attend college or career school in the pursuit of higher education. Each program offers a different way to receive, earn, or borrow funds.

Federal Pell Grants

Federal Pell Grants are typically awarded to undergraduate students who have not yet earned a bachelor’s, graduate, or professional degree and who display exceptional financial need. Federal Pell Grants typically do not have to be repaid, unless under extremely specific circumstances.

Each year, the Federal Pell Grant award amount is subject to change. For the 2020-2021 school year, the maximum Federal Pell Grant award is $6,345. The amount you are awarded will depend on whether you are attending for a full academic year, your status as a part- or full-time student, the cost of attendance for your school and program, and your EFC.

The Federal Pell Grant is not impacted by any other student aid you qualify for, and funds come from the U.S. Department of Education.

Federal Work-Study

Federal Work-Study jobs provide an opportunity for graduate and undergraduate students to work part time on or off campus, earning money to pay for college or career school. Federal Work-Study is available to full- and part-time students, as well as graduate, undergraduate, and professional students demonstrating financial need.

The work that students do when in a federal work-study program focuses on community service or work related to the student’s course of study. Employment is part time while the student is enrolled in school and is administered by the school.

On-campus jobs typically involve working for the school, while off-campus jobs typically involve public interest work for a private nonprofit organization or a public agency. 

Students participating in work-study programs earn at least the current federal minimum wage; however, they may earn more based on the type of work they do and the skills required. Awards depend on when you apply, your level of financial need, and how much funding your school has for work-study programs.

Undergraduate students are paid hourly; graduate and professional students are either salaried or paid hourly. 

Your Federal Work-Study award, as well as your class schedule and academic progress, will determine the amount you work.

Direct Subsidized Loans

Direct Subsidized Loans are a type of federal student loan designed to help cover the costs associated with attending college or a career school. Direct Subsidized Loans differ from Direct Unsubsidized Loans when it comes to interest; however, the interest rates and terms of federal student loans are often much less than that of private loans.

Direct Subsidized Loans require a demonstration of financial need, are only available for undergraduate students, and the interest on the loan is paid for by the U.S. Department of Education while the student is at least half-time, during a period of deferment, or six months after graduation. Additionally, the amount of the loan cannot exceed the student’s financial need, as determined by their school.

To receive a Direct Subsidized Loan, you must be enrolled at least half-time in a school that participates in the Direct Loan program. Your FAFSA form will determine how much you will be eligible for as part of your financial aid. If this is your first time receiving a Direct Loan, you will need to sign a legal contract agreeing to the terms of the loan after participating in entrance counseling, which ensures that you understand that you are obligated to pay the loan.

Direct Subsidized Loan funds are first used to pay your tuition, fees, room and board, and other school charges. Afterward, you will be provided with any additional funds, which must be used toward educational expenses.

In comparison, Direct Unsubsidized Loans do not require a financial need to be demonstrated. They are available for undergraduate and graduate students, the loan amount is determined based on the cost of attendance and any other financial aid received, and the recipient is responsible for paying the interest on the loan at all times (during forbearance, deferment, grace periods, and while not in school).

There are many repayment plans available, but some are based on income, while others are based on fixed payments.

Federal Supplemental Educational Opportunity Grant (FSEOG)

The Federal Supplemental Educational Opportunity Grant (FSEOG) is a type of grant for undergraduate students with exceptional financial need that is administered directly by the financial aid office at participating schools. 

Each year, qualified students receive between $100 and $4,000, which is paid through participating schools from funds received from the U.S. Department of Education’s Office of Federal Student Aid. 

Schools that participate only have a certain amount of aid to give out, and once that has been awarded, there is nothing left under the FSEOG designation. Because of this, not every eligible student will be able to receive funds. If you qualify, be sure to apply for FSEOG as soon as possible.

Institution, State, and City Need-Based Aid

Colleges, states, cities, and private organizations also offer need-based financial aid grants and scholarships. Once you have an idea of what schools you’d like to attend, you can look to see what is available for students through the school and the surrounding area.

Online resources are also great ways to learn more about your choices before making a final decision. If you have questions that are specific to your school, College Finance offers many guides focusing on the student aid process for popular schools. You can also contact your school’s financial aid office.

Whether you’re researching how to borrow money responsibly to finance your college education or are learning how to best pick your loans, College Finance offers guidance, answers, and research to help shine a light on student aid and finances. Pursuing a higher level of education is a commitment, both in time and finances, and College Finance is here to help guide the way.