Financial Aid Ultimate Guide

Introduction

Applying for financial aid is intimidating and often mystifying for high school students. You’ve never had to think about finances before -- what the heck is a W2 anyway?  There are many steps to the financial aid process, and while it seems like a lot of work it is actually pretty simple for most students to complete. This guide should serve as a resource to shed light on all those acronyms, provide an overview of the requirements and timeline, and answer some common questions.

What is financial aid?

Simply put, financial aid is funding for college, including tuition, books, room, board, travel and other expenses students will incur in pursuit of their degree. According to EducationData.org, 86% of first-time, first-year college students in the US received some form of financial aid. There are many types of aid that come from different sources to help students achieve their educational goals. 

Where does financial aid come from?

Financial aid comes from many sources, including:

• The federal government

• State government programs

• Private companies or nonprofits

• Higher education institutions (e.g. colleges and universities)

The largest source of financial aid is the U.S. government, which provides $120 billion in grants, loans and work study each year. In order to be eligible for aid from the government, students must fill out the FAFSA (Free Application for Federal Student Aid). We will go into more detail about how and when to complete the FAFSA later in the article. 

What are the different types of financial aid?

There are four key types of financial aid: loans, grants, scholarships and work study. Some are need-based and some are merit-based. Need-based aid is awarded based on financial need, as demonstrated by documentation of the family’s income and assets (if the student is financially dependent on their family) or the student’s income and assets (if the student is independent). Merit-based aid is awarded based on the student’s academic performance or other factors (extracurricular involvement, leadership, community service, background/identity) which vary by institution or organization.

Student loans 

Student loans are need-based, and come from the federal government. Each higher education institution uses the FAFSA to evaluate how much students are able/allowed to take out in federal loans. These loans must be repaid within a set period of time and at a set rate. The two types of loans students can receive are subsidized and unsubsidized. 

• Subsidized loans do not collect interest while students are enrolled in college. Interest is a percentage of the principal balance of the loan, charged annually by the lender. For example if a student takes out a $2,500 loan with a 10% interest rate, she will owe $2,750 at the end of the first year ($2,500 + $250 in interest). Subsidized loans do not have to be repaid while the student is enrolled in college and in good standing (and usually for six months after graduation).

• Unsubsidized loans collect interest while students are enrolled in college. Students must begin making payments immediately.

You can find more detailed information about both types of loans at the Federal Student Aid website. 

Grants

Grants are free money (yay!) awarded by the federal government, state governments, or higher education institutions. Federal and state government grants are need-based, while institutional grants may be need- or merit-based. Some common types of grants are Pell Grants and the Cal Grant (for California students). Students do not have to repay grants. Grant eligibility is calculated using FAFSA, and award amounts are determined by the higher education institution.

Scholarships

Scholarships are also free money (yay!) awarded by higher education institutions, private companies, or nonprofit organizations. Scholarships are often merit-based, although some large scholarships like the Gates Foundation Scholarship take financial need into account. Merit-based scholarships are not always based on academic merit. Some scholarships are awarded based on attributes (leadership), talents (athletic, artistic), contributions (community service) or unique backgrounds (minorities, first-generation students). Scholarship eligibility is determined by higher education institutions; while FAFSA may not be required for scholarship eligibility, students should submit the FAFSA to maximize scholarship opportunities. Students do not have to repay scholarships.

Work Study

Work Study is a federal program through which students are provided with a part-time job to supplement their education expenses. Students must submit the FAFSA to be eligible for work study, and also attend a college/university which utilizes the federal work study program. Higher education institutions determine the amount of work study each student is eligible for. Students are paid directly by the work study program, and choose how to utilize their earnings. However, students must keep in mind that they may be asked to leave their position once their work study amount is exhausted.

See the chart below for a more simplified explanation of the differences between these types of aid.

Who can apply for financial aid?

Anyone who is qualified to enroll in an accredited college or university (including community colleges and trade or vocational institutions) in the U.S. is qualified to apply for financial aid.

Students who are U.S. Citizens or permanent residents should apply using the federal student aid website (e.g. the FAFSA). This is the first step in the financial aid application process. 

International students and non-citizens (e.g. DACA recipients) are not eligible to apply for federal aid, but may be eligible for institutional or state-based aid programs. 

Who should apply for financial aid?

The short answer is: everyone! 

Many students assume they will not be eligible for aid, so why bother? Over $2 billion per year is left on the table because students do not take advantage of financial aid programs! You’ll never know what is possible if you do not apply, and there is no obligation to accept the aid offered to you. We will go into more detail about how to decline or appeal your financial aid offer later on.

FAFSA

What is the FAFSA?

The FAFSA, or Free Application for Federal Student Aid, is the first step for everyone. Filling out the FAFSA makes you eligible for need-based federal aid.

Higher education institutions, state programs, and scholarship programs also use your FAFSA information to determine your eligibility for aid. Therefore, it is important for every student to fill out the FAFSA regardless of perceived need.

When do I submit the FAFSA?

The FAFSA opens on October 1st. The deadline for submitting FAFSA varies by college, and depends on the student’s selected deadline (e.g. early action or regular decision). It is best to submit the FAFSA as early as possible, preferably before November 1st to ensure no deadlines are missed.

What do I need in order to complete the FAFSA?

You can use this PDF worksheet before you log onto the website to make sure you have all the required information. For most students, the following list is comprehensive:

• Your Social Security number (if you are a U.S. citizen) or Alien Registration number If you are not a U.S. citizen)

• Your parent(s)’ Social Security number(s) if you are dependent on them financially 

• Your driver’s license number (if you have one)

• Information on cash; savings and checking account balances; investments, including stocks and bonds and real estate (but not including the home in which you live); and business and farm assets for you for your parents (if you are a dependent student)

• Federal tax information for you (if you work) and for your parents (if you are a dependent student). Your parents should have these documents available. 

  • IRS W-2

  • IRS 1040

  • Foreign tax return, IRS 1040NR, or IRS 1040NR-EZ

NOTE: Your parents can use the IRS Data Retrieval Tool in the FAFSA platform to automatically populate their tax information. Note that the FAFSA system always utilizes prior prior year tax forms. For current seniors and transfers applying to college for the 2021-2022 school year, this means the family's 2019 tax returns will be required. 

How do I apply?

After you gather all the documents above and fill out the PDF, you will need to get a Federal Student Aid ID (FSA ID). This is your account information that you will use to log into your FAFSA. It is very important that you keep this information safe and secure. Your parents will also need a login if you are a dependent student. 

Next, fill out the FAFSA here: https://studentaid.gov/h/apply-for-aid/fafsa

Within the online form, you will be able to list up to 10 colleges. These colleges will automatically receive your SAR (see below) when you submit. 

If you are applying to more than 10 colleges, you can add more colleges to your FAFSA form after you receive your SAR (see below). The 11th college you add replaces one of the original 10 (you can choose which one). The removed college will still have the information you submitted but will not receive any updated information. You can always update the college yourself by emailing or calling its financial aid office.

What happens after I apply?

You will receive your Student Aid Report (SAR) via email. Your SAR includes a summary of the information you provided.

You should review your SAR and make sure all the information is correct. Next, check to see if you have been selected for a process called Verification. Verification means you will need to provide additional documentation or information. Being selected for verification does not necessarily mean you have done something wrong -- simply follow the instructions!

The most important information on the SAR is your Estimated Family Contribution (EFC). Your EFC is the amount of money that your family will be expected to contribute each year to your education. The EFC is based on your income, assets, family size, number of family members who will be attending college, and other financial factors.

Your EFC is not synonymous with the amount of aid you will receive -- it is how much you will be expected to pay.

After receiving your SAR, there may be more steps to complete in the financial aid process depending on the institutions you are applying to. Your best bet is to check the financial aid website for each college and follow their instructions. One commonly requested item is the CSS Profile.

CSS Profile

What is the CSS Profile?

The CSS Profile is an online application for non-federal aid run by the CollegeBoard (yes, the SAT people). It accompanies the FAFSA in creating a full picture of your family’s financial status. Unlike FAFSA, CSS is not free to submit. It costs $25 to complete the form and send it to one college, and an additional $16 for each additional college. Fee waivers are available for low income students.

Do I need to fill out the CSS Profile?

While all colleges require the FAFSA, the CSS Profile is only required by some private colleges. You can check this list to see which of your colleges requires the Profile. 

When do I submit the CSS Profile?

The CSS Profile opens on October 1 and should be submitted as soon as possible (by the financial aid deadline for your earliest college).

What do I need in order to complete the CSS Profile?

The Profile is more in-depth than FAFSA. Before you begin, gather the following documents for you and your parent(s):

• Federal Tax Returns

• Tax Return Schedules

• W-2s 

Like FAFSA, the Profile will request information from two years prior (e.g. 2019 docs for 2021 applicants). 

The Profile offers a video slideshow to walk through the application. uAspire, a nonprofit organization, has put together a worksheet to help students prepare.

How do I apply?

Once you have the documents organized, you can use your CollegeBoard account to log in and complete the application at https://cssprofile.collegeboard.org/

What happens after I apply? 

Your information will be delivered to the colleges you select within the application form. You can add colleges at any time from your Dashboard on the CollegeBoard website. Your Dashboard will also provide instructions if verification (additional documentation) is needed.

Institution-Specific Steps

Need-Based Aid

Besides the FAFSA and CSS, some colleges and universities may require additional information or forms. It is your responsibility to check the financial aid website for the college(s) of your choice to make sure you have completed all steps. Your Applicant Portal should also include a financial aid section with a checklist displaying whether each required item has been submitted or is still missing. 

Merit-Based Aid

The merit-based aid application process is not as consistent as need-based aid. Therefore it is important that you do your research in advance and plan ahead to get the recommendations and documentation you will need. 

For example:

• Many colleges allow students to apply for scholarships along with their application for admission

• Sometimes, applying for scholarships means applying by an earlier deadline (USC, Boston U). 

• Other colleges ask students to check a box on the application if they are interested in a specific scholarship. The college will then send instructions for the scholarship application. 

• Outside scholarships awarded by nonprofits or other organizations are available for application at various times throughout the school year. 

Calculating, Awarding and Accepting Aid

How do colleges decide how much aid I am eligible for?

Each college compares your EFC (from the FAFSA) to their annual Cost of Attendance (COA). COA includes tuition, college fees, room and board (a.k.a. housing and food), books, and miscellaneous funds like travel and transportation. Essentially, COA is the college’s best estimate of how much money a student needs to survive for one year at their institution. 

Subtracting your EFC from the COA determines your financial need. Need-based aid is awarded based on this number.

For example: 

Your EFC is $12,000. The COA for an in-state student living on campus at UC Berkeley is $37,468. 37,468-12,000 = 25,468. You are eligible for $25,468 in need-based financial aid. 

Who decides how much (and which type of) aid I will receive?

Colleges work to meet the financial need of all admitted students. If they have accepted you, they want you to attend! They do not want finances to be a burden. Therefore, if you are eligible for $25,000 of financial aid, you will likely receive it. 

However, the manner in which the aid is awarded will differ from institution to institution. College A might give you $20,000 in loans (which you will need to pay back) and $5,000 in grants (free money, yay!), while College B might do the opposite ($20,000 in grants and $5,000 in loans). Therefore, it is important to review your financial aid offers from each higher education institution carefully.

How will I find out what financial aid I am being awarded?

Colleges will send an Award Letter along with (or shortly after) your acceptance letter. The Award Letter will be broken down into sections:

• Cost of Attendance: The price per year (or semester) to attend the college, broken down by category (e.g. tuition, room and board).

• EFC: The amount your family is expected to contribute according to the FAFSA’s recommendation. This will potentially be adjusted based on the college’s individual evaluation (accounting for additional information received via forms like CSS).

• Grants and Scholarships: The amount of free money (yay!) you will receive from the college, the federal government, and your state’s government. 

• Net Price: This is the difference between the COA and the amount of free money you will receive. For example, if the COA is $50,000 and you receive $25,000 in grants and scholarships, the Net Price will be $25,000. 

• Loan and Work Options: This is the amount of money that you, the student, will actually need to earn (via work study) or pay back (via student loans) in order to attend. 

Here is an example of an Award Letter. This is the standard format used by most U.S. colleges and universities, although some colleges use their own approach. Read carefully!

What should I look for as I review Award Letters?

If you are accepted to multiple colleges, the Award Letter should be an important factor in your decision-making process. If one college is offering most of your aid in the form of student loans while others are offering mostly grants and scholarships, you might end up moving that college down (or off) your list.

As an example, here is a breakdown of an Award Letter from two different colleges:

What if my financial situation has changed significantly since the “prior prior” year?

You will still need to apply for FAFSA and CSS using the prior prior year’s information. However, you can contact each college you apply to and let them know about the situation. They will likely request documentation from you (e.g. updated financial records, bank statements and tax forms) to verify the situation. 

You should always let colleges know immediately if your financial situation changes (before and after you enroll) so that they can meet or decrease your aid accordingly. If you are “overawarded” you will have to pay that money back (see If I receive an outside scholarship, does that affect the amount or type of aid I receive from the college? for more information).

Can I appeal my financial aid award? 

Yes!

You can always appeal. However, make sure that you have a good reason for the appeal (e.g. you can demonstrate that the amount you must pay will cause real hardship for your family). 

If awards from different colleges are very different (e.g. your Net Price is much higher on one Award Letter vs. another), you can use the better offer as part of your argument for the appeal. 

Do I have to reapply for aid every year?

Yep! You have to file the FAFSA, CSS and other financial aid documents each year. Your college will remind you to do this. 

Can my financial aid eligibility change?

Your financial aid eligibility can change for many reasons including:

• Your family’s financial situation (ex. Your dad loses his job, your younger sister starts college)

• Your academic achievement/GPA  (ex. You are failing your classes)

• Your progress toward your degree (ex. You need to take a semester off, you go from full time to part time)

You should speak with the financial aid office at your college or university if you are concerned or have questions about your aid changing. 

If I receive an outside scholarship, does that affect the amount or type of aid I receive from the college?

Yes. 

If students are awarded a scholarship from an outside agency, the outside agency sends the funds directly to the college (rather than to the student). The college will use the scholarship in its calculation of your award. They can choose to use the outside scholarship to replace their own institutional grants, or to replace your student loan offers (which would be a good thing!). 

If you end up with more need-based aid than you are eligible for, the government requires your college to adjust and/or reduce your need-based award. Therefore, it is important to let your college know about outside funding in advance so you are not required to pay back the amount you were “overawarded”. 

Am I more likely to get merit aid from some colleges vs. others?

Yes. 

Private colleges and universities have more money to give than public colleges and universities. They often offer more (and more robust) scholarships. 

You are more likely to get a merit scholarship at a college or university you are overqualified for, as they will strategically ease your financial burden in an effort to entice you to attend. 

You can find many lists online for colleges offering the most merit-based aid. You won’t see many Ivies on these lists, as schools like Harvard are dedicated to increasing diversity and accessibility.

Am I more likely to get “free money” from some colleges vs. others?

Yes.

There are many colleges that are committed to meeting 100% of demonstrated student need without the use of loans. 

Private colleges are your best bet for institutional grants and scholarships -- again, because they have more money to give, and because they are interested in diversifying their student body.

Public institutions that are out of your state of residence are not likely to provide institutional aid, as they are awarding what funding they do have to support in-state students. Therefore, you are going to see a lot more loans in your Award Letter. 

Public institutions that are in your state of residence have already decreased your tuition, so your aid will likely be limited to federal grants/loans and work study programs.

Will my financial need impact my admissions decision? 

Most colleges are “need-blind” in their admissions process. This means that financial aid information is not used by the admissions officers or readers as a factor in the admissions review. After a student is admitted, their file is sent to financial aid where need is calculated and aid is awarded. 

Students may notice questions regarding income in the application form are optional to answer. If provided, information about finances may be utilized by colleges to identify and flag students who are low-income; this information is not used to penalize the student, but to contextualize the student’s accomplishments. 

There are some exceptions to the need-blind policy:

• International students: International students must provide proof that their family is able to pay for their educational expenses. 

• Waitlisted students: When evaluating which students to accept off the waitlist, some colleges use a “need-sensitive” policy, meaning that a student who can pay will be more likely to be admitted.

• Incidental information: Within the application form, students are asked questions about their family and their place of residence. Admissions officers can get an idea of the student’s financial situation from this information. Here are some examples:

  • If a student notes that their parents both have masters degrees and work as executives, admissions officers may assume that the student’s family can pay for the majority of their educational expenses.

  • If a student uses the COVID supplement on the Common App to talk about how things are difficult since their parents lost their jobs, admissions officers can get a sense that the student will need assistance to pay for their educational expenses.

  • If an admissions officer at a public university is evaluating an application from an out-of-state student, the officer knows that the applicant will be required to pay full tuition in order to attend. 

While this information will not be used to penalize a student, it can be used to contextualize the applicant and her achievements. Therefore, while policy indicates that financial need does not affect a student’s admission status, financial need can indirectly affect a student’s admission. 

Should I apply early decision/early action if I have financial need?

Early action is not binding (meaning, you’re not required to go if admitted), so it is always possible to opt out of attending if your financial aid award is not suitable. 

Early decision, however, is binding. That means if you are admitted, you must attend. The college will offer you the aid you need based on your EFC, but the manner in which the aid is awarded may not meet your expectations. For example, you may be offered a significant amount in student loans. You may not be able to appeal your aid without a very compelling reason; therefore, it is a risk to apply early decision if you are depending on aid. 

Is it a bad idea to take out student loans?

We don’t think anyone would tell you it’s a good idea to take out student loans! But if a loan is what you need to make your educational goals happen, it’s not always a bad idea. 

In every case you should try to minimize the amount of money you are borrowing -- there is never a guarantee you will be able to pay back the loan at the rate and within the timeline you are expected to do so. However, there are many loan repayment options available to suit your situation, and even loan simulators to help you plan out your financial future. 

Will the financial aid process and student loan policies change any time soon?

There is hope! A bill to simplify the FAFSA from 108 to 33 questions was signed into law at the end of 2020. Additionally, many federal lawmakers in 2021 are pushing for policies like cancelling student loan debt and making public colleges and universities free for in-state students. 

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