6 Ways to Handle a Disappointing Financial Aid Award

You’ve gone on a dozen college visits with your son or daughter and watched as he or she applied to just as many schools. You’ve waited months for the financial aid award from his or her first-choice school to land in your inbox. You open it nervously and your eyes dart immediately to the bottom numbers. The out-of-pocket cost. The amount you and/or your child will need to pay for college.

You may think it’s a lot of money. 

Before you set that award aside and start poring over the financial aid awards for other (less expensive) schools, stop for a second. This could be an opportunity — a challenge! It’s time to get creative, ask a lot of questions about cost savings and stay positive. You can do this.

I caught up with Dr. Terri Snyders Crumley, vice president for enrollment and marketing at Mount Mercy University, to get her perspective.

Crumley said, “Everyone wants college to be free, but colleges have to pay their faculty and staff, electricity and more, just like any business. If a family thinks of paying for college as a partnership — where the college helps a bit, the student helps, the family helps — it’s usually doable. And that’s the same whether it’s a state school or private college.”

In other words, there are things you can do if you feel the financial aid award is a lot pricier than you anticipated.

1. First, breathe.

It can be hard to focus on anything but those final numbers. You want your child to go to his first choice school — especially when he’s worked so hard to get into the school of his dreams. Stay calm and know that there are things you can do — and a lot of what you can do involves a little bit of creative thinking. 

2. Talk to the financial aid office.

Crumley suggests picking up the phone and directly talking to financial aid personnel at your son or daughter’s top choice institution. This is when the relationships you developed during college visits may come in handy. Ask a few questions: 

  • Are there other scholarship opportunities available? Find out whether there are additional scholarships your son or daughter can still apply for. He or she may still be able to apply for a last-minute music scholarship or a writing scholarship — just ask! 
  • Is work-study available? Work-study is a federally-funded program that can help your son or daughter pay for college. They do this by earning money through an on-campus job. Your son or daughter may not have been awarded work-study at all, and this is the time to ask whether it’s available. If work-study is already plugged into the financial aid award, ask if more work-study money can be added. It’s a little-known secret — and to get it, all you might have to do is ask.
  • Was my FAFSA information correct? Ask some deeper questions about the FAFSA, says Crumley, because it’s very possible that you could have filled it out incorrectly. Work with the financial aid office to double-check. Did you accidently include your 401(k) retirement? Was your expected family contribution (EFC) inflated due to one-time income? (EFC is an indicative number that colleges use to determine how much financial aid you’re eligible for.) Find out through the financial aid office whether you need to fix what’s on your FAFSA.

3. Evaluate whether you qualify for special circumstances. 

Colleges know that financial setbacks happen. You might have caught a bad break or two since you filed your FAFSA. Your son or daughter’s first-choice school may be able to take special circumstances into account and adjust your financial aid award. The following situations could qualify as special circumstances. You may: 

  • Support multiple households (married family members may live apart or you may support elderly family members or family members abroad)
  • Experience one-time income, such as withdrawing retirement funds for emergency purposes
  • Be paying funeral, medical or dental expenses
  • Have education debt yourself
  • Experience a job loss or a significant reduction in income

Check with the college financial aid office to find out whether you’re eligible to fill out its special circumstance form.

4. Consider cost savings.

This is where you get to think outside the box. Put all your creative juices into overdrive and figure out how much cost savings are in store. How much money will you save when your child is no longer living at home (if he or she is going away to school)? How can those savings can be applied to college costs? 


How much do you currently spend on groceries? Imagine how much you’ll save if your son isn’t home to drink four gallons of milk per week and eat two meals in one sitting!


How much do you spend on utilities? How much cost savings will you incur when your teenager isn’t taking two showers a day, leaving all the lights on or cranking up the heat without your knowledge?

Car insurance and other vehicle-related expenses

Your student may not need a car at college. Unless he or she has an off-campus job, the reality is that your student can catch rides with friends to Walmart or take public transportation. That means you could even sell the car! You’ll also save a lot of gas money — no more, “Hey, Mom, can I have $40 for gas?”


You won’t have to stock your house full of toilet paper and Kleenexes for your high school student — major cost savings. Plus, if you really wanted to, you could encourage your student to come up with his own funds for deodorant, soap, shampoo and whatever else he might need. He can get a job, use birthday cash — it’s a great time for him to get creative with money.

Lessons and athletic fees

You won’t have to pay for piano or voice lessons anymore. That’s a lot of savings right there, especially if you’re spending hundreds of dollars per year on athletic club participation or whatever else your son or daughter participates in at his or her high school.

How can you save save money in college in other ways? Why not make a long list?

5. How can your student pitch in?

How much can your child work and save over each summer break? Don’t discount what your student can earn at the public pool, waiting tables or even freelancing. Add that to the pile! A summer job earning $4,000 can make a huge difference. 

6. Break it down.

Once you’ve done steps one through five, take a look at the out-of-pocket costs again. Pretend it’s a puzzle you need to solve (and can solve!) and break it into chunks to make it more palatable. Encourage your student to figure out how much he or she can contribute. Determine how much you can each feasibly add and consider the cost savings mentioned above. Maybe grandparents want to chip in, too! 

Another way to break the cost into manageable chunks is to opt for a 10-month payment plan at your child’s school. The 10-month payment plan divides the out-of-pocket costs into 10 separate payments over the course of a school year. Once you do that, does it seem so scary anymore? I hope not. 

Finally, decide whether you need a private loan for the rest. Note: Direct Subsidized and Unsubsidized Loans, which are both federal loans for eligible students who will attend four-year colleges or universities, could also be built into the financial aid award. Talk to the financial aid office about loan options for you and your family.

Get excited and have a family conversation

I love Dr. Crumley’s approach — that paying for college can be a partnership between the parent, the student and the college. Tackle that out-of-pocket cost with some energy! Once you and your family sit down and actually tackle the financial aid award head-on, it can even be exciting! 

It doesn’t have to be daunting. Work with the financial aid office to break down the out-of-pocket costs. Make it your mantra! Break it down, break it down, break it down.

Top Tips: How Do Student Loans Work?

Student loans stir up a media frenzy all the time.

Love ‘em or hate ‘em, they still enable your son or daughter to get a degree that can increase his or her earnings way, way into the future. So, how do student loans work in the easiest language possible? (Key words, right there!)

Here’s what you need to know, from interest rates to federal loan and private loan options. Let’s dig in and answer the big question: “How do student loans work?”

What’s a Student Loan?

Simply put, you borrow money and pay it back — that’s a student loan.

You can access student loans from various sources, including the federal government, private sources (like your hometown bank) and other organizations. Your kiddo must pay back the money he borrows — with interest. He must pay student loans back whether he graduates or not.

One more thing before I dive in. Many families get hung up on taking out loans. I get it. However, if a particular school is the right fit for your child and can deliver the results he or she wants or needs, consider taking out loans.

So, how do you know what type of student loan is best? Great question.

Types of Student Loans

For simplicity’s sake, let’s focus specifically on federal and private loans.

Federal Student Loans

Guess who your lender is when you borrow federal student loans? Yep, it’s the federal government — or to be specific, the U.S. Department of Education. You’ll find three types of federal loans created specifically for college-bound students:

  • Direct Unsubsidized and Subsidized loans
  • Direct PLUS loans: This includes Grad PLUS loans for graduate and professional students and Parent PLUS loans for parents of undergraduate students.

Federal student loans are more flexible than private student loans for several reasons:

  • No credit checks involved — with the exception of the Direct PLUS loan, which does require a credit check.
  • Income-driven repayment plans are an option in some cases, which means repayment is based on how much your student makes once he or she graduates from college. 
  • Repayment plans can change as needed.
  • Federal student loan interest rates are lower compared to private loans.

Private Student Loans

Where can you get a private loan?

A local bank, credit union or national bank are three primary options.

These loans can fill in the need gap after your student has exhausted these options, in order: Scholarships, grants, parent/student savings and federal student loans. Here are some fast facts about private student loans:

  • You’ll hear about two types of interest rates: fixed and variable interest rates. Fixed interest rates are just like they sound — they don’t change, so your monthly payments stay the same. Variable interest rates go up and down. 
  • You or your student can make interest-only or fixed payments while you’re in school.
  • Private loans often require a co-signer. This person is commonly you, the parent, or another relative. Students can qualify for a private loan without a co-signer, though that’s difficult to achieve. No matter who applies for the loan, you will need a good credit score and will need to show proof of income.

Finally, remember that co-signers are just as responsible for paying back loans. Have a conversation with your son or daughter about risk and how you’ll each repay the loan before you agree to take on a private loan.

What Are Interest Rates?

You pay interest to a lender in order to be able to borrow money. Interest is a percentage ofunpaid principal amount. Direct loans are daily interest loans, which means that interest accrues (accumulates) every single day.

The higher the interest rate, the more you’ll end up paying on a loan if you take the full loan term to pay it off. Subsidized and unsubsidized loans treat interest rates differently:

  • Subsidized loans: The government pays the interest while your student is in school at least half-time, for the first six months after he or she leaves school and during deferment. Deferment is when your child postpones loan payments.
  • Unsubsidized loans: The government does not pay the interest while your son or daughter is in school. 
Federal loan interest ratesPrivate loan interest rates
Interest rates are fixed and rates are also usually lower than those for private loans. Here are the current rates:

Direct Subsidized loans and Direct Unsubsidized loans for
undergraduates: 4.53%

Direct Unsubsidized loans
for graduate or professional students: 6.08%

Direct PLUS loans for parents and graduate or professional students: 7.08%
Can be variable or fixed; interest rates can be higher or lower than federal student loan rates.

How to Apply for Student Loans

Fill out the Free Application for Federal Student Aid (FAFSA) to get federal loans. To get private loans, you’ll need to fill out an application with individual financial institutions.

Shop around to find the right private student loan lender. You can also check with your child’s chosen school’s financial aid office to see whether it has a preferred lender list. Have a conversation with someone in the financial aid office of the community college, liberal arts college or university your child plans to attend!

Next, compare interest rates, payment terms and fees to find the most cost-effective loan that suits your student’s needs. Next, complete a full application once you decide on the right loan for you.

Key tip: Only apply for how much you need to borrow.

What’s the Max Amount You Can You Borrow?

Your son or daughter can’t borrow an unlimited amount of student loans. He or she can only borrow from $5,500 to $12,500 per year for federal subsidized and unsubsidized student loans as an undergraduate. This amount also depends on his or her year in school and whether you can claim your child as a dependent.

Private student loan limits vary by lender. Generally, the amount your student borrows can’t exceed the school’s total cost of attendance.

Pay Off Student Loans

One key to knowing the answer to the question, “How do student loans work?” is knowing how interest rates play into the picture. It’s never too early to start talking about how to handle student loans. High school is a great time to start!

Lots of fancy repayment options may present themselves once your child graduates — refinancing, consolidating, etc. Consider the Debt Avalanche Method of repaying student loans.

What’s the Debt Avalanche Method? Great question. Here’s a quick overview:

  1. First, make sure your child doesn’t consolidate the loans. Keep them separate. Your child’s interest rates will likely be a mix of low to high rates for federal and private loans.
  2. Next, your child should always make the minimum monthly payment on each loan.
  3. The Debt Avalanche Method means your child pays off student loan debt with the highest interest rate.
  4. Once that higher rate loan is paid off, pay off the loan with the next highest interest rate.
  5. Your child is finally done when the last payment is made on the lowest interest rate loan.

The Debt Snowball Method is also a great option for quick wins. Your child would pay the minimum balance on all loans, just like in the Debt Avalanche Method. Then, he or she would pay the smallest balance first. Next, tackle the next highest balance until the loans disappear. It’s a great way to get some instant gratification!

Get the Right Student Loans for Your Child’s Needs

Think you have a basic idea of how student loans work? I hope so!

Above all else, make sure you max out federal student loan borrowing before taking out private student loans. Federal loans have protections that private loans don’t, including income-driven repayment plans and loan forgiveness programs.

How to Apply for a Parent PLUS Loan in 6 Easy Steps

Calling all parents! Want to help your kiddo(s) pay for college by learning how to apply for a parent PLUS loan? (It’s technically called a Direct PLUS Loan. We’re using the commonly-used term “parent PLUS loan” for this post.)

Lots of parents get parent PLUS loans to help their college students pay for college. Brookings data showed that at least 3.4 million parent PLUS borrowers owe $87 billion.

The average parent PLUS loan balance is $25,600. There’s been a rise in parent borrowers over time due to:

  • Increased tuition
  • Borrowing cap reduction
  • Regulatory changes

Interesting, huh? Now, here’s how to apply for a parent PLUS loan.

What is a parent PLUS loan?

Parent PLUS loans, or Direct PLUS Loans, are federal loans that parents of dependent undergraduate students can use to help pay for college or career school. The U.S. Department of Education is the lender. The current interest rate is 7.08 percent.

You must meet a few requirements to get a Parent PLUS Loan. According to studentaid.gov, you must:

  • Be the biological, adoptive parent or stepparent of a dependent undergraduate student.
  • Not be the grandparent or legal guardian of the student unless you’ve legally adopted your dependent student.
  • Your undergraduate student must be enrolled at least half-time at an eligible school.
  • You must not have an adverse credit history. That said, you can meet certain additional requirements and still be able to get a loan.
  • Both you and your child must meet eligibility requirements for federal student aid.

Here’s how to apply for a parent PLUS loan in 6 easy steps. You’ll have one faster than you can say, “Happy graduation!”

Step 1: Submit the FAFSA.

First, you’ll need to fill out the application for the Free Application for Federal Student Aid (FAFSA). We’ve outlined those steps below.

  1. You’ll need a few documents before you get started: Social Security numbers for parents and your student, your driver’s license number, alien registration number if you aren’t a U.S. citizen, tax returns and W-2s, information for income such as child support, interest income and more. You’ll also need statements for cash, savings, checking and investment accounts.
  2. Next, you’ll need to get your FSA ID. The FSA ID is a unique username and password that confirms your identity when you sign official financial aid documents. You’ll need two separate FSA IDs — a parent FSA ID and a student FSA ID. 
  3. Find “Start Here” on the official FAFSA website. Enter your student’s name, Social Security number and date of birth.
  4. You can list up to 10 colleges and universities where you want the FAFSA sent. You must choose at least one. Use the Federal School Code search to identify each of the schools on your list.
  5. Add legal parent(s) to the FAFSA if you’re a dependent student or add your own name if you’re filing for a dependent. 
  6. The data retrieval tool (IRS DRT) takes most of the work out of filing the FAFSA. It pulls information from the IRS and prepopulates it onto your FAFSA. 
  7. Go to the IRS website through the DRT and fill out your name exactly as it is on your taxes. 
  8. Import your information directly onto the FAFSA form. 
  9. You’ll be able to see “Transferred from the IRS” in the correct fields on your FAFSA but won’t be able to see exactly what’s in these fields. You also won’t be able to change that information. 
  10. Finally, sign your FAFSA with your FSA ID. You do have the option to print, sign and mail in a signature page. Your FAFSA won’t be processed as quickly, though.

Step 2: Find out what each school’s requirements are.

Most schools require you to apply for a Direct PLUS Loan online, but some schools have different application processes. When you select your child’s school from the list, the site will tell you if the school has a different application process. Do you see that your child’s chosen school has a different process?

Check with the school’s financial aid office or contact an admission counselor at that school to find out how to request a parent PLUS loan.

Step 3: Be aware of fees and other specifics.

You can borrow the full cost of attendance at the school your child attends minus other financial assistance your child receives. Your child’s college or university can give you a PLUS loan for the full cost. It’s your legal responsibility to pay the loan — not your child’s.

Wondering about other fees? Good call. Along with the interest rate of 7.08 percent (which will remain the same until at least July 2020), you’ll also pay a loan fee. The percentage depends on when the loan is first disbursed. If the first disbursement date is on or after October 1, 2019, and before October 1, 2020, the loan fee is 4.236 percent.

Step 4: Complete the application. 

Next, you’ll need to complete the application. The information you provide will be sent to your child’s chosen school. The school you select will use the information collected to determine your eligibility for a Direct PLUS Loan and process your application.

There are four sections to the application: 

  • Loan Information
  • Borrower Information
  • Review
  • Credit Check and Submit

Remember, you must have filled out the FAFSA in order to qualify!

Step 5: Sign the Master Promissory Note.

The PLUS Master Promissory Note (MPN) is a legal document. It’s your promise that you’ll repay your federal student loan(s) and any accrued interest and fees. Most schools can offer multiple loans under one MPN for up to 10 years.

The PLUS MPN will ask you a slew of personal information, such as: 

  • Social Security number
  • Date of birth
  • Driver’s license state and number
  • Citizenship status
  • Reference information (this means you should list two people who do not live with you and who have known you for at least three years.)
  • Dependent undergraduate student’s full name and Social Security number

Step 6: Pay back the PLUS loan.

Yes, you’ll have to pay back the PLUS loan. But first, the PLUS loan funds will be applied to your child’s tuition, room, board and fees. Your child’s school will give you any excess money from the PLUS loan to pay other education expenses. The college may, with your authorization, give this excess money directly to your child.

There are three repayment options available:

  • Standard Repayment Plan: Payments are fixed and you’ll make payments for up to 10 years (between 10 and 30 years for consolidation loans). This option requires you to pay the least amount of interest over time.
  • Graduated Repayment Plan: You’ll start out with a lower payment that increases every two years. Payments are made for up to 10 years (between 10 and 30 years for consolidation loans). This is a great choice if you think you’ll be making more money later on during those 10 years.)
  • Extended Repayment Plan: You’ll make fixed or graduated payments for up to 25 years. This is a great option if you need to be able to make lower payments.

Parent borrowers can also become eligible for an additional repayment plan, the Income-Contingent Repayment Plan. This means you roll it into a Direct Consolidation Loan.

Other PLUS loan tips

After your child receives the parent PLUS loan, you will be contacted by your loan servicer. The loan servicer will provide regular updates on the status of your parent PLUS loan.

You might also wonder if you can get your PLUS loan forgiven (canceled) at any time. It’s possible, but you’ll need to review student loan forgiveness guidelines for more information.

Finally, give yourself a pat on the back for your willingness to help your child out with his or her college education. Whether you want to help your son save money in college or help your daughter get that history degree she’s always wanted, you’re giving an amazing gift.

What is Financial Aid? Plus, 6 Steps to Get It

Financial aid can seem like the most daunting hump in the getting-your-kid-to-college process. But what is financial aid, anyway? What does it entail? Don’t worry, it’s normal to be confused.

Let’s compare financial aid to baking a cake. The ingredients — scholarships, grants, loans, work-study and out-of-pocket funds — are combined to create a finished product: Your child’s final financial aid award. 

Hang in there! Let’s dive in and learn more.

How to Apply for Financial Aid for College

We’ll break down the process of how to apply for financial aid for college into a few simple steps. But first, let’s go over exactly what types of financial aid are out there.

Types of Financial Aid

There’s no one way to go about getting aid for college (which can make it even more confusing). Your son or daughter will have different scholarship opportunities depending on where you live, your financial situation and more.

You might hear about two types of financial aid: need-based financial aid and merit-based aid.

Need-Based Aid

Need-based financial aid takes parent and student assets and income into account. In other words, a student’s scholastic achievement or ACT scores have no bearing on how much need-based aid your child receives.

Federal student aid is need-based aid awarded by the U.S. Department of Education. Every year, the Department awards more than $120 billion in grants, work-study and loans to over 13 million students. Federal student aid can help out with your child’s tuition, room, board, books, supplies, transportation, fees and more. The schools you apply to partner with the U.S. Department of Education to incorporate this aid onto your award.

  • Grants are financial aid that doesn’t have to be repaid. 
  • Work-study allows you to get a job at the school you ultimately attend — you’re paid a wage for the work you do.
  • Loans are borrowed, which means you have to pay them back with interest.

Check out the basic eligibility requirements to get need-based aid.

Merit-Based Financial Aid

Scholarships! As a parent, isn’t that word absolute magic? The vast majority of merit-based scholarships are not based on need. This means that whether you’re “needy” or not, there are scholarships available. Luckily, they’re not doled out only to straight-A students or National Merit Semifinalists (though if you have a child who is one, great!) They’re based on just about any other qualification — art, athletics, music, etc.

Lots of colleges and universities offer merit-based scholarships. All colleges have different awarding structures for how they divvy up merit-based scholarships, and the amounts are different, too. What’s the best way to understand everything there is to know about scholarships at a particular school? Talk to your kiddo’s admission counselor to learn more.

You can also find merit-based scholarships online (the word “scholarships” turns up close to 1,000,000 results on Google). You can also seek scholarships in your community, too. Don’t forget to check your local hospital, nursing home, veterans group or church for free money. School counselors can provide a wealth of information about local scholarships. Make sure your child talks to his or her school counselor on a regular basis!

Fast fact: Did you know that private colleges and universities offer lots of merit-based aid? The discount rate, which is the amount colleges channel directly back to students, surpassed 50 percent in 2017-18, according to an annual study by the National Association of College and University Business Officers (NACUBO). A $50,000 per-year college truly isn’t going to cost you a full $50,000 — because, financial aid!

Take These Steps to Get Financial Aid

There are several steps you can take to get need-based or merit-based aid.

1. File the FAFSA. 

The swiftest way to get financial aid for college is to file the FAFSA. The FAFSA is a free application that gives you access to federal grants, work-study and loans to pay for college. Which types of aid are these? Yep, they’re need-based!

Get your FSA ID before you file the FAFSA. Your FSA ID is your unique username and ID that you can use to look at or sign official financial aid documents. Make sure you get both a student and parent FSA ID. 

Colleges use your FAFSA results to determine your eligibility for different types of aid, such as loans, scholarships and grants.

Not sure you want to file the FAFSA? You don’t have to — but you’ll miss out on federal need-based aid. Here’s how to pay for college without the FAFSA. Complete the FAFSA between October 1, 2019, and midnight, June 30, 2020, to be considered for financial aid for the 2020-2021 academic year. Any corrections or updates must be submitted by midnight on September 12, 2020.

Many states and colleges have earlier deadlines for applying for state and institutional financial aid, so you’ll need to check the deadlines with each college you’ve applied to.

Pro tip: You’ll have to file the FAFSA every year, so use the data retrieval tool (DRT). It’s a lifesaver! The DRT pulls information directly from the IRS and prepopulates it on your FAFSA.

2. Apply for admission.

Your child can’t get scholarships from colleges until he or she applies. What type of admission does each college have? Rolling admission? Early decision? Early action? 

It’s important to know each admission type, make sure your child follows all directions and applies well ahead of the deadline. Applying incorrectly (or late) could also directly affect your child’s financial aid opportunities. 

3. Ask colleges about scholarships.

All colleges post information about scholarships on their websites. To get a full understanding of what a school offers, it’s a good idea to make contact with the admission office at each school. Colleges and universities can’t post every single scholarship they offer on their websites. Those lists are long!

For example, an alumna could have donated a scholarship for red-headed students education majors who like to knit. (Okay, that could be an exaggeration.) But there are dozens of scholarships that you might not know about unless you take the time to turn over every single stone at a particular college. Just ask!

4. Apply for outside scholarships.

You probably want your child to apply for every bit of scholarship money possible. That means doing some extensive research online, in your community and through your school counselor’s office. There’s no one way to piece together the scholarship opportunities available to your kiddo. You can search in the following places, according to the U.S. Department of Education:

  • The financial aid office at the colleges you plan to attend
  • Your school counselor
  • Your TRIO counselor
  • Scholarship search tools — but make sure they’re valid
  • State grant agencies
  • Library reference section
  • Foundations, religious or community organizations, local businesses, civic groups
  • Organizations related to your field of interest
  • Ethnicity-based organizations
  • Your employer or your kids’ employers

Pro tip: Ask the colleges you’ve applied to whether they offer scholarship competitions. Many do, and it’s a great way to earn more scholarship money.

5. Compare financial aid awards.

You’ve applied to several schools, filed the FAFSA, auditioned or interviewed for scholarships and attended scholarship events. Next, you’ll receive financial aid awards from schools. Sit down and compare them.

Be sure you do an apples-to-apples comparison. What does that mean? Let’s say you’re getting a $19,000 merit-based scholarship from College X and a $17,000 merit-based scholarship from College Y. That doesn’t mean that it’s necessarily cheaper to go to College Y.

What’s the full price for each? Figure that out, then subtract the amount of financial aid you’re awarded from each college to see which is cheaper.

6. Make a decision by May 1. 

National Candidate Reply Date is always May 1. It’s a great idea to decide by May 1 or before that date to ensure your spot in the class. As soon as you’ve decided what college you’d like to attend, accept your financial aid award. You should be able to indicate exactly which loans, grants and scholarships you’d like to take advantage of online or via a paper version of the financial aid award. You’ll need to send an enrollment deposit to secure your spot in the class and secure housing. 

Ask Great Questions!

Once you get your financial aid award from each school, read everything. Ask your admission counselor or the financial aid office at each school for clearer explanations about loans, scholarships, grants and other types of aid.

You might ponder these questions:

  • How much will you need to pay out of pocket?
  • Who’s contributing to college costs? Are you paying for it all, or is your child responsible for some of it?
  • How much will the college’s scholarships and grants (free money) offset the cost?
  • How much will outside scholarships help?
  • Will your child work and attend school at the same time?
  • How quickly does your student want to get through school? Would he or she rather attend school part-time instead?
  • How much does your child feel comfortable borrowing?

What are some other factors that you need to consider as a family?

What is Need-Based Financial Aid?

There are lots of ways you can take care of the costs of college. You can pay for it all out of pocket, you might earn a scholarship because of your violin-playing talents or your high ACT score. Or you might get need-based financial aid.

What is need-based financial aid, exactly? It’s exactly like it sounds — it’s based on your family’s financial situation. Or, in very rare cases, it’s based on your financial situation if you’re an independent student. Your grades, test scores or extracurricular achievements don’t factor in. 

How do you get need-based financial aid?

You’ll need to file the Free Application for Federal Student Aid (FAFSA) if you want financial aid. Every single school you apply to will use your FAFSA results to determine your eligibility for federal financial aid. 
Certain schools you apply to may ask you to fill out the CSS Profile. Check out the list of schools. You can use the CSS Profile to apply for aid and scholarship programs from each school, not the federal government.

How is need-based financial aid calculated?

Let’s break it up into two parts — here’s how to calculate your federal student aid and CSS Profile.

Federal student aid

Once you file the FAFSA form, colleges will use your Expected Family Contribution (EFC) to determine how much federal aid you’ll receive. A formula established by the government calculates your individual EFC. The EFC takes into consideration your family’s:

  • Taxed and untaxed income
  • Assets
  • Benefits (including unemployment and Social Security) 
  • Family size 
  • Number of family members attending college

The formula looks like this:

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

You won’t be able to get more need-based aid than the amount you actually need. In other words, let’s say your COA is $20,000 and your EFC is $15,000. Your financial need is $5,000 and you aren’t going to be eligible for more than $5,000 in need-based aid.

Here are the federal student aid programs: 

Federal Pell Grant

You could get a Federal Pell Grant if you’re an undergraduate student who has extreme financial need. Amounts can change yearly. The maximum Federal Pell Grant award is $6,195 from July 1, 2019 to June 30, 2020.

Federal Supplemental Educational Opportunity Grant (FSEOG)

An FSEOG also requires you to have a considerable amount of financial need. You can receive between $100 and $4,000 a year. This amount depends on a few factors: your financial need, the date you apply, how much other aid you get and the availability of funds at your school.

Direct Subsidized Loan

Direct Subsidized Loans are for undergraduate and graduate students. Postsecondary schools decide how much money they can offer you, but there are caps on the amounts available. These limits depend on your year in school.

Federal Work-Study

Federal work-study offers part-time employment for undergraduate, graduate and professional students. Each school determines the amount of work-study you get. Learn more from each school’s financial aid office.

CSS Profile

It costs $16 per school to send the CSS Profile. Invest the money and send it to each school to see what kind of institutional aid you qualify for.

First, register with the College Board. You’ll also want to have the following financial documents handy (both yours and your parents’):

  • Most recent tax return
  • W-2 forms and any other records of income from the current year
  • Current bank statements
  • Records of assets

Is need-based financial aid different than merit-based aid?

Soooo, what’s the difference between need-based financial aid and merit-based aid? Financial need isn’t a consideration for merit-based scholarships.

They’re also need-blind. This means that a your financial profile is not a factor. Schools use another combo of merit-based factors. They might factor in your:

  • Grade-point average
  • SAT or ACT scores
  • Class rank
  • Academic performance
  • Teacher recommendations
  • Community service
  • Academic major
  • Gender, race or ethnic background
  • Extracurricular activities

The government issues need-based financial aid. Colleges or private sponsors award merit-based aid.

Do you have to pay need-based aid back?

You’ll pay back financial aid if it’s a loan, but you don’t have to pay back grants, scholarships or work-study money.

You don’t have to begin repaying most federal student loans until after you leave college or drop below half-time enrollment.

A repayment schedule will explain when your first payment is due, how many payments you’ll make, the frequency of payments and your payment amounts.

You might get a grace period, which is a set period of time after you graduate, leave school or go below half-time enrollment. You don’t have to start repaying your loan until after the grace period is over. The grace period gives you time to select your repayment plan. Not all federal student loans have a grace period. Interest will build during the grace period in all cases.

How to get the most need-based financial aid possible

Filing the FAFSA is the best way to get the most need-based aid possible. Be sure you know how much need-based financial aid you’re taking out and make a plan to pay it back when you’re through school.

Think of it this way: An average of 66 percent of graduates from the class of 2017 took out loans to pay for college, according to U.S. News data. Students borrowed about $30,000 on average.

You’ll use your income from 2018 for the 2020-2021 FAFSA. Parents and guardians, here are a few ways you can decrease your finances:

  • Be intentional: Make less during the preceding years you know you’ll be filing the FAFSA
  • Don’t realize capital gains or take retirement distributions
  • Defer work bonuses
  • Decrease reportable assets
  • The more kids you have in college, the better

Get need-based financial aid

We’ve saved the best tip for last: Make sure you file your FAFSA as soon as possible, because many schools award aid on a first-come, first-served basis. There’s a finite amount of campus-based money. (You could file the FAFSA as of October 1.)

What is the FAFSA?

The perfect college visit scenario: You crunch through the leaves on a beautiful college campus and listen to a tour guide’s perfect spiel on a 70-degree October day.

The reality: You might’ve had the gorgeous campus tour. But then — you find yourself in the financial aid director’s office. He’s saying words like “FAFSA” and “FSA ID” — and then, he turns you loose. You feel a little… blurry.

A college decision is a thrilling adventure — so let’s keep it that way. We’ll completely demystify the FAFSA for you. 

What is the Free Application For Student Aid (FASFA)?

The Free Application For Student Aid (FAFSA) is a free application that gives you access to federal and institutional aid to pay for college. You’ll get access to federal grants, work study and loans. Colleges use your FAFSA results to determine your eligibility for different types of aid. Private financial aid providers may also use your FAFSA application to determine whether you qualify for the type of aid they provide as well. 

Still sound a little murky? Never fear — we’ll cover how to file the FAFSA next.

How to fill out the FAFSA

Here are the steps you’ll need to take to fill out the FAFSA — whether you’re a student, parent, guardian, grandparent or if you’re filling it out for yourself.

First, grab a few documents before you even sit down at the computer: 

  • Social Security numbers for parents and students
  • Your driver’s license number
  • Your alien registration number if you aren’t a U.S. citizen
  • Tax returns and W-2s
  • Information for income such as child support, interest income and more
  • Statements for cash, savings and checking accounts, investment accounts and more

Step 1: Get your FSA ID.

An FSA ID is a username and password that’s unique and confirms your identity when you’re looking at or signing official financial aid documents. Let’s say you’re filling out the FAFSA for your dependent student. You’ll need two separate FSA IDs — one for you and one for your child. Remember that you’ll need to remember your FSA ID every year that you file the FAFSA — lock it in your memory bank.

Just kidding. You might never remember it ever again. Write it down and save it somewhere safe.

Step 2: Go to the FAFSA login page.

Find “Start here” on FAFSA.gov and enter your student’s name, Social Security number and date of birth. Be absolutely sure your name and Social Security numbers match what’s on your Social Security card — lots of financial aid personnel at colleges encounter a problem when these don’t match.

Step 3: List colleges and universities.

You can list up to 10 colleges and universities where you want the FAFSA sent — but you must choose at least one. Use the Federal School Code search to identify each of the schools on your list.

Step 4: Know your dependency status.

Some students might consider themselves an independent student — but the reality is that it’s really tough to declare yourself an independent student, even if you don’t live with your parents. Here’s the checklist that can lead you through the process so you know for sure.

Step 5: Add parent information.

You’re going to have to add legal parent(s) on the FAFSA if you’re a dependent student or add your own name if you’re filing for a dependent.

  • You must almost always list a stepparent who is married to your legal parent. 
  • Let’s say that your parents are divorced — you’ll include information for the parent you live with most of the time. 
  • You’ll need to list both parents if they live together, regardless of whether they’re the same or opposite sex.

Step 6: Offer up financial information.

You’ll need to gather up tax information from 2018 for the 2020-2021 FAFSA. 

The data retrieval tool (IRS DRT) takes most of the work out of filing the FAFSA. It pulls information from the IRS and prepopulates it onto your FAFSA. Here’s a quick overview of how it works:

  • Go to the IRS website through the DRT and fill out your name exactly as it is on your taxes. 
  • You’ll be able to find a page that tells you that your tax information is ready to go and you’ll be able to use that page to import your information directly onto the FAFSA form. 
  • You’ll be able to see “Transferred from the IRS” in the correct fields on your FAFSA but won’t be able to see exactly what’s in these fields. In other words, you won’t be able to change this information.
  • You can opt to fill in all parts of the FAFSA manually instead of using the IRS DRT.

Step 7: Sign and submit your FAFSA.

Sign with your FSA ID and that ensures that your form is processed quickly. You do have the option to print, sign and mail in a signature page to submit your FAFSA, though that won’t be processed as quickly as it would if you used the FSA ID.

How does the FAFSA work?

Next, the magic happens in each college’s financial aid office. The colleges you’re interested in attending will use your FAFSA results to determine your eligibility for financial aid. The financial aid office at every school uses a couple of pieces of information, including: 

  • Expected Family Contribution (EFC): Your EFC is a formulated number (the formula is established by the federal government) which helps colleges and universities determine how much you could feasibly pay for college. (Note: Don’t be alarmed if your EFC seems high. Many families feel that way.)
  • Year in school
  • Enrollment status: The schools will need to know whether you’re going to be a full-time or half-time student.
  • Cost of attendance (COA): The COA is the amount you’ll pay to attend each school. It may include — but is not limited to — tuition, room, board and fees, books, supplies, transportation costs, loan fees and more. 

The schools you’re considering might have other forms you’ll need to fill out to get financial aid specifically from each school, so check each financial aid office for more information.

Each school will also have a different timeline to release aid. Some colleges can get your financial aid award to you within two weeks — but this varies from school to school. Just ask.

What does the FAFSA get you?

Contrary to popular belief, you don’t have to file the FAFSA — but know that you could miss out on certain need-based aid if you don’t. The aid you could get comes in four major flavors: Scholarships, grants, loans and work study. Here’s the scoop.

Federal aid

Federal aid is given through the U.S. Department of Education primarily through grants, work study funds and low-interest loans. 

  • Grants don’t have to be repaid, unless you withdraw from school and owe money to the program that provides you the grant.
  • Work study is a program through your school that allows you to work at your school and earn money. 
  • Federal student loans are borrowed money that must be repaid. Federal student loans are the best loans you can get because they typically offer the lowest interest rates on the market.

There are other federal aid opportunities, too. You might qualify for aid as the spouse or dependent of a veteran, as a foster care youth and more.

State aid

You might not qualify for federal grants — so check with the department of education, the higher education agency or adult education agency in your state to see what types of grants may be available to you. Note: The colleges and universities you’ve applied to will also be able to tell you whether you qualify for state grants or other state aid.

College or university aid

The colleges and universities you’ve applied to will evaluate your FAFSA and award you directly from their own funds, too. Scholarships can offer you a major boost. Scholarships are like grants — you don’t have to pay back the money you’re awarded.

You’ll see the need-based scholarships you’ve received after you get your financial aid award. But if you want to be proactive, ask your admission counselor at each college for more information about all scholarships available.

When is the FAFSA due?

The federal FAFSA deadline is June 30, but the schools you’re applying to might require you to submit it before then. Don’t miss schools’ deadlines — check with each individual school so you don’t miss out on getting as much financial aid as possible.

As of October 1, 2019, you could file the FAFSA for the 2020-2021 academic year.

File the FAFSA now

You’ll be able to check your FAFSA form’s status immediately after you submit the online form. A paper FAFSA form takes a bit longer. You can learn more about 7–10 days you mail it in — either log in to fafsa.gov or contact the Federal Student Aid Information Center.

Again — remember that you should never pay money to complete the FAFSA. You know you’ve encountered a scam website if a site asks you for your credit card information. Close out of the website immediately and go to fafsa.ed.gov.

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