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?