If you have a student in the process of applying for colleges, you understand the heavy price tags that come with many colleges. If financial aid is something you are considering, we have compiled a list of facts that will be important to know.
Determining your financial situation.
This is the first step you should take when applying for financial aid. A way to get an estimate on what your financial aid will look like, you can use this financial aid calculator, here.
Understanding different types of aid.
There are two main types of financial aid, merit based and need based aid. Merit based aid is awarded based off your student’s academic performance in high school, where need based aid is awarded based solely on your family’s ability to pay the cost of college tuition.
Three types of need based aid.
- Grant. This is money that students will not have to pay off after they graduate.
- Federal Loan. Federal loans need to be repaid after your student graduates or anytime that student falls below full time enrollment.
- Work Study. A work study guarantees students part time employment on campus that they can put towards their educational expenses. It does not guarantee what type of job they will have, so to get a good work study, your student should apply early to on campus jobs.
Around 38% of financial aid awarded are through federal loans. Federal aid sounds good when you believe it’s mostly free money. But a good percentage of financial aid is federal loans or work studies that require work or repayment to receive.
Financial aid eligibility is calculated annually.
A form called the Expected Family Contribution (EFC) uses information from your FAFSA and needs to be filled out for each school year. The school will use the EFC to determine how much money your student will receive every year.
Use a 529 Plan over a UGMA/UTMA account if applying for financial aid.
Funds in a UGMA/UTMA account are considered your student’s asset and are evaluated at 20% when determining the EFC. Whereas, funds saved in a 529 plan are parental assets and are only evaluated at a maximum rate of 5.64% for the EFC.
Vacation homes are a liquid asset.
If you purchase a vacation home it will be considered a liquid asset on the FAFSA, whereas your permanent resident will not.
You can appeal your financial aid offer.
If you received less money than you thought, you have the ability to appeal the offer. It could be helpful to appeal directly to the college for tuition help. By explaining your situation to them, they may be willing to review your case to determine if you qualify for more financial aid than originally granted.
Complete the FAFSA application even if you are not interested in taking out student loans.
If you want any need based financial aid, complete the FAFSA. It is a good thing to do, even if you don’t expect to get much financial aid and you are not willing to take any federal student loans. You may be surprised what you qualify for.
Communicate with your student.
Make sure to sit down with your student before they start their college search and explain to them how much you have saved, and what financial aid they can expect. Although this can be a difficult conversation, it’s important for students to be realistic about their college expectations and to know if they need to work harder to increase their chances of a merit based award.