Understanding College Financial Aid: What You Need to Know

During the 2021-2021 FAFSA application cycle, 17.8 million forms were completed. Whether you’re a student or parent, you’re probably wondering about the application process and what’s involved.

It’s important to have a firm understanding of what financial aid is, exactly. “Financial aid” is a blanket term for any funds provided by a private lender, educational institutions (such as colleges and universities), or the government.

You can apply for and receive various types of financial aid, including but not limited to loans, scholarships, grants, and Work-Study Programs. Here’s your complete guide to understanding financial aid.

Who Qualifies for Financial Aid?

To apply and qualify for financial aid, you need to be a U.S. citizen. Otherwise, you need to be an eligible citizen. You also need to enroll in either a certificate or degree program, so long as they’re both eligible for financial aid.

Eligible programs are any type of organized study or instruction where a degree or certificate is rewarded upon completion. These degrees or certifications also have to be a certain length of time, which varies from program to program. The degree or certificate you complete can either be vocational, academic, or professional.

How Do You Apply for Financial Aid?

To begin, you’ll need to create an FSA ID. You need to use this electronic signature when you complete your loan applications and when you apply for financial aid.

Next, you have to complete the Free Application for Federal Student Aid (FAFSA). Depending on who completes this application, be sure to have the following information available: parent/guardian tax information for the year requested and any information about current assets.

If the parent, guardian, or student filed a Federal Tax Return, it’s possible to streamline the application process and import data from the IRS into your FAFSA application. You’d do so using the IRS Data Retrieval Tool.

Once you submit all information, you need to select the “Apply Now” button on the FAFSA’s confirmation page. Afterwards, you’ll have you Student Aid Report (SAR). Always retain a copy of this report for your records.

There’s a chance your school’s Financial Aid Office may ask for additional documents for verification. If this is the case, always send over the required documents as quickly as possible to ensure you receive financial aid without delay.

How Much Financial Aid Do You Qualify For?

The amount of financial aid you qualify for depends on the type of loan, grant, or program you qualify for.

Understand that you may not qualify for the maximum amount of money. The amount of financial aid you qualify for depends on your financial need and how many funds a school or institution has available to its students.

These numbers are for the 2022-2023 school year:

  • Pell Grant: Maximum of $7,395/year
  • Teacher Education Assistance for College and Higher Education Grant (TEACH): Maximum of $3,772/year
  • Federal Supplemental Educational Opportunity Grant (FSEOG): Maximum of $4,000/year
  • Direct Subsidized Loan: Maximum of $3,500 – $5,000/year
  • Direct PLUS Loan: Total cost of school or institution attendance
  • Direct Unsubsidized Loan: Maximum of $5,500 to $20,500/yearly
  • Federal Work-Study: This depends on your school or institution
  • Iraq and Afghanistan Service Grant: $6,501.99/yearly

The amount of money you qualify for also depends on your year in school and whether you’re an undergraduate or graduate student, amongst other things. These numbers are broad generalizations for comparison.

But how is financial aid determined? For example, it factors in your enrollment status, your school’s Cost of Attendance (COA) and your Expected Family Contribution (EFC), replaced in 2024-2025 with the Student Aid Index (SAI). Using a variety of information, your financial needs are calculated and funds are awarded.

What Types of Financial Aid Are Available?

There are several different sources of financial aid to choose from. This includes grants, scholarships, Work-Study jobs, and loans. Some can help with bills while in school.

Grants are financial aid, but you don’t have to pay them back. The exception would be if you leave school and don’t complete your designated service obligation, such as with TEACH Grants.

Grants include TEACH Grants, Pell Grants, FSEOG Grants, and Iraq and Afghanistan Service Grants.

You may also qualify for scholarships. These may be academic, athletic, need-based, employer, STEM, Military, and more. Scholarships are essentially free money that you don’t have to repay.

Another type of financial aid comes in the form of Work-Study Programs. These jobs are available to students who want to work part-time while paying for school.

You won’t earn anything less than the federal minimum wage, but you may earn more. The amount of money you’re awarded depends on when you apply for the Work-Study Program, how much financial aid you need, and your school’s funding level.

Loans are another type of financial aid. You borrow these funds and pay them back with interest. When you complete your FAFSA, you may find that loans are offered to you when your school provides you with a financial aid package. You have to pay this money back — with interest — so always understand all repayment options before applying for a loan.

Understanding Financial Aid

As you apply for college, you may find yourself wondering about financial aid. Always begin by completing your FSA ID and the Free Application for Federal Student Aid (FAFSA). If you’re a student applying for financial aid, you’ll also need your parent’s tax information (or yours if you filed taxes).

After you gather the necessary information and complete your FAFSA, you’ll learn about the different types of financial aid available to you. You’ll probably have questions along the way, as understanding financial aid often has many moving parts. College Funding Professionals can help.

We’ll guide you through the entire college application process, answering all your questions. We’ll also explain everything you need to know about FAFSA.

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