financial aid fundamentals

Financial Aid Fundamentals

Paying for college requires a basic understanding of the process of applying for and receiving financial aid. If you are worried about your family’s ability to manage financially, adding schools to your list that you can currently afford is a smart and responsible idea.

The best time to think about financial aid is before you apply.

As I’ve said repeatedly, putting in the work up front to build a college list that meets all your needs, including financial, is the surest way to find the right fit. Here’s an overview of the financial aid process.


In order to receive federal grants, scholarships and loans you will need to complete the Free Application for Federal Student Aid (FAFSA). This year’s FAFSA will be released on Oct. 1st. If you submit your FAFSA early, you will have a better chance of more federal financial aid or institutional financial aid. Many schools distribute aid on a first come, first served basis.

To complete the Free Application for Federal Student Aid, you will need:

  • Your Social Security Number OR Alien Registration Number (if you are not a U.S. citizen)
  • Your federal income tax returns, W-2s, and other records of money earned (Note: You may be able to transfer your federal tax return information into your FAFSA using the IRS Data Retrieval Tool)
  • Bank statements and records of investments (if applicable)
  • Records of untaxed income (if applicable)
  • An FSA ID to sign electronically

What happens next?

After your FAFSA is filed and processed, you will receive an email with a link to your online Student Aid Report (SAR). This will give your EFC based on the federal methodology.

What’s an EFC? The EFC is the Expected Family Contribution. It is an estimate of the student’s and their parents’ ability to pay the costs of a year of post-secondary education.

Copies of your SAR are automatically sent to campuses that you designated in the FAFSA. Schools then use these figures to calculate your award letter. You may designate up to 10 schools to receive this report. 

Tip: List an in-state public school first on the FAFSA to qualify for state grants. Use the next 9 spots for schools with the earliest financial aid deadlines. You can add additional schools to the FAFSA online or by calling 1-800-433-3243.


Should we fill out the FAFSA even if we know our EFC is high?

Yes. Occasionally, merit scholarships are only awarded to students who fill out the FAFSA, even if these grants aren’t based on the information provided. Also, if your financial circumstances change, filing an amendment is quick and easy. A job loss, a serious injury, or a death in the family can impact your financial situation at any time while your student is in college. Having a FAFSA on file can give you a leg up in case your student needs aid in the future. Maybe your student has a one-time scholarship that helps for the freshman year but won’t extend into the sophomore year or beyond. Maybe additional children will be starting school in coming years.

You never want to assume that you won’t qualify for aid, or that filling out a FAFSA won’t benefit you. Your income could be different, the school’s cost could be different, your student could transfer, and much more.

Do I need a FAFSA for college loans?

Any student, regardless of income, who wants to borrow federal student loans must fill out the FAFSA to get access to these loans. In addition, any parent, regardless of income, who would like to borrow the Parent PLUS Loan must also fill out the FAFSA.

Will having financial need hurt your student’s chances of being admitted?

Maybe… It depends on the financial aid philosophy of the college.

Colleges are either considered need-blind or need-aware when it comes to how they consider financial aid as part of their admissions process. Even with need-aware admission, only students who are on the borderline are affected by having financial need. Of course, if you fill out a FAFSA and it shows you don’t have financial need at the school, then the application won’t be affected either way because you won’t actually use need-based aid. The financial aid office will let the admissions office know if you didn’t quality.

The CSS Profile (College Scholarship Profile)

Many private colleges (over 200) require a CSS Profile in addition to the FAFS to receive financial aid. Unlike the FAFSA, there is a fee to apply. The first application is $25 and reports to additional schools are $16 each. Fee waivers are granted to high-need students, generally for household incomes of $45,000 or less per year. Check each college website to see if the CSS Profile is required.

Both the CSS application and the FAFSA can be filed as early as October 1 and should be completed as soon as possible to take advantage of aid that is distributed on a first-come, first-served basis. All schools have their own deadlines in place for the CSS, but many require students to file the profile two weeks before the college’s priority admission application deadline.

It is important to know that the CSS has some significant differences from the FAFSA, in particular the way it calculates certain assets. The FAFSA considers cash gifts – such as from grandparents to grandchildren for college – as a part of parents’ total assets, where the CSS counts it as parental income, thus decreasing a dependent student’s eligibility for aid. Overall, the CSS takes a closer look at family finances than the FAFSA does. Among other factors, the CSS also evaluates a family’s medical bills and school costs for younger children to determine a family’s expected contribution. FAFSA looks strictly at numbers such as income and family size, so families must discuss personal situations and hardships directly with schools. For some students, this could mean more financial aid opportunities are available through the CSS.


If you plan to attend a college that will require loans, there are multiple options. Federal loan repayment schedules may be impacted by the current COVID-19 pandemic.

Federal Subsidized Loans (to students) 

These government-backed loans are awarded on the basis of financial need. The interest is paid by the government while the student is in school and for 6 months after graduation. The interest rate varies and there is a one-time fee. There are limits:

First year: $3500
Second Year: $4500
Third Year and beyond: $5500

Unsubsidized Federal Loans (to students)

These loans are available to students independent of need and the government does not pay the interest while the student is in school. Interest rates and loan fees vary each year. Students may defer interest while in school, but it will accrue and be added to the loan principle. The total of subsidized and unsubsidized loans cannot exceed:

First Year $5500
Second Year $6500
Third and Fourth Year $7500.

PLUS Loans (Parent Loans to Undergraduate Students)

These loans enable parents to borrow up to the total cost of education for each student, minus financial aid awarded. They are not based on financial need. The loan is unsubsidized but can be deferred while the student is in school. To be eligible, parents must not have adverse credit from a bankruptcy or foreclosure in the last 5 years.

Wrapping up

Paying for post-secondary education will likely be one of your single highest lifetime expenses. Make sure you understand the process, your options and deadlines to maximize your financial aid opportunities. Take advantage of online tools, such as O*Net Online to explore careers and salary predictions after graduation. And know that using data on graduate employment and indebtedness is key to building a college list that meets your financial needs.

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