The Ultimate Guide to Financial Aid

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Financial aid can help you pay for college. Are you thinking about attending college, graduate school or a technical school? There’s a lot to consider: where to go, what to study, how to get accepted, and how to afford the education.

In this guide, you’ll learn all about financial aid and the application process.

What is Financial Aid?

Financial aid helps you pay for college or technical school that includes all funding sources. The type of student aid available include grants, scholarships, work-study jobs, and loans.

Financial aid is money to help pay for college or career school. Aid can come from:

  • the U.S. federal government,
  • the state where you live,
  • the college you attend, or
  • a nonprofit or private organization.

To be eligible for financial aid, you must complete the FAFSA or Free Application for Federal Student Aid.

Note: FAFSA must be completed each year for every academic year to determine financial aid eligibility.

Get Started Early

It’s best to get started sooner rather than later. In fact, don’t wait until you’re just about to start college. Plan how to pay for college ahead of time. Here are some tips:

  • Read our guide to financial aid thoroughly. It’s sure to spur some additional questions.
  • Start by asking your school counselors about the financial aid process.
  • Make a list of the colleges you’re interested in and inquire about the financial aid available.
  • Make note of the application deadlines as many colleges have deadlines for school-specific grants, aid, and scholarships.

How to Get Federal Student Aid

The first step in the financial aid process is to complete the Free Application for Federal Student Aid. The FAFSA is used by colleges to determine your eligibility for financial aid offered by federal and state governments. Additionally, colleges use FAFSA data to award college-specific aid such as scholarships and grants.

Apply for Federal Student Aid

To apply for federal student aid, and for most state and college aid, you must complete the FAFSA, online at the US Department of Education’s Financial Aid website. There is no fee to apply for federal student aid. Contact the financial aid office at the school you plan to attend for more information.

It is important to note that even if you are not eligible for federal student aid, you may still be eligible for aid from your state or school.

After submitting the application, you’ll receive a Student Aid Report also referred to as SAR.

How to Review the Student Aid Report

The SAR lists your FAFSA information and allows you to make corrections. The school(s) you list on your FAFSA form will have access to your SAR data electronically within a day after it is processed.

You may receive your SAR online or via courier mail if you provide an email address in the FAFSA form. The StudentAid.gov resource states, “If you provide a valid email address, you’ll receive an email from noreply@FAFSA.gov with instructions on how to access an online copy of your SAR.”

Access your SAR online by using your FSA ID on fafsa.gov.

What information is in the Student Aid Report?

Your SAR will include an Expected Family Contribution. The EFC is your expected financial contribution to your college education. If you don’t see an EFC, the SAR will indicate what you need to do to resolve the issue.

What do I do with my SAR?

Review your Student Aid Report carefully to make sure it’s complete and correct. The information listed in your SAR is used by the colleges you’ve listed when filling out FAFSA to determine your eligibility for federal and nonfederal financial aid.

Make any corrections, update information, and follow-up with any requests. This is extremely important.

If your SAR is correct, keep the report for your records.

Eligibility for Financial Aid

In general, to be eligible for financial aid, you must be a U.S. citizen or eligible noncitizen and are enrolled in an eligible degree or certificate program at your college or career school. There may be more eligibility requirements to qualify for federal student aid. If additional information is needed to determine eligibility, it will be reported on your Student Aid Report.

Note: There is no income cut-off to qualify for federal student aid. Many factors such as the size of your family and your year in school are taken into account.

How to Review a Financial Aid Offer

After receiving your SAR, you’ll receive financial aid packages from the schools you listed on FAFSA. The financial aid package includes the types and amounts of aid a college is offering you, and your expected costs for the year (your Expected Family Contribution).
If you’ve been accepted to multiple colleges, compare the costs and aid offers. Accept the aid from the school that’s best for you and inform them of other sources of aid (such as scholarships) you expect to receive.

The Award Letter

Each school will send you an Award Letter that includes a combination of aid from grants to loans. Review the financial aid offered by the schools you have applied for or plan to attend. Follow these steps:

1. Analyze the financial aid award letter. Determine how much of the aid is free money (grants and scholarships). This can help you prioritize based on affordability.

2. Calculate. Determine if there are any gaps in funding your college education. Do this by subtracting the amount of free aid from the cost of attending the school (tuition, room, and board). The amount that remains is what you or your parents are responsible to cover.

3. Choose student loans.  Look at the number of federal student loans offered. Subsidized federal student loans are better than unsubsidized federal student loans.

If your aid is insufficient, contact the financial aid offices to determine other opportunities to fill in the gap. Additionally, continue to look for outside sources such as scholarships and tuition reimbursement programs offered by some employers.

Get Your Financial Aid

After choosing the school you’ll attend, the financial aid office will apply your aid to the amount you owe. If there is a surplus, you’ll receive the unused balance for other college expenses. To remain eligible for financial aid, you must make satisfactory academic progress. Additionally, you’re required to complete FAFSA each year.

Types of Financial Aid Available

The federal government offers a number of financial aid programs. Besides aid from the U.S. Department of Education, you also might get:

  • aid for serving in the military or for being the spouse or child of a veteran,
  • tax benefits for education,
  • an Education Award for community service with AmeriCorps,
  • Educational and Training Vouchers for current and former foster care youth, and/or
  • scholarships and loan repayment through the Department of Health and Human Services’ Indian Health Service, National Institutes of Health, and National Health Service Corps.


Grants can come from the federal government, your state government, your college or career school, or a private or nonprofit organization. It’s free money that does not need to be repaid.

Federal and state grants are funds that do not need to be paid back as long as you meet all requirements. Grants are usually based on your family’s eligibility to pay, merit, and cost of education. There are federal and state-specific grants that are available. Such as:

  • Federal Pell Grants
  • Federal Supplemental Educational Opportunity Grants (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grants
  • Iraq and Afghanistan Service Grants
  • State-specific grant programs


Work-study is a federal program providing part-time employment while enrolled in school. The work-study program is available for undergraduate and graduate students based on financial need. The program encourages community service work and work related to the student’s course of study.

Here’s a quick overview of Federal Work-Study:

  • Part-time employment while enrolled in school.
  • Available to undergraduate, graduate, and professional students with financial need.
  • Available to full-time or part-time students.
  • Administered by schools participating in the Federal Work-Study Program. Check with your school’s financial aid office to find out if your school participates.

Read more about Federal Work-Study.


Scholarships are awarded by meeting or exceeding certain standards set by the scholarship-giver.

Available scholarships range from merit-based, need-based, community service, athletic, etc. Merit scholarships might be awarded based on academic achievement or on a combination of academics and a special talent, trait, or interest. Other scholarships are based on financial need.

You can learn about scholarships in several ways, including contacting the financial aid office at the school you plan to attend and checking the information with your high school counselor or online. Get creative when sourcing scholarship opportunities.

Some sources include:

  • Financial institutions
  • Parent’s employer
  • Your employer
  • Organizations or associations in your community

Be aware of scholarship scams that include fees and payments to access applications.

Check out our financial marketplace for a list of scholarship websites.

Notify your school if you receive any scholarships that may impact your financial aid package offered by the college.

Considerations: The organization providing the scholarship will determine when and how the money is awarded–directly to you or the school.

Student Loans

As part of your school’s financial aid offer, you might be offered student loans. Federal student loans are typically available for both undergraduate or graduate students.

The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program, the U.S. Department of Education is your lender. The federal government regulates these loans and controls interest rates and loan terms.

There are four types of Direct Loans available:

  • Subsidized Loans – loans made to eligible undergraduate students who demonstrate financial need. The federal government pays the interest for the borrower while in school, in grace, or in deferment.
  • Unsubsidized Loans – loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. The federal government pays the interest for the borrower while in school, in grace, or in deferment.
  • Direct PLUS Loans – loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need. A credit check, however, is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.

Learn more with our Ultimate Guide to Federal Student Loans.

When to Consider Private Student Loans

In many instances, the amount of financial aid you receive may not cover the total cost of attending college. It may be necessary to apply for private student loans.

Lenders such as banks or credit unions offer private student loans. Private lenders set specific guidelines and requirements for their loans. These loans do not have the same federal loan benefits such as income-driven repayments or loan forgiveness.

Only consider private loans as a last resort. Find private student loans in our financial marketplace.

Learn more about private loans in our Ultimate Guide to Federal and Private Student Loans.

Top Financial Aid Myths Debunked and Answered

There’s a lot of financial aid myths that circulate frequently. Today, I want to address five myths so you can focus on getting aid.

The first step in the financial aid process is completing FAFSA. The Free Application for Federal Student Aid is essential in affording college for many people.

If you don’t fill out the FAFSA, you could be missing out on a lot of financial aid. I’ve heard a number of reasons students think they shouldn’t complete the FAFSA. Here are a few:

“I (or my parents) make too much money, so I won’t qualify for aid.”

Truth: There is no income cut-off to qualify for federal student aid. Many factors besides income—from the size of your family to the age of your older parent—are taken into account. Your eligibility is determined by a mathematical formula, not by your parents’ income alone.

And remember when you fill out the FAFSA, you’re also automatically applying for funds from your state, and possibly from your school as well.

In fact, some schools won’t even consider you for any of their scholarships (including academic scholarships) until you’ve submitted a FAFSA. Don’t make assumptions about what you’ll get—fill out the application and find out.

>> Learn more about the FAFSA

“FAFSA is only for federal student loans.”

Truth: In addition to federal aid, FAFSA is used by your state and college to determine your eligibility for needs based student aid. FAFSA is the first step to apply for nonfederal aid. Many colleges many also look at FAFSA information to base their merit-base scholarships to determine how it fits within the total student aid received.

However, understand that FAFSA does not apply to private student loans. With private loans, you must complete an application with a private lender.

>> Learn more about apply for private student loans.

“Only students with good grades get financial aid.”

Truth: While a high grade point average will help a student get into a good school and may help with academic scholarships, most of the federal student aid programs do not take a student’s grades into consideration.

If you maintain satisfactory academic progress in your program of study, federal student aid will help a student with an average academic record complete college education.

>> Learn how to complete and get the most from FAFSA.

“The FAFSA is too hard to fill out.”

Truth: The FAFSA is easier than ever, especially if you fill it out online at www.studentaid.gov. There are detailed instructions for every question, and the form walks you through step by step, asking only the questions that apply to you.

If you need help, you can can call, email, and chat with a customer service representative. If you’re filling out the paper FAFSA, you can get help from a high school counselor, from the financial aid office at the school you plan to attend, or from our toll-free number: 1-800-4-FED-AID. All these sources of advice are FREE.

Learn how to complete FAFSA.

“I’m too old to qualify for financial aid.”

Truth: Funds from federal student aid programs are awarded on the basis of financial need, not on the basis of age. Adult students can get financial aid, so be sure to fill out the FAFSA.

So What Can You Do Now?

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