Background on Financial Aid: What is it and how do you get it?

Piggy bank on books

Just the facts ma'am

  • College costs have grown nearly 40% in the past five years.
  • The average graduate leaves college with over $24,000 in debt.
  • Between 2001 and 2010, 2 million academically qualified students did not go to college because they couldn't afford it.
  • Only 12% of Hispanics and 16% of African Americans eventually earn a bachelor’s degree, compared to 33% of white students who earn a BA. The rising cost of college is to blame for this disparity. 

Confused? We'll break it down.

  • Need-based aid is calculated and awarded based on the financial needs of students and their families (a.k.a. how much your parents make). The Free Application for Federal Student Aid (FAFSA) is the official way to determine just how much you'll need.
  • Merit-based financial aid means scholarships awarded by colleges, universities, and outside organizations. At many schools, all students are automatically considered for merit scholarships. At some a separate application process is required, so be sure to ask your dream school's admissions office which method they consider you for those scholarships.
  • Athletic scholarships are a form of merit-based aid.
  • Scholarships are also given from community groups like the YMCA, Girl Scouts of America, etc. We've got a pretty hefty list of volunteer-based awards to apply for in our scholarships section

The application process

  • To apply for financial aid, fill out the Free Application for Federal Student Aid (FAFSA), which includes a Student Aid Report to help determine your expected family contribution. You can download the application at FAFSA.ed.gov.
  • You must fill out a FAFSA for every year you plan on attending a university or college. That means, that you have to fill one out for your freshman, sophomore, junior and senior year.
  • Be prepared to give financial information such as family income, number of people in household and number of people going to college as well as personal information such as social security number.
  • List six schools you are interested in attending (these can be changed if those schools do not provide the financial support you need).
  • You will receive the results of the application, including the amount of aid you can expect to receive. This is also sent to the schools you apply to.

What are grants?

  • Federal Aid for low-income students typically comes in the form of a Federal Pell Grant. Application for the Pell is automatic with the submission of the FAFSA.
  • Most grants do not have to be repaid. However, you should always be clear about this prior to accepting the grant so ask someone in your school's financial aid office.
  • The Federal Pell Grant Program provides need-based grants to low-income undergraduate students (and some graduate students) to promote access to higher education.
  • Pell Grants can be used at over 5,400 participating colleges and universities across the country.
  • The maximum Pell Grant for the 2010-2011 award year is $5,500.
  • Pell Grant amounts depend on the student’s expected family contribution (which is determined in the FAFSA application process), the cost of attendance, the student's enrollment status and whether the student attends school for a full academic year or less.
  • If you qualify for a Pell Grant, you will receive the money in one of a variety of ways:
    • Your school credits Pell Grant funds to your school account,
    • You are paid directly (usually by check), or
    • A combination of the above two methods of payment.

Obama's plan

  • Spurred by research that shows that eligible students often fail to apply for aid due to the complexity of the process, the linchpin of Obama’s plan is to simplify the process.
  • In his 2010 budget proposal, President Obama suggested a five-year, $2.5 billion fund to build federal-state-local partnerships aimed at improving college access and completion, particularly for students from disadvantaged backgrounds.
  • The Obama administration announced a shorter, simpler FAFSA application in 2009, which included instant estimates for Pell Grant and other loan rewards and seamless retrieval of tax information from the IRS.
  • He has said that he intends to expand Pell Grants for low-income students and wants to eliminate the more expensive private loan program and direct that money into direct aid for students.
  • In his 2011 State of the Union address, not only does Obama to have the highest proportion of college graduates in the world by the end of the decade, but he also proposed making a $10,000 tax credit for college expenses permanent.

Sources:
FAFSA.ed.gov
U.S. Department of Education
College Bound
College Board
Project on Student Debt

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