By The Princeton Review
Two students apply for federal student aid–a mediocre student and a high–achieving student. Which applicant will receive a higher award?
A) The mediocre student
B) The high-achieving student
C) The student who applied first
D) The better-looking student
E) Cannot determine from the information given
Are you holding an intense internal debate, vacillating between C and D? Well, you might be surprised to learn that the correct answer is actually E. Federal student aid is need–based. That means it doesn't discriminate by any factor apart from need. Eligibility is based solely on the assets and income of the prospective student and his or her family. Factors such as test scores or athletic ability have no bearing on any aid designated need–based.
On the other side of the coin is merit–based aid. Merit includes a variety of categories: academic, artistic, athletic, and the list goes on. Scholarships are the most common type of merit–based aid (though some do have a need-based component). Assuming need is not a condition, a student with extensive assets and income is just as entitled to a merit-based award as a student with limited assets and income.
For the far majority of students, the chief source of financial aid will be need–based aid. However, it's important to educate yourself on the variety of assistance available. Regardless of your economic situation, take every opportunity to lessen the financial burden.
How Does Federal Student Aid Work?
Trying to understand financial aid can induce headaches, anxiety, and frustration. If it's not the acronyms (EFC, SAR, FAFSA), it's the vocabulary (unsubsidized, unmet–need, institutional grants). Let's take a step back and look at the big picture.
The intent of federal student aid is to bridge the gap or make up the difference between (1) what your education costs and (2) what you can afford to pay. The goal of federal student aid is to meet your need. Now it doesn’t always achieve this goal.
This equation clearly paints the picture…
Sound simple? Well, it is and it isn't. Financial Aid officers prefer using other terminology to express the same meaning. Here is exactly the same equation written using financial aid jargon:
The cost of attendance refers to the total cost of tuition, room & board, insurance, books, transportation, and other fees. Be cautious not to confuse tuition with cost of attendance – one will be higher than the other! If you were to win a full-tuition scholarship (and you would be a lucky duck if you did) you would still have to pay all these other expenses to attend college or graduate school. The good news is – federal student aid covers these types of expenses as well.
Your estimated family contribution (EFC) is the amount of money the federal government has determined you and your family can afford to contribute toward your education. Uncle Sam determines your EFC from your answers on the Free Application for Federal Student Aid (FAFSA). Now chances are that “what you think your family can afford” and “what the government thinks your family can afford” and “what schools think your family can afford” are three different things.
Your NEED is the amount that remains to be paid. If you are lucky, the schools to which you apply will "meet" all of your need with grants, loans and work–study. Any left–over amount is called unmet need.
What About The FAFSA?
It asks mostly about you and your family’s income and assets. The government plugs your information into a complex formula to determine “how much you can afford to pay for school” or your “expected family contribution.” There are a few other things I want you to know about the FAFSA:
- You apply to many schools, but you only complete a single FAFSA that covers all of them
- You submit your FAFSA ASAP in January the year before you plan to attend school
- You must submit a FAFSA every year thereafter for each year of college or graduate school you want aid
But Who Creates Your Award?
It’s the schools that create your award package. They receive a single large pool of federal dollars, and they choose how to distribute it. That pool of money is limited however, and they usually don’t have enough money to cover the need of all of their students. You and your family meet your unmet need. So while you shouldn’t ignore the cost of attendance, the cost of attendance is not as important as how much of your need is being met.
Is Cost A Factor?
You shouldn’t decide not to apply to a school that you like, just because the sticker price is too high. The fact is that once you receive an award package, the most expensive school you apply to can become the most affordable one. But you won’t know until you’ve applied, been accepted and received an award offer from that school.
After you receive all the award offers from all the schools that have offered you admission, then decide which school you should attend. It’s only at this time that you and your family will truly know what the cost of college or graduate school will be.