When going through the financial aid process, many students and parents often ask themselves, ‘How does financial aid work?’ The process depends on a number of factors, and its complexity can be overwhelming for families. The reality is that financial aid is a multi-dimensional process that uses different types of aid to put together a complete financial aid package. By understanding how this process works, students can give themselves an advantage when seeking financial assistance for college.
Everything Starts with the FAFSA
The main component of the financial aid process is the Free Application for Federal Student Aid, better known as the FAFSA. This is the form that both the government and the selected school use to determine a student’s level of need. It is through this level of need that the government and schools decide how much they should award each student.
The FAFSA form usually consists of about 130 questions in total, asking questions about parent income and assets, as well as the student’s financial dependence on their parents. Parent income and assets are used to determine the expected parent contribution towards cost of attendance. Depending on how much the parents make, the expected contribution could range from nothing all the way to over half the cost of tuition. The factors determining these price ranges changes yearly as the standard of living fluctuates.
The student’s information from the FAFSA form is used in calculating the student’s contribution towards their education. This usually ranges between $2,800 and $5,000 judging from summer employment and previous savings.
Students who cannot meet this contribution will qualify for the federal work-study program, which provides students a job on campus to give them the money to meet their contribution.
The Types of Aid Available to Students
The different types of financial aid offered are federal grants, loans, and outside scholarships. The Pell Grant is an example of a federal grant that allows students to receive $5,500 that does not have to be paid back. The Perkins and Stafford Loans 
offer students loans at the fixed interest rates of 5% and 6.8% , respectively. These are much lower compared to the double digit adjustable interest rates offered on private loans.
In additional to federal aid options, students can receive financial aid from their selected institution. Schools also use the FAFSA form to determine a student’s level of need and award need-based scholarships accordingly. Most schools have scholarships sponsored by alumni specifically for extreme financial circumstances.
Schools also offered merit-based scholarships for athletics and academics. Students who are extremely intelligent or extremely talented in a sport often have most of their expenses paid for by schools in which their talent is in high demand.
Whilst the financial aid process can be complicated at first glance, it is important to know how it works in order to minimize the costs of college. Through the FAFSA form, students can qualify for the grants, loans, and scholarships that make attending college a reality.
