Financial aid

Many families and their students are often shocked when they see the sticker price associated with a college education. If you’re looking to apply to college, chance are that you may already be stressed about the price of tuition, housing, and fees. Combined, the overall cost of college can feel downright overwhelming. Obtaining a college education doesn’t need to feel out of reach. Fortunately, financial aid for higher education can help you realize your dreams of earning a college degree.

Financial aid can be a confusing process. If you’re unclear about what all this means, read on to learn more about financial aid, how it can help you pay for college costs, and the steps to apply for financial assistance for your education.

Financial aid helps offset college-related expenses

Financial aid is a broad term that includes all types of funding you can use to help pay for college. This includes grants, scholarships, loans, and work-study programs. Although many students pursue financial aid through federal programs, there are also state-sponsored, college-sponsored, and privately-funded financial aid opportunities.

Statistics show that, while 86% of college students benefit from some form of student financial aid, more than $2 billion in student grants go unclaimed.

Statistics show that, while 86% of college students benefit from some form of student financial aid, more than $2 billion in student grants go unclaimed. Numerous other financial aid opportunities, such as scholarships offered by businesses, nonprofit organizations, and other entities, are also underutilized. This means a lot of money is left on the proverbial table. Most students don’t realize there are many opportunities to find money to help them achieve their educational goals if they’re willing to invest the time and effort.

History of federal financial aid

Until the mid-20^th century, students not from wealthy families generally had to lay their hopes for college on the kindness of generous philanthropists.  The U.S. Congress enacted the GI Bill in 1944 to reward veterans who served during wartime, giving them the opportunity to pursue higher education and catch up to their peers. The next step in financial aid opportunities came in 1958 when Congress passed the National Defense Education Act. This law provided college students with low-interest loans with debt cancellation for students who became teachers. But although graduate fellowships for students pursuing science, math, engineering, and other fields falling under “strategy” were also approved, the general population could not yet access benefits offered by the federal government.

The biggest change came in 1965 when Congress passed the Higher Education Act (HEA). This law solidified the federal government’s commitment to equalizing college opportunities for students in financial need. Over the years, this law has evolved to be more inclusive and, with the act’s reauthorization in 1972, the basic charter of today’s federal student aid system was formed.

The biggest change came in 1965 when Congress passed the Higher Education Act (HEA).

Cost of college degrees

The cost of a college degree can vary widely. Aside from some colleges being more expensive than others, other factors also impact the cost of a degree. This includes specific degree programs, attendance levels, college fees, opportunity cost, room and board, books, and more. That being said, for the 2018-19 academic year, the average cost of college, including factors such as tuition, fees, and housing was estimated to be about $18,400 for public institutions, $47,400 for private, non-profit institutions, and $27,000 for private, for-profit institutions.

Compared to costs from 10 years prior, 2018-2019 costs of attending a public institution increased by 28%. After adjustment for inflation, the cost of attending private, nonprofit colleges rose 19% and decreased by 6% at private, for-profit institutions for the same time frame between 2008-09 and 2018-19.

Percentage of students receiving financial aid

Students often assume they aren’t eligible to receive financial aid. However, even if you think you don’t meet the criteria, you can always apply. You might be surprised at the percentage of students who receive full or partial student financial aid even though they initially thought they wouldn’t qualify.

Types of financial aid

Pell Grants, a type of federal aid for low-income students, are the most well-known type of assistance for higher education expenses. While this type of aid is granted based solely on a family’s income and financial resources, numerous other types of aid exist, including grants, scholarships, loans, work-study programs, 529 plan grants, and assistantships (the latter is for graduate students).

Aid granted by degree level

The percentage of first-time undergraduate students who attend a 4-year institution receiving financial aid has been increasing over the years. According to the National Center for Education Statistics (NCES), the percentage of students receiving financial aid from 2000-01 to 2017-18 increased by 11%. As a comparison, in the 2000-01 academic year, 75% of students pursuing a bachelor’s degree were awarded aid; in 2017-18, 86% of students were given aid, when all types of higher education institutions were considered. Here is a breakdown of the percentage of student aid awarded in the academic year 2017-18.

Looking at the percentage of financial aid awarded to first-time, full-time students attending 2-year institutions, this has also increased. In the 2017-18 academic year, 78% of students received a form of aid – up 16% since the 2000-01 academic year.

Graduate students typically have to pursue different types of financial aid, primarily through loans, university-based awards, and assistantships.

Average student debt at graduation

Student debt at graduation generally varies due to the amount borrowed, type of school attended, whether students received grants, or the degree level. Generally speaking, the average student debt for a bachelor’s degree graduates in 2019:

Step-by-step guide to applying for financial aid

Pursuing financial aid is considerable work, although the time you invest in the process can make the effort worthwhile. Here is a step-by-step guide to help you increase your chances of identifying and qualifying for different forms of financial assistance.

• Conduct your research. This is a critical step because sometimes you have to dig deep to find the best award opportunities. Start with online resources, including the FAFSA website and online scholarship databases. Also, check with your university’s financial aid office and speak with faculty.
• Determine your eligibility by checking that you meet all the listed criteria. Don’t waste valuable time and resources applying for aid you aren’t eligible to receive.
• Check rules and regulations. Do this twice, especially for scholarships where you may need to maintain a specific GPA. If you take out a student loan, make sure to ascertain your loan repayment terms.
• Fill out application forms and accompanying documents. Carefully follow all directions, fill out all spaces, answer questions in their entirety, and submit all requested documents. Be sure to meet all specified deadlines.
• Receiving responses. Once you submit your applications, you’ll need to wait to hear back. In the meantime, it’s a good idea for you to continue to seek out financial aid opportunities. If you aren’t accepted for aid, return to step 1 and restart the process and apply to any additional opportunities you’ve uncovered in your research.

Remember, remaining eligible for aid or awards means continuing to meet any criteria stipulated by the organization granting money for education.

Financial aid FAQ

Types of financial aid

Here is a deeper look at the various types of financial aid offered to college students during different stages in their education.

Federal Aid (FAFSA)

The Free Application for Federal Student Aid (FAFSA) is the place to start for financial aid. This application is required before you can be considered for federal grants, work-study, and low-interest loans to help pay for school. The information contained in your FAFSA application is also typically used by colleges and states to determine your eligibility for additional aid they may offer.

The FAFSA is a fairly straightforward process, especially now that the application is offered completely online – students can even apply with the myStudentAid app, available on both Android and Apple devices. It is important to go over each step carefully and fill in all required fields accurately so your application isn’t delayed. Here is how to apply.

Create an FSA ID

The federal Department of Education recommends all students create an FSA ID before getting started on the FAFSA. This ID, a user name and password combination, enables you to sign your FAFSA form electronically and provides authentication needed to access the myStudentAid app, sign loan contracts, and access other information you need online. Make sure to have your Social Security number available.

Note: If you’re a dependent student, one of your parents will also need to create an FSA ID so they can sign their portion of the FAFSA electronically.

Fill out the FAFSA form

With your FSA ID, you can start to complete the FAFSA form. This helps streamline the process, making it easier to log in and access your application. Even if you have doubts that you meet the eligibility criteria for aid, it is recommended that you fill out the FAFSA.

Tip: Double-check you aren’t accidentally putting your parent’s FSA ID in by accident when starting the FAFSA because this will cause problems.

The FAFSA requires you to provide specific information which can take some time to gather. Familiarize yourself with the necessary documents to avoid scrambling to gather the information as you go along.

• Social Security Number
• Parents’ Social Security Number(s) if you’re a dependent student
• Alien Registration number (if not a U.S. citizen)
• Driver’s license, if applicable
• Federal tax returns, including your W-2 information. If married, you’ll need your spouse’s tax information and if you’re a dependent student, you’ll need your parents’ tax return information.

Details about your financial status

• cash on-hand
• savings and checking account balances
• investment income (stocks, bonds, secondary real estate)
• other specified assets
• your parents’ financial details if a dependent student
• any untaxed income

The FAFSA becomes available on October 1 for the following academic year, and the deadline is June 30. Check your school’s deadlines carefully if you plan to apply for aid directly from the school, as some schools have early deadlines.

As you fill out the FAFSA, be sure to check all applicable fields to ensure they are filled in and follow directions very carefully. You must list at least one school to process your application, but you can list up to 10 on the web or app applications; paper applications are limited to 4. Add all schools you either plan to or have already applied to so they receive your FAFSA information in a timely fashion.

Tip: Be sure to use the save key option as you’re working on the application so your information isn’t accidentally lost.

Sign and submit your FAFSA

Once you’ve completed your FAFSA, you’re required to sign and submit the application. To do this, you must enable pop-ups on your browser. Sign the FAFSA with your FSA ID. Parents of dependent students are also required to sign with their own FSA ID. You can then view your confirmation page to check that you have successfully submitted your FAFSA. Next, expect to receive your SAR (student aid report), either online or by post. This document provides important information, including Expected Family Contribution (EFC) and your estimated eligibility for aid. If you are awarded aid, you’ll receive an Aid Offer. Should you receive one or more from the different colleges, review and compare the offers carefully. Decide which school offers you the best option, accept your award, and get ready for school.

Scholarships

Scholarships are gifts that don’t need to be repaid. There are 1000s of scholarship opportunities offered by different organizations, including schools, businesses, employers, individuals, nonprofits, communities, religious entities, and other establishments.

To qualify to apply for the majority of scholarships, applicants must meet stipulated criteria that can be based on merit, academic achievement, talents, sporting skills, academic interests, to name a few. Other scholarships are gifted to specific groups which may focus on underrepresented groups that can be relate to  religion, gender, ethnic background, first-generation attending college, community connections, military affiliation, or membership in an organization.

Scholarships vary in amount. Although some cover full tuition, most are partial or one-time awards. Some scholarships are renewable. If you’re thinking of applying for scholarships:

• start your search early
• understand specific criteria that needs to be met to apply; for example references, essays, videos, or other supporting documents
• check the due date and apply beforehand
• research if scholarships can be renewed annually and, if so, what does this process involve are renewable each year and understand how to initial this process

Scholarships are a key source to cover college expenses, yet many students don’t apply. To begin, talk to your high school or college about how to identify scholarships.  Check out our comprehensive scholarship database for assistance in finding opportunities.

Tip: Unfortunately, students need to watch out for scholarship scams. Remember, you don’t have to pay to find scholarship opportunities.

Grants

Grants are money given to students, typically based on financial need.  One such example is the federal Pell Grant for low-income students. Need-based grants are awarded at the federal, state , or college level. These awarded monies are one of the most common types of financial aid.

Although many people confuse the terms grant and scholarship, and use them interchangeably, there are distinct differences. Scholarships, for the most part, are merit-based. Grants are based on an individual student or a family’s financial need. You must file a FAFSA to be considered for grants. The most common types of grants are federal PELL grants, state grants, and school-specific grants.

Scholarships, for the most part, are merit-based. Grants are based on an individual student or a family’s financial need.

PELL grants are typically awarded to undergraduate students in financial need, and yet to earn a bachelor’s, graduate, or another professional degree. These grants do not need to be repaid except under certain circumstances, such as early withdrawal or changes to enrollment status if linked to the grant amount. A grant is not usually enough to live off; the maximum PELL amount is approximately $6,500, with slight changes every academic year. Many students secure additional means to finance schooling, such as scholarships or loans. Getting a job can jeopardize your grant status. You cannot earn more than you would with a Federal Work-Study Award (more on this below).

TEACH grants are awarded to students in financial need who are pursuing teaching careers at the undergraduate or graduate level. These grants, which are up to $4,000 per year, require that the student complete a teaching service obligation as a condition of the monetary award. If these conditions are not met, the money awarded converts into a loan situation.

Every year, the federal government distributes about $30 billion in grant money.

Loans

Along with grants, loans are common alternative options to pay for higher education. Most families anticipate taking out loans to help cover college costs. All students are eligible to apply for loans regardless of degree level or whether they are attending full or part-time.

Loans can come from the federal government, banks, credit unions, or other financial institutions and organizations. Federal student loans tend to offer the most benefits. The 2 primary types of loans under the federal Direct Loan program are subsidized and unsubsidized.

• Subsidized loans are based on financial need. They offer lower loan limits than unsubsidized loans. While you’re in college, the federal Department of Education pays the interest. This loan is only available to undergraduate students.
• Unsubsidized loans aren’t linked to financial need, meaning that the majority of students are eligible to apply. These loans offer higher loan limits and immediately begin accruing interest that the student will eventually have to pay. Both undergraduate and graduate students can apply.

If you qualify for a subsidized loan, you’ll pay less over time than you would for an unsubsidized loan. Roughly 30% of students use federal student loans and these are the most common type of loans people apply for to help them pay for school.

If you qualify for a subsidized loan, you’ll pay less over time than you would for an unsubsidized loan.

Families often start the repayment process while their student is still enrolled in school, but with most types of loans, students aren’t required to start the repayment process until six months after graduation. Sometimes students face obstacles when it comes to their loans and are able to apply for loan forgiveness. Or, they meet other special criteria that allows them to have their school debt forgiven, discharged, or canceled. If approved, this means you are no longer required to repay a portion, or all of your loan. However, you must meet specific circumstances for this to occur.

• Public Service Loan Forgiveness (PSLF). If you become and remain employed by the government or a not-for-profit organization, you may be eligible for loan forgiveness after you’ve made 120 qualifying payments. Available for Direct Loans.
• Teacher Loan Forgiveness (FFEL). Graduates who teach full-time for 5 consecutive and complete academic years in low-income elementary or secondary school (or educational service agency), you can apply to have up to $17,500 of your loan forgiven. Available for Direct Loans and FFEL Program loans.
• Perkins Loan Cancelation and Discharge. Graduates may be eligible to be released from loan repayment obligations if they meet certain employment, volunteer, or are discharged under certain conditions. Available for Federal Perkins Loans.
• Total and Permanent Disability Discharge. If you become permanently and totally disabled, you may qualify to be relieved of your loan obligation. Available for Direct Loans, FFEL Program loans, and Perkins Loans.
• Closed School Discharge. If your college closes while you’re attending school or soon after you withdraw, you may be eligible to discharge your student loan. Available for Direct Loans, FFEL Program loans, and Perkins Loans.

Under normal circumstances, even if you don’t graduate or find a job in your field, you’re still responsible for paying for any education loans you’ve taken out.

Work-study and assistantship programs

Work-study programs are opportunities, paid for by the federal government, for students to work part-time either on or off-campus while attending classes. These jobs are offered based on financial need to help students supplement their grants, scholarships, and other methods of paying for school. Qualifying students at all degree levels can participate in work-study programs if offered by their school. These programs enable students to earn at least the federal minimum wage, with some jobs paying more, depending on the type of work performed and the required skills.

Assistantships are strictly for graduate students, though are not offered at every school or program. Jobs are usually linked to doing research or teaching undergraduate students.

Assistantships are strictly for graduate students, though are not offered at every school or program. Jobs are usually linked to doing research or teaching undergraduate students. To land an assistantship, you need to apply to listed jobs, similar to any other job. These positions are competitive. If your studies take longer than planned, this may not necessarily reduce your eligibility, although this will need to be checked with the school. Similarly, if you are unsuccessful in defending your dissertation, talk to the school about how this may impact your eligibility.

529 plans

529 programs are education-based savings programs. Each state has its own version of a 529 and students can apply to programs outside their home state. These savings plans can be a good way to supplement college expenses.  This is a proactive process that ideally is started when a future student is very young. It is important to understand, 529 are included as assets on the FAFSA and can restrict your ability to receive grants. Additionally, on reaching a certain age, financial advisors often suggest other options to invest your money, because the benefits received from a 529 no longer apply.

 Other ways to finance your education include:

• volunteering with Americorps, which provides a living stipend while working, and on completion of service, you receive money for college, along with other benefits
• sponsorships from employers, community organizations, or churches
• opening a Roth IRA to help finance education
• securing private loans from family or friends

Preparing to attend college is a very exciting time. It is also a costly endeavor. By proactively planning for college and understanding the financial resources available to you, your educational goals can be easier to reach. Unfortunately, many students go into the process unaware of the amount of available financial assistance, and graduate in heavy debt. With preparation and willingness to invest the time pursuing financial opportunities and awards, you can significantly reduce your post-graduate debt levels.