After your children have submitted their financial aid applications and started
receiving award letters from various colleges, it may be difficult to interpret and
compare their offers. The following information should be helpful in this regard.
College financial aid is usually characterized as either self-help aid or gift aid. It is awarded based on either need or merit. Self-help aid must be repaid through financial obligation (loans) or service to the college (work-study). These offers are awarded primarily on the basis of need. Gift aid is financial aid that does not require repayment or work (i.e., grants and scholarships). It may be awarded based on either merit or need. Obviously, gift aid is the most desirable form of financial aid.
Merit-based aid is awarded to a student with a special talent (e.g., academic,
musical, athletic). Students who have a high GPA, a high class rank, and excellent
standardized test scores can earn substantial merit scholarships that can cover a
significant amount of college costs. Heavy involvement in activities that colleges
are most interested in (athletics, leadership, journalism, music, etc.) will help
earn even more scholarship dollars.
The better college financial aid awards usually are given to students with merit. The
student's unique skills and abilities and the college's interest will determine the
amount of merit-based aid offered. Need-based financial aid is awarded solely on the
financial needs of the family.
Much financial aid awarded comes from the federal government. This aid is available to
students enrolled in an eligible program at a school participating in the federal
student aid programs. An eligible program is a course of study that leads to a degree
or certificate and meets the U.S. Department of Education's requirements. Eligible
schools include four-year or two-year public or private educational institutions,
career schools, or trade schools.
Aid may cover school expenses, including tuition and fees, room and board, books and
supplies, transportation, and some personal expenses. Once need has been established,
eligible students may be offered some combination of the following types of federal
a. Work-study. The Federal Work-Study Program encourages community
service and work related to each student's course of study. Students earn at least
the current federal minimum wage, but the amount might be higher depending on the
type of work and the skills required.
b. Loans. The federal government offers two primary loan programs
that may be part of a college's financial aid offer to an eligible student: Perkins
loans and Stafford loans. These loans are desirable because they offer low interest
rates and generous repayment terms.
c. Grants. The federal government offers several grant programs for
certain low-income students or students in certain fields of study (such as the TEACH
After submitting the financial aid application, the student will receive a Student Aid
Report that indicates the amount of money the family (student and parents) is
expected to contribute to the student's college expenses for the upcoming school
year. This is the Expected Family Contribution (EFC). All colleges will use this
number as the basis for awarding their need-based financial aid. Families will
receive college financial aid awards that will state the amount and type of financial
aid offered. Students may accept, decline, or negotiate any part of an aid award. The
college should not be allowed to pressure students into accepting an aid award before
they have time to receive and compare awards from other colleges. Students should
request an extension to reply if they have not received all aid awards. When a
particular college will not grant an extension, students can accept the aid award to
safeguard the award at that college. The acceptance does not commit the student to
attending the college; it merely holds the aid award for the student.
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2014