10 Important Financial Aid Terms You Should Know
Financial aid is a lot like a football game. If you’re unfamiliar with the lingo, it can leave you dazed and confused. Just imagine what it would be like if a coach were to send in a quarterback without giving him a playbook or any tools to create an effective offense. In most cases, he would fail to move the ball. For some students, that’s exactly what has happened during the college planning process; they’ve received their college financial aid applications, but nobody has taken the time to explain what it all means. But don’t throw in the towel just yet. Here are 10 important terms that can help you score a financial aid touchdown!
1. Free Application for Federal Student Aid (FAFSA)
High school seniors and current college students can submit the FAFSA beginning in January (or as soon as taxes have been filed). The information in this application will be used to determine your eligibility for federal aid. Colleges may use the FAFSA to determine eligibility for institutional aid, as well.
2. CSS/ Financial Aid PROFILE®
CSS/Financial Aid PROFILE® is a financial aid application service managed by the College Board. Some colleges may request this form in addition to the FAFSA, but it is only used to determine eligibility for non-federal financial aid. Applications are available starting October 1st.
3. Student Aid Report (SAR)
Once you complete the FAFSA, you will receive the SAR (either by email or paper). Be sure to review it for errors, as colleges may use the information in this report (including your Expected Family Contribution) to help determine your eligibility for financial aid.
4. Expected Family Contribution (EFC)
Colleges determine your EFC by using information received from the FAFSA or CSS/Financial Aid PROFILE®. This number represents your family’s financial strength, and determines this number by considering your family’s income, assets, size, and how many family members will be attending college. Colleges subtract your EFC from the total cost of attendance (COA) to determine how much financial aid you may need to attend college. Your EFC also determines how much financial aid you may receive from the federal government.
5. Cost of Attendance (COA)
Your COA is the amount needed to attend a college per year before financial aid is applied. It may include tuition, fees, room and board, books, supplies, and living expenses.
6. Merit-Based Aid
Merit-based financial aid is awarded to a student based on his/her academic success (grade point average, class rank, etc.), athletic ability, artistic talent, or other areas.
7. Need-Based Aid
Need-based aid is awarded to a student based on his/her inability to pay the full cost of attendance. It may include grants, loans, scholarships, and work-study opportunities.
Grants are free money for college that does not need to be paid back. Students typically receive grants based upon financial need.
Scholarships are gift-aid that does not have to be paid back. Students may receive scholarships from state, institutional, or private organizations/donors. A scholarship may awarded based on need, merit, skill, creative essay, or other factors.
This type of financial aid must be paid back. Loans may be offered through the federal government, a bank, or other sources. Terms and fees will vary by lender.
Understanding the lingo is the first step to creating an effective financial aid strategy. To learn more about financial aid and how to find free money for college, be sure to visit the Federal Student Aid website or head over to ScholarshipExperts.com for more helpful advice.