Financial Aid 101: A Crash Course in Paying for College

You’ve found the college of your dreams. The academic programs are a great fit for your career interests, the campus is just the right distance from home, and the social life is definitely your scene. Even better, there’s a good chance you’ll be admitted. There’s just one problem: the price tag.

Given the sky-high price of tuition at many universities, more and more pre-collegiettes are turning to financial aid to help support their higher education. The College Board reports that about 75% of college students get financial aid; an average student receives $6,100 in aid that does not have to be repaid at a public four-year university, or $16,000 at a private four-year college.

Between applying for college itself and everything else going on in a busy high school senior’s life, the path to reducing college costs can be difficult to navigate. What exactly is financial aid? How do you get it? Read on for everything a pre-collegiette needs to know about financial assistance for college expenses.

How much aid can I get?

Before applying for college and financial aid in the fall or winter of senior year, you should have an idea of your aid eligibility. Your financial need determines the maximum amount of aid that you can obtain. The basic formula for your financial need is the cost of attending a given college minus your expected family contribution.

Cost of Attendance (CoA)

Tuition may comprise the bulk of your college expense, but additional costs including room and board, books, transportation to and from school, and personal expenses such as toiletries, groceries, entertainment, dining out, and shopping are all factored into the total Cost of Attendance. When you apply for financial aid at a college, the financial aid office uses your CoA to determine the amount and types of aid the college will offer you. Because of the wide range of tuition costs at different schools, as well as personal decisions such as living on- or off-campus, the Cost of Attendance varies from one university to the next and one student to the next. For this reason, it’s necessary to calculate the CoA for each college you’re considering.

The first step in finding the CoA is to make a list of all possible college-related expenses. Keep in mind that you should do this separately for each university on your list. First, look up the cost of tuition on the college’s website. (For some public universities, note that tuition is lower for in-state students than students from other states.) Alternatively, you can search for your university on the College Board’s College Search site to quickly get a tuition figure.

The College Search site also tells you the average cost of room and board (both on-campus and off-campus), books and supplies, transportation, and personal expenses for students at that college. However, it’s also important to consider your own lifestyle when estimating these costs. For instance, how many times per year will you travel home? Do you intend to use an on-campus dining plan, buy groceries, or eat off-campus?  How much do you think you’ll spend on personal expenses? In addition, you might have special circumstances, like a parent who recently lost their job or a medical condition that requires you to travel home frequently to see a doctor, which might affect some of your expenses. Situations like these are not always addressed by financial aid applications, so you should contact the college financial aid office and explain your circumstance to get a better estimate of your potential costs.

After listing your tuition and all other expected costs, add up them up to get your Cost of Attendance.

The range of CoA values at the colleges you’ve applied to might surprise you. Consider Student X, who’s applying to an in-state public university within driving distance of her hometown, where the tuition matches the average in-state public school tuition, $19,388. She’s also applying to a private college on the other side of the country, whose tuition is $39,028, the average cost for a private university. The difference in tuition is about $20,000, but after Student X factors in transportation costs (it costs $500 more for her to fly home during breaks than to drive), room and board ($3,000 more at the private school), and miscellaneous costs (for example, she’ll have to pay to store her belongings or ship them home over the summer at the private school), her CoA is actually $23,500 higher at the faraway private institution.

Expected Family Contribution (EFC)

Your EFC is an estimate of how much your family can afford to pay toward your college education. It is determined by your family’s income, assets, and other factors like how many of your siblings are currently in college. Check out the College Board’s free EFC calculator to determine your family's estimate.

After figuring out your Cost of Attendance and Estimated Family Contribution, calculate the difference between the two to find out exactly how much assistance you need in order to attend a particular college. For example, if the CoA at your first-choice school is $25,000, and your EFC is $10,000, then your financial need is $10,000. In other words, you’re eligible for up to $10,000 in financial aid.

Keep in mind that because CoA varies with each college, your financial need will also differ from one university to the next. It’s helpful to calculate your financial need for each college you’ve applied to so that you’ll end up with a range of possible financial aid goals. Later, when you receive your financial aid offer from each college, you’ll be able to compare it to your corresponding financial need at the same college to see if it’s economically feasible for you to enroll there.

Once you know how much financial assistance you need, it’s time to check out the kinds of aid available to you.

Types of Aid

Gift Aid
Gift aid, usually consisting of scholarships and grants, is the preferred form of financial aid because you don’t have to pay it back or work in exchange for it. Gift aid is a payment from a private institution and often entails an application process.

What’s the difference between a scholarship and a grant? “A grant is usually based on financial need,” says Kay Lewis, Director of Student Financial Aid at the University of Washington. Colleges, the federal government, and state governments provide grants. For example, the Pell Grant awards up to $5,550 a year to low-income undergraduates.

“A scholarship can be based on both merit and need, or just merit,” Lewis explains. Colleges, corporations, and other institutions fund scholarships. When applying for aid, it’s advantageous to seek out local scholarships, whose eligibility restrictions will narrow the applicant pool. On the other hand, large-scale scholarships such as the College Board’s National Merit Program may provide a larger award sum for the small percentage of applicants who are selected. Although many scholarships are commitment-free, “students should watch for ‘conditional scholarships’ which may mean that work in a certain field is required after graduation or the scholarship turns into a loan that has to be repaid,” Lewis says.

In addition to scholarships, some colleges may offer you a work-study position. The Federal Work-Study Program ensures that you work reasonable, part-time hours on or near campus. Although work-study is a considerable time commitment, the program allows you to avoid post-college debt. At many universities, certain jobs or a fixed number of positions at a particular workplace are set aside for work-study eligible students, aiding you in the process of securing part-time employment. If you do not qualify for work-study but still need help covering your cost of attendance (or want some extra cash to splurge on coffee for all-nighters!), most campuses provide plenty of part-time employment opportunities geared toward students.


When gift aid and work-study aren’t enough, you may have to borrow money to finance college. The College Board advises that federal, subsidized loans are the least expensive option. An important consideration when taking out a loan is interest, a fee based on a percentage of your debt, that you must repay in addition to the amount you originally borrowed. Student loans sponsored by the federal government usually have low interest rates, and low interest loans are the most affordable. Another concern is subsidization. Some private loans are unsubsidized, which means that interest starts accumulating as soon as you borrow money. However, many federal loans are subsidized, meaning that you won’t be charged interest until after you graduate from college.

The student herself usually takes out a federal loan, but parents can choose to be the borrower through the Parent PLUS program. If you are denied federal student loans because your financial need isn’t large enough, or you’ve already taken out all of the federal loans available to you as a student, your parents or legal guardians can opt to borrow a Parent PLUS loan to cover the remaining cost, which is equal to the CoA minus the amount of financial aid you already have. In addition, private loans are available to students. To take out a private loan, you may be asked to present a parent who is creditworthy, or has a good credit score and financial history, to be a cosigner, meaning that they share equal responsibility with you in making sure the loan, interest, and all other fees are fully repaid. Private loans have higher interest rates, but you might consider them if you don’t qualify for federal loans based on your calculated financial need.

Finally, the federal government and some private institutions may offer loan forgiveness, erasing a student’s debt altogether if she commits to work in a certain field, the military, or a public service career after graduation. For instance, a student who takes out a federal Perkins loan and later becomes a teacher in a low-income area may have 30% of her student loan canceled once she has taught for five years.

Compare and contrast your student loan options

Applying for Aid

As you complete college applications, you should also fill out the federal government’s FAFSA form, the College Board’s Financial Aid Profile form, and the financial aid application at each of your prospective colleges. If you’re accepted, universities will offer you a financial aid package, which likely contain a combination of gift aid, work-study, and loans. For this reason, it is necessary to apply for both need-based and merit-based aid.

Need-Based Aid

  • FAFSA:  The Free Application for Federal Student Aid is your gateway to federal and state grants, work-study, and loans. Filling out the FAFSA is important because “federal aid is the bulk of aid available,” Lewis says. Some universities also award financial aid based on a student’s FAFSA form, she adds. The FAFSA is open to high school students from fall to January 1 of their senior year. You or a parent can fill out the FAFSA form online, but first, you’ll need to register for a PIN and have income tax returns and other financial documents within reach for reference. Three to five days after completing the FAFSA form, you’ll receive a Student Aid Report, which will list your federal aid options: the number and types of grants, aids, and loans you qualify for.
  • CSS/Financial Aid Profile:  College Board’s Profile form is sometimes used to award need-based, non-federal aid. “Schools that offer a large amount of aid from institutional funds may require that the students complete the CSS Profile form,” Lewis says. “The Profile form usually asks for more information about the parents assets like home equity and other information that is used to determine financial need for institutional funds.” Because the Profile is not required by all schools and the College Board charges a fee each time your Profile report is mailed to a college, you should contact prospective universities to find out if you need to submit the Profile as part of your financial aid application.

Merit-Based Aid
Unlike the FAFSA for need-based federal aid, there is no common application for all merit aid. Luckily, financial aid databases can connect you with opportunities you’re eligible for based on your background, interests, and college plans. Try the free sites below.

Don’t forget that your high school’s guidance office is a great place to discover local scholarship opportunities. Also look to your parents’ employers, as well as extracurricular and community organizations in which you’re involved, for potential scholarships and grants.

Decoding Your Aid Packages

Be warned that even though a college may offer you a “financial aid award,” this doesn’t mean that the entire package consists of free gift aid. Depending on your financial needs, you may be offered a combination of all three types of aid, and each school’s offer will be unique.

“It is important to review the offers and try to compare some basic information,” Lewis says. She advises that you start by comparing the Cost of Attendance for each school and the annual loan amount multiplied by the four (or five) years necessary to complete a degree. Once you know the total cost and how much you’ll need to borrow, compare the total amount of grant and scholarship aid. “For scholarships, students should check with the school to make sure they understand if the scholarship is renewable or a one-time scholarship,” Lewis says. If you have to renew it, be sure to review what criteria you have to meet in future years to renew the scholarship.

Keep in mind that on your journey to becoming a collegiette™, applying for financial aid can be a time-intensive but rewarding process. “[Applying for financial aid] takes work, searching for sources, completing applications and essays for scholarships, and this continues every year the student is in school,” Lewis says. “Persistence pays off.” With financial aid knowledge and a little persistence, you’ll make it to college without breaking the bank.

“About Federal Student Aid,” FAFSA []
“Financial Aid: How it Works,” College Board []
Kay Lewis, Director of Student Financial Aid at the University of Washington
“Trends in College Pricing 2010,” College Board []