Financial Aid: The basics of how it works
It’s tax time, and for anyone thinking about college, that means it is also time to work on financial aid. The basics of how financial aid works can be tough to untangle for anyone approaching the challenge for the first time.
Determining your status
One of the first things you will need to determine when you start filing your FAFSA form is your filing status. A “dependent student” is still expected to receive financial support from their parents’ income and assets. The student status you claim as you start your Free Application for Federal Student Aid is the status you will have for the full year, so it is extremely important to get it right. There are a variety of criteria that make you an “independent student,” and they include being 24 years old or older, married, having children of your own or a of other criteria outlined on the FAFSA form.
Filling out your forms
FAFSA forms use much of the information that is already included in your tax information, so doing taxes and the FAFSA form at the same time is much easier. If you are classified as a dependent student, then both your taxes and your parents’ must be included. Fill out your forms as completely as possible and be sure to get the forms in on time.
The basics of EFC
When you fill out your FAFSA form, it determines your “expected family contribution.” The EFC is the amount of money that the federal government expects your family to come up with to help pay for education. The financial aid reports and offers you will receive from colleges you apply to will assume that the family will come up with the EFC. This could be with private student loans, cashing in assets or from other financial assets.
Grants, loans and work-study, oh my
Most financial aid reports that schools will send to you include three major types of financial aid. Grants are the money that the school or private donors will pay directly to your educational costs and do not need to be paid back. Loans are financial aid that does need to be paid back. Federally funded loans are supported by the federal government and your FAFSA acts as your loan application. Private or PLUS student loans must be separately applied for. These loans are all distributed to the school, which applies the money to your account, and then the school cuts you a check for the remainder, which is intended to be used for your living expenses.
Work-study is often listed as a type of financial aid. Work-study is a federally supported program, but the money is not directly distributed to the school. Instead, you must find an on-campus job and get paid either once or twice a month, usually at minimum or close-to-minimum wage.