Financial Aid & Scholarship Tips

Financial Aid Basics

In a nutshell, financial aid helps make up the difference between the cost of college and what a family can afford to pay for college. To qualify for financial aid, there is an application process.

The majority of full-time undergraduates receive some type of aid in the form of grants, scholarships, loans or work-study, most of which is need based and provided by the federal and state governments. Nearly 40 percent of financial aid dollars are awarded to students through federal loans, while the remainder are awarded through grants, scholarships, work—study, tax credits and deductions.

Primary Sources of Financial Aid

  • Federal government
  • State governments
  • Colleges and universities
  • Private organizations, such as companies and clubs
  • Credit unions, banks and lending companies

Primary Types of Financial Aid

  • Grants (do not need to be paid back and are generally need based)
  • Scholarships (do not need to be paid back and are generally merit based)
  • Loans (must be paid back with interest)
  • Work study (a federal program that involves part-time employment to help pay for part of college costs)

Financial Aid Applications & Deadlines

  • Complete the Free Application for Federal Student Aid (FAFSA) to be considered for financial aid from the federal government, state governments, and many colleges and universities.
  • Some colleges, universities and private organizations require additional forms such as the CSS/Financial Aid PROFILE or their own forms.

October 1 of the year prior to the fall year in which the student plans to go to college is the first day the FAFSA can be filed. Application deadlines for state and private aid vary. Since financial aid dollars can be limited and are frequently awarded on a first-come basis, filing the FAFSA close to October 1 is generally a good strategy.

Beginning with the 2017-18 FAFSA form, filers are now required to report income information from an earlier tax year than previously. On the 2018-19 FAFSA form, students (and their parents, as appropriate) need to report 2016 income information, rather than 2017 income information.

Pay attention to deadlines and apply for financial aid annually.

Need-Based Financial Aid Eligibility

Three primary ingredients determine the amount of need-based aid for which the student is eligible:

  1. Cost of Attendance. The “COA” is determined by each college, is based on federal guidelines, and represents the cost for one year. Components include: tuition, mandatory fees, room & board, books, supplies, transportation and personal expenses.
  2. Expected Family Contribution. The “EFC” is the amount that the family is expected to contribute towards college costs based on their financial circumstances. Components used to determine the EFC for a dependent student include: parents' income and assets and student's income and assets.
  3. Resources. This is the dollar amount provided to the student from outside sources, including scholarships or payments directly to the college by a grandparent, for example. Effectively, these dollars generally reduce the cost of attendance and correspondingly, the level of Financial Need, on a dollar-for-dollar basis.

Financial Need = 1 - 2 - 3

For example, consider a private four-year college where the total cost is $35,000. For a family with an expected family contribution of $16,000 and where the student has been awarded a $2,000 scholarship from a local organization, the level of financial need would be $17,000.

1. Total Cost of Attendance: $35,000
2. Expected Family Contribution
  • Parent's contribution $15,000
  • Student's contribution $1,000
  • Total EFC:
3. Resources:   $2,000
4. Financial Need: $17,000

EFC Formula

The federal financial aid methodology counts the following financial resources as being available to pay for college for a dependent student:

  • 2.6% - 5.64% of parents' assets (based on a sliding income scale and certain allowances)
  • 22% - 47% of parents' income (based on a sliding scale and after certain allowances)
  • 20% of student's assets
  • 50% of student's income (after certain allowances)

Income is more heavily weighted than assets in the needs analysis process. Some families worry that contributing to a Coverdell Education Savings Account or a 529 plan may hurt their chances of receiving financial aid. In reality, a maximum of 5.64% of the amount in a Coverdell ESA or 529 plan is considered in calculating the EFC under the federal methodology, since these assets are considered parental assets when owned by the parent or the dependent student.

Financial Aid Package

Financial aid packages generally consist of a combination of the following:

  • Gift Aid
    • Grants
    • Scholarships
    • Tuition Waivers
    • Housing Waivers
  • Self-Help Aid
    • Student Employment
    • Student Loans
    • Installment/Payment Plans

Financial Aid Award Letters

Comparing financial aid award letters can be challenging. Comparing the out-of-pocket cost to attend each college may help you cut through the confusion of the various configurations of financial aid awards. Out-of-pocket cost is the difference between the total cost of attendance and the total gift aid. Since each college is likely to award different amounts of gift aid, the out-of-pocket costs may vary from college to college. Lower out-of-pocket cost may be a significant benefit, potentially resulting in lower borrowing levels and fewer work-study hours, and correspondingly in lower debt burden and work burden.


Undergraduate scholarships and graduate fellowships are forms of aid that help students pay for their education. Unlike educational loans, scholarships and fellowships do not need to be repaid. Scholarships given by the colleges and universities are the most common type of scholarships. Check out the college web sites, catalogs and financial aid catalogs for information and requirement on their scholarships. Find out if there are application requirements beyond the general financial aid forms.

Some scholarships are need based. This is one of the reasons that the Free Application for Federal Student Aid and other required financial aid forms can be very important. If you fit all of the other criteria for a scholarship, but your level of financial need has not been determined by filing the FAFSA, you may not be eligible for the scholarship. The FAFSA is a requirement for a high percentage of scholarships.

A high percentage of scholarships and fellowships are very competitive and are reserved for students with special qualifications and talents in areas such as academics, athletics, art or other areas. Awards are also available to students who are interested in certain fields of study, who are members of certain groups, who live in certain areas of the country, or who demonstrate financial need. Scholarship awards range from a few dollars to covering the full tuition bill.

Researching Outside Scholarships: Start Locally

In addition to the colleges and universities and the federal government, thousands of sponsors award outside scholarships and fellowships each year.

The Internet offers numerous free scholarship searches that can be very helpful and beneficial, but the first stop for researching scholarships should be in your own backyard. Looking for scholarships locally first may work best, because you will probably be competing with far fewer applicants. When applying for a scholarship found through a national Internet search, the chances are high that you are going to be competing with hundreds or thousands of other applicants.

  • Check with the local high school guidance department, town hall and newspaper. These potential sources may have listings of scholarships offered by local organizations to students from the town.
  • Contact state or local agencies. Most states offer scholarships that are specifically intended for state residents. Often these scholarships are limited to those attending in-state colleges and universities.
  • Consider employers, groups and clubs. Many of these organizations offer scholarships to employees or members and to children of employees or members.

Use Free Scholarship Searches

  • Don't waste money on fee-based scholarship matching services.
  • Avoid scholarship scams where you are asked to pay money to get money.
  • Take advantage of free scholarship databases, such as Federal Student Aid Scholarships, and the U.S. Department of Education. These sites will choose the best options for you.

These online resources let you tailor a search by interest, geography, and other categories. Keep in mind that for some of the free scholarship searches, you will be asked to provide an email address. Review the email options and policies to make sure that they are agreeable to you.

Pay attention to requirements and deadlines and apply for scholarships annually.