Financial Aid Paying for College

What is Financial Aid?

Written by CB Experts

Did you know the cost of a four-year college education is probably the second largest expense you will ever have in your lifetime next to purchasing a house? It could cost you over $40,000 a year to attend a private liberal arts college. Multiply that figure times four, and that’s over $160,000 to pay for a four-year college education!

Don’t despair. Although this price tag seems staggering at first glance, it is still doable for most families because of financial aid. NEVER immediately rule out a college that is a perfect match for you simply because of the “sticker price.” You need to wait to see the REAL cost after you have applied for financial aid and seen what the financial aid package looks like.

Did you know that students have attended a private college for less than what they might pay by enrolling at a public university because of the amount of institutional aid a private college can give to needy students from their large endowments?

What makes up a financial aid package?

There are 3 main parts to every financial package.

Grants and Scholarships

These are gifts given by the college or university. They do not need to be paid back. No wonder students love this form of aid the best! You might even receive several different types of scholarships and grants in your award package:

  • Federal Need-based Grant (PELL Grant)
  • College Need-based Scholarship
  • Merit Scholarship (Non-need based)


Even though you do have to pay back this money, it is cheap money because of low interest rates!  There are several types of loans.

  • A Subsidized Stafford loan requires no interest payments while you are attending college; you don’t have to start your payments until after you have graduated! Such a deal!
  • Unsubsidized Stafford Loans are handy if you need additional funds, but, unlike the regular Stafford Loan, Uncle Sam does not pay the interest while you are in school. You have to begin paying the loan back immediately.
  • Plus Loans are available from a bank if parents need more money to pay the total cost of education and if they have good credit.


This is money you will work for in a school-sponsored job. Don’t worry; this won’t be drudgery or hard labor, and you definitely won’t be working long hours. In fact, you might even be able to use this work experience on your future resume.

How do I qualify for financial aid?

You have probably heard the horror stories about colleges awarding very small amounts of money (and sometimes no aid at all!) to help families pay the huge tuition costs. “Why does this happen?” you ask. To understand how financial aid works, you need to understand the definition of financial need. Visualize a bar graph that has 3 bars in it:

  • Bar A represents the amount of college costs a family is judged capable of paying (the Expected Family Contribution or EFC). This amount will remain constant, no matter where you apply to college.
  • Bar B signifies the total cost of college. This amount can change and will probably differ for each of your selected colleges.
  • Bar C is your Need. Need is determined by the difference between Bars A and B. So if your Bar B cost is larger than Bar A (EFC), the family then has “need” (Bar C).

And if a family has need, the student qualifies for financial aid. It is that simple!

How is the Expected Family Contribution (EFC) calculated?

The first step to getting financial aid is to submit a Free Application for Federal Student Aid which is commonly known as the FAFSA. It is free because there are no service fees.

However, if you are applying to a more expensive school or a private college, you may need to file additional forms that do have service fees. Some of the more expensive schools will ask you to submit the College Scholastic Services (CSS) Profile and also submit their own financial aid form, both of which require more specific information than the FAFSA form. You will need to reveal life insurance policies, retirement plans, home equity, and more. From this data, the college will apply complex formulas called “methodologies” to determine the amount of financial aid your can receive.

Both of these forms will calaulate what your EFC is, which will determine your need.

All colleges use the “Federal Methodology” for eligibility for federal and state funds. Private colleges use an additional methodology, termed “Institutional Methodology,” to award their own funds. The ordinary person shouldn’t be overly concerned about understanding the complex formulas that they use. Colleges can apply the data in their own way which sometimes results in your financial aid package varying from college to college in federal and state aid.

What is most important to keep in mind is to file the required forms EARLY! The early bird does reap the award! If you file too late, there may not be any money left for you, as monies are distributed on a first-come-first-serve basis!

What are other sources of financial aid?

In addition to aid granted from the federal and state governments and by the college, you should also seek scholarship funds from sources outside the colleges, such as your parent’s employer(s), local service organizations such as Rotary Club or Kiwanis Club, professional organizations, and social clubs.

Local Scholarships

A great place to start researching is right at your high school. Go to your guidance office and ask if they have a file of local scholarships available to students. Outside scholarships can easily be found right where you live! If you are willing to put in the time and effort, you could possibly find more money than you actually need! In fact, your chance of obtaining a local scholarship is so much better than applying for a nationally based scholarship.

And don’t forget to apply for graduation scholarships offered at your high school in house. Most high schools offer a multitude of different scholarships that they award during special recognition nights or at the graduation itself. Throw your hat into the ring so that you will at least be considered during the selection process.

National Scholarships

Now with the Internet available to most students, it has made a scholarship search so easy to do. There are many websites that offer a centralized search database that are free for students to use and can provide you a wealth of information about possible scholarships. You can even find some really bizarre ones too! Did you know there are scholarships just for twins, or for left-handed people, or for really tall people or for little people, or for duct tape creations at the prom, and even for duck-callers?!! So don’t miss out. You will find at least one that will fit you! A good place to start is at Scholarship Experts and at FastWeb—two great scholarship search engines that will customize the scholarships to match you, and they will also send reminders of new scholarships available for you. In addition, FreeCollegeScholarships offers a monthly drawing to win a 10K scholarship and it is easy! All you need to do is fill out their entry form; no essay to write! Apply now so that you don’t miss out!


You MUST report any outside scholarships that you receive to each college from which you are seeking financial aid. Write a cover letter to each Director of Financial Aid and enclose a copy of your award letter.

Why do colleges need this information since they did not give the award? The reason is simply because any scholarship is a form of financial aid, and colleges need to know exactly what funds you have available to allocate the proper amount of state and federal funds.

Some colleges will reduce the amount of loans you have in your financial aid package when you receieve outside monies while others will reduce the free money, their grants, or their scholarships.

It is your responsibility to keep the financial aid office updated. If you fail to report any awards, you will be committing fraud!

About the author

CB Experts

Content created by retired College Admissions consultants.