College Financial Aid
How Need-Based Financial Aid Works
Federal financial aid is available only to those who demonstrate "financial need" as determined by a federal formula. Need-based financial aid in the form of grants (grants do not have to be paid back and are often referred to as “scholarships”), low-interest loans, and student work-study programs are available based upon the information submitted on the Free Application for Federal Student Aid—the FAFSA. The federal government makes a determination about an expected family contribution (EFC), or the amount a family can reasonably be expected to contribute toward a student's education, based on information entered on the FAFSA about assets, income, and other data from a parent's (and student's) U.S. income tax form.
The data submitted on the FAFSA is compiled and then a formula is applied. The formula the Department of Education uses to compute an EFC is called Federal Methodology.
The EFC is basically what the government believes a family should be able to contribute toward the cost of attending college, based on their state of residence, household size, number in college, and student and parent income and asset information. Next, the school establishes a Cost of Attendance (COA). The COA is composed of tuition, room and board, fees, and estimated expenses (books, supplies, personal). Together, the EFC and COA are used to determine financial need. Financial need is calculated by subtracting the EFC from the COA and is a guideline in determining how much need-based financial aid a student may receive. The equation looks like this:
COA - EFC = Financial Need
The college's financial aid office then uses the "need based" resources they have available to try to "meet" a student’s financial need.
Many of the most selective schools provide only need-based, as opposed to merit-based, financial aid. Some colleges do, however, sometimes provide merit awards. These awards are used to encourage talented students to consider attending these schools. Colleges realize that talented students will have a number of acceptance offers and use merit awards as an incentive to attract them. Talent grants are given to students who demonstrate a particular talent in academics, sports, the arts, leadership, social service, or academics. These grants are offered regardless of a student’s financial need. Students can attract merit aid by applying to schools where their class rank and test scores will place them in the top 25% of the applicant pool. The most generous colleges tend to be private liberal-arts colleges that boast large endowments but face stiff competition from more affordable and academically comparable state schools.
If a financial aid award package includes an education loan, the student is responsible for applying for the loan. Instructions are generally provided with the award letter. Loans have made higher education possible for millions of students, but students should consider their options carefully before borrowing and limit borrowing to only the amount necessary.
International Student Aid
It is a fact that very few colleges in the world offer financial aid to students who are not citizens of that country. Students who are not U.S. citizens or permanent residents should plan on finding their own sources of money to pay for their college education, and thus the cost of a particular college may become a large factor in their choice. Those who plan to study in the U.S. will not be granted a visa unless they can prove they have sufficient financial resources to pay for their college, living expenses, and a return trip to their home country.
Only a small percentage of colleges offer financial aid for international students. International students who must have aid should not waste their time applying to schools that don’t offer it. Because the amount of aid available to international students is limited, colleges will only offer it to the very strongest applicants in their applicant pool. A general rule of thumb is that a non-U.S. citizen who requires financial aid will need to be among a college’s top applicants in order to receive an offer of aid. Those whose scores or grades are marginal for that college will most likely be rejected, since money will be allocated among the top students.