Guide to Understanding College Financial Aid

Many families are shocked by a college’s sticker price. While the cost of tuition can be overwhelming, financial aid can make higher education more affordable.

In fact, income and savings represent only a few of the resources families use to pay students’ college expenses, according to the annual Sallie Mae/Ipsos survey How America Pays for College. The 2023 survey found that for a typical family, scholarships and grants covered 29% of college costs in 2022-2023, up from 26% in 2021-2022. Scholarships and grants are types of college financial aid that don’t need to be repaid.

Navigating the financial aid process for college can be challenging. Here are a few answers to common financial aid questions.

College financial aid helps students and their families by covering higher education expenses such as tuition and fees, room and board, books and other coursework supplies, and transportation.

There are several types of financial aid:

Different types of aid are provided through various sources, such as federal and state agencies, colleges, high schools, foundations and corporations. The amount of aid a student receives depends on federal, state and institutional guidelines.

Students have the choice to accept or reject the aid offered. The type of aid determines whether it will have to be repaid.

The first step is to file the Free Application for Federal Student Aid, known as the FAFSA. This application is used by many state agencies and schools to determine college aid. This is usually based on their household income as reported on federal income taxes.

The FAFSA is available through the U.S. Department of Education’s Federal Student Aid website. Normally families can begin filling out the form Oct. 1 for the following academic year. But this year, after an overhaul to the application as part of the FAFSA Simplification Act, the form will open sometime in December for the following academic year.

The deadline for filing the FAFSA is June 30 for those attending college in the fall. For instance, the 2024-2025 FAFSA, which has a December 2023 release (exact date to be determined), is due June 2025. But that deadline is only for federal financial aid. Many schools and colleges that use the FAFSA to determine aid set earlier deadlines.

Some schools – mostly private colleges – use a supplemental form called the CSS Profile to determine how to give out their own funds. This form is more detailed than the FAFSA and can be more time-consuming to complete.

The initial submission fee for the CSS Profile is $25; each additional report is $16. But fee waivers are available. Undergraduate students with a family adjusted gross income of $100,000 or less, for instance, can file the form at no cost.

A list of schools that require the CSS Profile can be found on the website for the College Board, the organization that administers and maintains the application.

“Bear in mind, the CSS Profile will dig much deeper into your family’s finances than the FAFSA,” says Joseph Orsolini, president of College Aid Planners Inc.

For instance, the CSS Profile takes into account assets that are excluded on the FAFSA, as well as information about medical or additional educational expenses.

Sometimes, a student must complete additional applications to be considered for scholarships or private aid.

There are two types of aid: need-based and merit-based.

Federal need-based aid, for instance, is determined by a family’s demonstrated ability to pay for college as calculated by the FAFSA.

Merit aid, on the other hand, can be awarded by an institution, college or private organization to a student for a specific talent or an athletic or academic ability. These awards aren’t based on financial need.

College students are potentially eligible for federal, state and/or institutional aid. Institutional aid is financial assistance provided by the college and varies by school, since each college uses its own policies and formulas to determine how to award its financial aid.

According to the Department of Education, most students qualify for some type of federal student aid. For federal financial aid, there are three types of funds: loans, grants and work-study.

When it comes to state aid, most states limit it to in-state residents.

While the FAFSA should be on a student’s radar to qualify for need-based aid for both federal and state funds, a college-bound student can go a step further and maximize merit-based aid, experts say. That’s because merit aid is one way to close the gap between the cost of attendance and need-based financial aid.

But not all schools award merit aid. Some schools reserve merit aid only for exceptional circumstances, while others require students to maintain a certain GPA.

Beyond federal, state and institutional aid, there are a few other aid programs to consider that serve specific student groups, such as Peace Corps volunteer benefits and the Reserve Officers’ Training Corps program, known as ROTC. Students who participate in ROTC can learn and train at the same time, and some receive a scholarship that covers either tuition, fees and books, or room and board instead.

There are also military benefits through which veterans, active-duty service members and their dependents can pay for school, such as GI Bill benefits that cover all or some costs.

Experts advise high school students to connect with school counselors and discuss additional types of grants or scholarship options like ones from private foundations.

Ronald Ramsdell, founder of College Aid Consulting Services, warns families not to pay for a scholarship search service.

“There are a lot of outside scholarship sources out there that are not legitimate,” he says. “They are worthless, so families need to do their homework.”

Pay attention to deadlines, experts recommend, as they may be different this year due to the FAFSA delay. It’s important to meet college financial aid deadlines, which vary by institution.

The University of Iowa, for example, set its financial aid priority deadline for Feb. 1 instead of last year’s date of Dec. 1. Aid at the university is distributed first come, first served.

Other colleges have later deadlines. The University of Michigan, for instance, set its deadline for March 31. But applicants who file the FAFSA by the suggested date of Dec. 15 and get accepted will receive a preliminary financial aid package sooner.

“This is a year where (families) really need to do even more investigation of the timelines, both for turning in financial aid materials as well as what those materials will be at an individual institution,” says Brian Lindeman, assistant vice president of admissions and financial aid at Macalester College in Minnesota. “And then also be prepared for some variation in when they’ll see results.”

But it’s not just institutional deadlines that parents and students should note. There are also different state deadlines, which families can find on the Federal Student Aid website.

College financial aid officers say that while there are many similarities in how schools award aid, each has its own unique process. Some schools offer larger financial aid packages than others, just like some institutions charge higher tuition rates compared with other schools.

For example, although some schools claim to meet full financial need for the cost of attendance with aid, those packages may include loans. A handful of institutions, including the University of Chicago in Illinois and Pomona College in California, package financial aid awards with no loans.

Financial aid award letters typically go out to college-bound students in early spring – usually after or at the same time as a college acceptance offer. That may change this year, however, depending on if a school relies solely on the FAFSA or has a separate institutional aid application, experts say.

At Grinnell College in Iowa for a CSS Profile user, for instance, it’s “business as usual,” says Brad Lindberg, the school’s associate vice president of institutional initiatives and enrollment.

“Students need access to their financial aid eligibility to make a smart enrollment decision, so we won’t be delayed,” he says. “We are going to use the profile to get information out at the same time we would have in the past, whether that’s with offers of admission for incoming students or in the late spring for our returning students. So it’s really not going to have that great of an impact for us here.”

But according to Orsolini, “You need more than ‘I need more money’ to appeal a financial aid award.” Families need a legitimate reason for schools to re-examine students’ financial situations, he adds.

To be successful with an appeal, families need to demonstrate there’s been a significant change in their financial circumstances since they submitted their FAFSA application, says Dan Blednick, senior director of college guidance at The TEAK Fellowship, a nonprofit organization that serves students from low-income families in New York City.

College financial aid experts say a family will usually be asked to submit a letter summarizing the special circumstance that affect their ability to pay. A qualifying special circumstance might be a recent job loss, divorce, death in the family, out-of-pocket medical expenses or care costs needed for an elderly parent, to name a few examples.

“I would recommend trying to connect with a specific person in the college’s financial aid office who is assigned to your case,” says Blednick, who recommends providing documents that reflect a need for additional funding. However, schools can still turn down an appeal, and sometimes do.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.