By Sarah Szczypinski
Education isn’t getting any cheaper. For the 2019-2020 academic year, the average cost of tuition and fees at an in-state, public university was $10,116, and the average cost of a private university was $36,801. When the price tag of a four-year education can easily top $100,000, employing money-saving strategies can help you avoid years of student loan debt. Applying for financial aid is the first step.
What is Financial Aid?
The term “financial aid” covers a broad spectrum of opportunities. As a concept, financial aid helps parents and students pay for college expenses like tuition, room and board, books, fees, and other expenses. Sources of aid include:
- Federal: Aid provided through the federal government in the form of grants, scholarships, work-study programs and loans. Keep in mind that unlike other forms of federal aid, loans must be repaid after finishing your education.
- State: In addition to federal aid, almost every state has its own financial aid program for residents attending school. The National Association of Student Financial Aid Administrators (NASFAA) provides a full list.
- Institutional: Many universities award funds to qualifying students through their endowments. Resident Advisors (RAs) at Cornell University, for instance, are paid a stipend of up to $900 per semester, and receive free room and board.
- Privately funded scholarships: Gifts from school alumni, corporations or nonprofit organizations may be available based on individual criteria, including financial need, academic merit, or area of study.
Applying for Financial Aid
Learning how to apply for financial aid can seem daunting, but the process is simple with a few basic steps:
1 - Apply for a Federal Student Aid (FSA) ID. Students are required to use an FSA ID to access their U.S. Department of Education financial aid information. Your ID allows you to sign documents electronically and make corrections online. Parents applying for federal loans are also required to create their own FSA IDs.
2 - Complete and submit the FAFSA form. The Free Application for Federal Student Aid (FAFSA) form is used to determine your eligibility for federal and state aid. “Students should file the FAFSA as soon as possible on or after October 1,” says Mark Kantrowitz, Vice President of Research at SavingForCollege.com.
“The FAFSA is used to apply not just for federal aid, but also state aid and financial aid at most colleges and universities,” he said. When applying to colleges, it’s crucial to ensure that your school of choice qualifies for federal and state aid funding through its accreditation—including online universities—and award amounts can vary. “Financial aid for online education and for brick and mortar based education may differ because the financial need differs,” Kantrowitz said.
“Financial need is defined as the difference between the cost of attendance and the [student’s] expected family contribution. Thus, if the COA is different between online and brick and mortar education, the financial need will be different, which will lead to differences in the financial aid packages.”
The FAFSA requires signatures from a parent and the student and must be submitted before your chosen college’s deadline date. The online form provides step-by-step directions to help you complete the process.
3 - Review your Student Aid Report (SAR). You’ll receive your SAR three-to-five days after filing your FAFSA online. The SAR details your family’s expected contribution. The report will also be sent to the financial aid offices of the colleges listed on your FAFSA form for review.
4 - Compare award letters. After receiving your SAR report, universities will award you financial aid by subtracting your family’s expected financial contribution from the total cost of attendance. The remainder is your financial aid award, which is likely to vary from college to college since the cost of attendance is different. “Financial aid award letters are typically mailed in March,” Kantrowitz said. “Students who apply early decision or early action may receive the award letters sooner, in some cases at the same time as they receive notice of college admission.”
Consider creating a spreadsheet to compare the financial aid awards and the total cost from each institution you applied to. The final numbers can help you make a well-informed decision about which college to choose.
The Importance of Timing
The pool of financial aid seems endless upon first glance. The federal government alone awards 13 million students more than $120 billion in aid each year. In most cases, however, timing is just as important as learning how to qualify for financial aid.
“Several types of financial aid are awarded on a first-come, first-served basis until the money runs out,” Kantrowitz said. “This means that students who apply for financial aid sooner tend to receive more money, on average, than students who apply for financial aid later.”
There is no foolproof equation when it comes to applying for financial aid, but understanding the process is a good start. Consider your goals and projected salary after graduation. The path to education shouldn’t include overwhelming debt.
Sarah Szczypinski is a journalist who covers topics related to money, career, and parenting. She frequently contributes to The Washington Post and The Seattle Times, and her work has appeared in The Chicago Tribune, TIME, CNN Money, Money magazine, Business Insider, and on The TODAY Show.