Most students can’t pay for college in cash. Funding can come from a few different places, like family help, loans, scholarships and grants.
Need-based financial aid is based on your family’s financial situation. If you need money, the federal government helps you cover college costs. Here’s what it is and how to qualify for need-based financial aid.
What Is Need-Based Financial Aid?
Need-based financial aid is federal money that covers your cost of college based on your family’s financial situation. There are a few types of need-based aid, including:
- Pell Grants. Grants are available to undergraduates with exceptional financial need. How much you get is based on your expected family contribution as calculated by the Free Application for Federal Student Aid, or FAFSA; your enrollment status (full-time vs. part-time) and your school’s cost of attendance. The maximum Pell Grant for the 2020-2021 school year is $6,345.
- Work study. These part-time jobs are available both on- and off-campus for graduate, professional and undergraduate students at schools participating in the Federal Work Study Program. You’ll earn at least the federal minimum wage and usually get paid directly as opposed to having the funds directly applied to tuition.
- Direct subsidized loans. The government covers—or subsidizes—the interest that accrues on these loans while you’re in school, and then you’re responsible for it after you drop below half-time status or graduate. This is different from unsubsidized loans, where you’re on the hook for all the interest that accrues while you’re enrolled in college.
Depending on where you go to school, you might qualify for state- and college-specific need-based financial aid. Along with that, there are other federal grants you might be eligible for based on your major. Many non-federal need-based aid still requires a completed FAFSA, to be eligible.
How to Qualify for Need-Based Financial Aid for College
If you’re looking to get money for school, you can qualify for need-based financial aid by first completing the FAFSA. The FAFSA is your first step in detailing your family’s financial information. The Department of Education uses this application to determine your expected family contribution, or EFC.
Be mindful that even if you qualify for need-based financial aid, you might not receive enough to cover college costs. Many free need-based options are awarded on a first-come, first-served basis. This means you’ll want to complete the FAFSA as soon as you’re able. You can submit your FAFSA as early as Oct. 1 for the following school year. That means for students entering school in the fall of 2021, you can submit your FAFSA starting Oct. 1, 2020.
Paying Back Need-Based Aid
While need-based financial aid is designed to help students cover college costs, not all of it is free.
Grants, like the Pell Grant, are free money that don’t need to be paid back. Scholarships are also a type of free money that you’re not required to repay. Work study pays you like a regular job, which means the money is yours to keep.
Loans, like the direct subsidized loan, require repayment once you leave school. But it does come with some friendly repayment terms. For instance, you’re not financially obligated for the interest that builds while you’re enrolled in school—only once you leave school.
Direct subsidized loans also have a six-month grace period from when you leave school until you must start repaying the loan, allowing you to hopefully secure a job in your desired field and start earning a solid income. Later on, you may want to consolidate your student loans and/or move onto an income-driven repayment (IDR) plan. Depending on your career, you may qualify for student loan forgiveness.
Some states and schools award need-based aid based on your expected family contribution, which can include grants and scholarships, too.
Need-Based Aid vs. Merit-Based Financial Aid
Need-based aid is based on need; merit-based aid doesn’t take your family’s finances into account. Merit-based financial aid is based on merit, like your grade point average (GPA) and standardized test scores. Some scholarships are based on your class rank.
For the most part, scholarships are awarded based on merit while grants are typically awarded based on need. Academic scholarships are a type of merit-based financial aid. There are some grants awarded based on merit—and some scholarships based on need—which is why it’s important to read all the details of awards you’re applying for.
How to Maximize Your Financial Aid
After you’ve completed your FAFSA as early as you’re able to and received your award letter that details how much aid you’re on track to get, there’s a chance you might not get enough money to cover your college costs. Or there’s a possibility that you want to limit what you borrow in loans so you don’t have as much to repay later. Regardless of your circumstance, there are other ways to get financial aid.
If you don’t qualify for need-based financial aid awarded through the federal government, you can apply for merit-based scholarships or other types of grants that are given out at the federal, state, local and school level. Many businesses and organizations award grants and scholarships in specific industries and fields. Search online for scholarships based on your desired major to see what you qualify for.
Along with that, there’s a lot of free money on the table based on race, religion, sex, ethnicity, sexual orientation and more. You aren’t obligated to accept all the aid you’re rewarded, especially if you’re liable for repaying it later on. Exhaust all your free money options through grants and scholarships before accepting loans. Use scholarship and regular search engines to find free money from the federal level all the way down to school-specific aid.
If you’re looking for money to pay for school, your family’s finances play a crucial role in determining how much need-based financial aid you can get. While you might need your entire cost of attendance covered through financial aid, you might not always get it. Complete your FAFSA as early as you can to maximize your return.
After that, scour the internet and your community for the best scholarships and grants based on your major or even personal details. Complete applications and if necessary, find references to vouch for you. Get as much free money as possible before accepting loans you’ll need to pay back after you leave school.
Culled from Forbes.com
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