In the spring of 2017, George Washington University President Steven Knapp visited high schools across Washington, D.C. He had amazing news for 10 talented students: They had earned full-ride scholarships to the university.
The university selected these students based on their achievements, but merit-based scholarships aren’t the only kind of aid that go into financial aid packages. Colleges also provide need-based financial aid to students who need help paying for college.
Read on to learn about both types of financial aid, and how you can get the most aid possible.
What is need-based financial aid?
Need-based financial aid is exactly what it sounds like — it’s doled out based on your financial need. Some colleges promise to cover your full financial need, while others only provide aid for part of it.
Each college’s financial aid office puts together your financial aid package. It could include a mix of federal, state, institutional, and private aid.
Need-based financial aid could include any of the following:
- Federal Pell Grant: Pell Grants tend to go to students with major financial need. The maximum award for the 2017-2018 school year is $5,920.
- Federal Supplemental Educational Opportunity Grant (FSEOG): You can receive between $100 and $4,000 per year through the FSEOG program. However, only some colleges participate.
- Direct Subsidized Loan: Interest will not start accruing on these federal loans until you’re out of school and the six-month grace period has ended.
- Federal Work-Study: This program provides you with a part-time, on-campus or off-campus job, so you can earn money to put toward school or living costs.
A college might offer need-based financial aid in the form of low-interest loans. Plus, the state or a private organization might give loans or grants to low-income students.
Massachusetts’ MASSGrant, for instance, gives grants to qualifying state residents with a family contribution equal to or lower than $5,328. And the Jack Kent Cooke Foundation provides up to $40,000 per year to high-achieving students with significant financial need.
Whether it’s federal, state, or private, need-based aid is largely based on your financial situation. Except in the case of private scholarships, your grades or extracurricular achievements don’t factor in.
How is need-based financial aid determined?
As the name suggests, your EFC is how much your family is expected to pay toward college. The difference between the cost of tuition and your EFC is your financial need.
Let’s say a school costs $50,000 per year, and your EFC is $25,000. In this case, your financial need would be $25,000.
Most colleges will cover at least part of that $25,000 with need-based financial aid. Plus, they might provide additional non-need-based financial aid.
If not, you’d need to make up for the difference another way — such as by taking out private student loans or choosing a less expensive college.
What is non-need-based financial aid?
Non-need-based financial aid, like its need-based counterpart, is offered on both the federal and institutional level. The Office of Federal Student Aid provides the following types of non-need-based aid:
- Direct Unsubsidized Loan: Unlike subsidized loans, unsubsidized loans accrue interest from the time they’re disbursed.
- Federal PLUS Loan: These loans go to parents or grad students. Your credit history must be relatively clean to qualify.
- Teacher Education Access for College and Higher Education (TEACH) Grant: To qualify for this grant, you must study teaching at a participating college. Plus, you have to agree to teach for at least four years in a high-need area. For the 2017-2018 school year, the maximum TEACH Grant was just over $3,700.
A financial aid office might include these loans in your financial aid package after it has exhausted need-based funding. Plus, it might award merit-based grants or scholarships based on your high school performance.
If you have excellent grades or a strong record of community service, for instance, you could get college scholarships, like the 10 students in Washington, D.C. Or, you could win scholarship money from an external organization.
Some organizations even give scholarships for unusual reasons. For instance, you could win scholarship money for being left-handed, having red hair, or winning a duck-calling contest.
Whether it’s an unsubsidized loan you have to repay or a scholarship you don’t, none of the aid on this list is based on financial need.
How do colleges give out non-need-based aid?
Unlike need-based aid, non-need-based aid doesn’t look at your EFC. Instead, your eligibility is based on the difference between the school’s cost of attendance and the amount of financial aid you’ve received so far, whether it’s from the college itself or an outside organization.
For example, let’s say your school’s cost of attendance is $20,000 per year, and you’ve received $15,000 in need-based financial aid.
In this scenario, you could qualify for up to $5,000 in non-need-based aid. You’re not guaranteed to get $5,000 — or even anything — but you are eligible for these additional funds.
How to get the most financial aid possible
To some extent, your financial aid package is out of your hands. Each college sets its own policies, and the financial aid offices will notify you of its decision.
But there are important steps you can take to qualify for aid, whether it’s based on financial need. Here are the top six:
- File the FAFSA as soon as possible. This application becomes available on Oct. 1. Submit it early, as some aid is given out on a first-come, first-served basis.
- Find out if your school requires the CSS Profile. Some colleges ask for the CSS Profile in addition to the FAFSA. They look at this document, along with the FAFSA, to determine financial aid.
- Communicate with the financial aid office. If you haven’t applied yet, speak with financial aid offices to learn about their policies. If you experience changes in your financial situation after submitting the FAFSA, let them know. They might be able to adjust your award.
- Use the FAFSA4Caster tool. This useful tool helps you estimate the cost of attendance at colleges around the country. You’ll get a sense of how much need-based financial aid you can get from each school. Use this info to be strategic about where you apply.
- Do your best in high school. You could end up getting serious merit-based aid for your achievements. Schools like Boston University and University of Texas at Austin offer full-ride scholarships to students with a record of academic and extracurricular achievement.
- Apply to outside scholarships. There are tons of organizations at the local and national level that award scholarships to students. Speak with your school counselor and browse scholarship search engines for opportunities.
By understanding the different types of financial aid — and being proactive when you apply to colleges — you can seriously reduce the cost of college.
Plus, you can avoid making the mistake that has burdened a generation of grads: taking on too much student debt to fund your education.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|