How Financial Aid System Works

Children’s education is very important. When people think of education, they think of costs. Then, they would think about the time taken for making these sacrifices for their offspring. In short, being a parent should be about giving the best to your child. But do you know how the financial system works in the world today?


College is an essential place for young minds to develop to their fullest potential. It could take as much as a 6-figure cost to enrol in a prestigious university or institution.

Financial aid system

Fortunately, we have various financial aid systems that are available to us. But before finding one, know that people who have advantage in terms of financial aspect when funding an education. For example, a rich family would not find it a problem to sponsor their daughter or son for a course that costs $20,000 a year.

However, those who think they are in need are in need indeed. The problem is that most parents do not think that they qualify to apply for scholarships or any of financial aid systems at the first place! This even includes a fully-funded student loan.

How to apply for financial aid

In every high school or college, you should complete the ‘FAFSA’ (Free Application for Federal Student Aid). This should be the first step in getting financial aids. This costs nothing and is free to do. Then there is also the ‘FAF’ Financial Aid Form, which needs you to fill out more details. This in turn creates more paperwork and consumes more time.

If you live in the United States, every state has a certain form of financial aid. This is provided that your child will attend the college that is located in the same state. Check with local high schools and colleges in obtaining financial aid forms. 

Then comes the financial analysis

After submitting these forms (which contain all the necessary details), an analysis will be run using a standard methodology that is approved by the United States Congress. A few factors are considered when running this analysis. These include income, assets, age, retirement income, number of dependents and so on.

What happens when the analysis says you do not qualify?

Well, this is not the end. Why is this so? Loans do not consider this financial need analysis. If applying for a scholarship does not turn out well, then all hope is not lost. You still have a low-interest loan. This is all because you submit your financial aid form.

The Ugly Truth about College Financial Aid

One of the many myths we hear is that parents believe their income is too high. Granted, a high level of income will not help you qualify for a large sum of free financial aid, but you need to understand that income is only part of the equation. The overall formula used by the Department of Education is complex and confusing. Do not let a high level of income deter you from attempting to qualify.

Another often heard excuse is “my student’s grades are too low”. Unless your child is failing, aid has nothing to do with grades. The intricate government formula simply does not include grades. If your child is failing, would college be a wise pursuit anyway?

Sixty-five percent of American families own their own home. One of the myths is that this eliminates families from aid consideration. Again, this is baloney. On the federal aid form (FAFSA) you will not find a space to insert information about your home.

“Aid is only for special groups” is another popular argument. Again, the formula for qualifying does not ask about where you are in relation to society – the criteria are strictly based on certain financial numbers the Department of Education requires.

Probably the biggest misconception we hear is that guidance counselors and financial aid officers (or your accountant) can do all of this for you because it is an easy process. First of all, it is not an easy process. Secondly, if you think doing your taxes every year is complex and time consuming let me introduce you to another phase of government you will love to hate. The colleges pray that you will go through this entire process unarmed and will take advantage of your ignorance. Going to them for help is analogous to going to the IRS to complete your taxes. Yes, they will do them – but in whose interest are they working?

Those who know and understand the process win the financial aid game. To master this game you’ll have to maneuver the complex formulas, rules, and regulations the Department of Education has devised. This information is not readily accessible and provides no guidance as to the best way to ultimately pay for what is referred to as the “expected family contribution”.

Professional college planners offer parents the opportunity to tap into their expertise at a nominal cost. You’ll benefit by sending your student to college for a reasonable amount of money while fully complying with all forms and procedures. And, you can accomplish this without going broke. By employing professionals, you’ll achieve peace of mind knowing that everything that could possibly be done for your child is covered.

College Education – Scholarship Grants or Financial Aid

For some, going to college means spending lots and lots of money. And why is that? Mostly it is because of the high cost of college education and tuition fee, not to mention the everyday expenditures (food, transportation, board and lodging, pocket money, etc.) that the student must bear and the numerous miscellaneous fees that are accumulated. This is one of the major problems of today’s parents.

Let’s face it, college education is very expensive. That’s a fact. That is why it is very important for a parent to plan ahead their children’s education. Even those who are in the upper class of society are having difficult times once they sent their kids to college. That is why every parent these days are looking for college scholarship or college financial aid.

A college funding and scholarship program does not oblige students or the parent to reimbursement what was spent for the education of the student. There are two possible types of college funding and scholarship. The first type is based on the need, this type of funding and scholarship is granted to a student wherein the student and its family (as a whole) are unable to pay for the education. The second type is based on merit. This type of funding and scholarship is given to those students who excel in a certain field, for example are sport athletes. Also, student who excel in the academic field also fall under this type of college funding and scholarship.

There are also some instances wherein the two types of funding and scholarship are combined to make the financial aid process easier. Lots of parents and students are looking for this type of financial aid. Unfortunately, there are not enough college funding and scholarships these days to compensate the increasing number of students yearly.

There are some federal and state scholarship programs these days that a qualified student can avail. Below are just some of the federal and state scholarship programs that a student can apply.

Federal or National Pell Grants – this nationally funded program is aimed to provide assistance to qualified undergraduates that want to purse post secondary education. This type of financial aid is given to individuals who have not completed a baccalaureate degree. This type of financial aid provides students to avail subsequent financial assistance from the national government.

Federal Supplemental Educational Opportunity Grant (FSEOG) – a program that is intended for continuing undergraduate students that has unresolved financial need. Unfortunately, this type of financial assistance is limited and not all students can avail this type of financial assistance. These are only awarded to students who are qualified and this also depends on the availability of the finances of the concerned educational institution.

Another type of financial assistance that a student or a parent can obtain is through loans. However this type of financial aid must be paid back. However, the financial need of the student or student’s family must greatly be considered first before availing this type of financial assistance to prevent high interest rates.

Always bear in mind that college education grants and scholarships, funding and other types of financial assistances are very complicated and quite frustrating. Fortunately, college education is an excellent type of investment.

3 Things to Consider When Comparing Your Financial Aid Packages

1. Rank all of your schools according to their rankings nationally

The first thing that you need to do is to rank all of the schools that you have been accepted to. You will find these forms that can help you to rank these schools in your guidance office or the Internet. You can go to the US News Rankings to find where the schools on your list are ranked nationally. There are many factors to be taken into account when you are ranking these schools such as their retention rate, size of classes, percentage of classes been taught by TA, number of successful alumnus, rates of graduates finding employment, etc. This way you can see how your schools stack up to the schools around the country. You want to attend the best school on your list that you can afford. This process has to be very practical and doable for you and your family.

2. Rank all of your packages according to the amount of free money offered to you

Free money is any money that you and your family don’t have to pay back. These monies will come under scholarships and grants (Federal grants and State grants). Rank the school that gave you the most free money number 1 down to the school that gave you the least amount of free money. Keep in mind that your favorite school may not give you the best package. This is a practical and non-subjective process. They will offer you a package based on your household income and assets depending on whether the school is private or public school. The schools will give you their money and the government’s money based on your financial need and the type of profile that you have created.

3. Rank all of your schools from the school that you like to attend to the school that you are the least likely to attend: Conquering college attendance

Now, start with your favorite school. This is the number 1 school that you would like to attend from your accepted list to the least favored school on you list. This is that one school that you would like to attend if you and your family can afford it without going into deep debt. Again, here, you and your family have to be practical and realistic because neither you nor your family should go into deep debt to get your education. You are investing in your future but your parents are getting closer to retirement so don’t ask them to take loans or refinance their home to send you to your dream school. Remember that you are going to have to pay for your loans and that you are not going to pay off their debt. It is your future, so invest wisely.

One consolation here is that you and your parents can always contact the financial office and explain your family’s financial situation and ask them if they can give you a little more help because you would really like to attend their institution.