What is Student Financial Aid?

Student financial aid is money given by the Federal and State governments and the colleges to help students pay for the cost of a college education.

There are two basic types of financial aid:

1) Self-Help aid which consists of interest subsidized loans and work study; and,

2) Gift Aid, which consists of grants and scholarships.

The amount and type of financial aid is based on two factors:

1) The merit of the student ( scholastic, athletic, musical, etc.); and,

2) The financial need of the student. By far, this is the most important factor in determining financial aid. Most of the financial aid given by the Federal and State governments is based on the financial need of the student. Also, most of the financial aid given by colleges is need-based.

NOTE: The Ivy league colleges and other highly selective private colleges base almost all of their grants and scholarships on the financial need of the student and not the student's merit.

So how is the financial need of a student calculated?

NEEDS ANALYSIS is the process of determining the financial need of the student. It is calculated using the following formula:

COST OF ATTENDANCE (COA)
- EXPECTED FAMILY CONTRIBUTION (EFC)
= FINANCIAL NEED
- RESOURCES OF THE STUDENT
= ADJUSTED FINANCIAL NEED

EXAMPLE: If the 'cost of attendance' at a particular college was $12,000 and the 'expected family contribution' was calculated to be $4, 000, the 'Financial need" of the student would be $8, 000. In this case the student would be eligible to receive $8,000 in financial aid. Whether he receives a financial aid award for the entire $8,000 is up to the discretion of the individual college. Nonetheless the financial aid eligibility of the student is directly related to the financial need. If the student, had other resources to help pay for the college cost, the financial need would be reduced on a dollar-for-dollar basis for these resources. In this example assume the student had received a $1,000 private scholarship from the local Chamber of Commerce. Since private scholarships (scholarships which are not given by the college), are considered a resource, the $1,000 scholarship would reduce the financial need down to'$7,000. This means the student would now be eligible for only $7,000 in financial aid from the college.



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