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How Financial Aid Works

Updated on November 17, 2010

How Financial Aid Works

Learning how financial aid works will help any get more money for college.  After all, it is a system that has been going on for decades, so there should be no mystery as to how financial aid works to get a quality financial aid package.

The first thing to know is that all need-based financial aid is based on the FAFSA.  The FAFSA stands for Free Application for Federal Student Aid.  The FAFSA is the application that takes one's family financial information and produces a Student Aid Report (SAR).  It is the SAR that colleges and foundations will examine to project a college student's financial need.  A student seeking financial aid will be delivering their SAR to a number of entities but the primary place to send the SAR is to the college or university one is attending.  The financial aid office will determine what federal financial aid is available for a student.

How financial aid works is that federal financial assistance will come in the form of grants like the Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG).  There will also be work-study opportunities, where one works on-campus part-time to generate dollars.  Then there could also be a portion that is relegated to student loans.  Guaranteed student loans are inexpensive federally guaranteed loans.  It is best to stay away from student loans if possible.

The federal aid will be the bulk of a financial aid package.  Most schools are priced within the combined maximums of college financial awards.  So, if one qualifies for all the available aid then they should be able to cover the cost of college.  However, should one not get full aid then they will have remaining need.  How financial aid works with remaining need after the federal aid package is that costs should be covered with scholarships.  One should also try to replace any student loans with scholarship dollars.  This way one does not have to pay back the money after college.

Scholarships are numerous but also competitive.  They are also often small so it takes a few to cover any gap in financial need.  The best approach to scholarships is to research often and try to look a year in advance.  This way one will know what is available, what the criteria will be, and can schedule making application.  Scholarships come from all kind of sources.  Some may be limited to certain majors or to certain institutions.  Many also serve a certain demographic of students like religion, ethnicity, or geographic area.  There is even a scholarship for college students who are left-handed.  Or there are a number of mother scholarships.  With scholarships coming from so many areas, that is even more reason why one should start looking early.

Hopefully, this overview of how financial aid works is helpful in securing plenty of money for college.

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