The U.S. Department of Education’s Office of Federal Student Aid provides more than $120 billion in federal financial aid to help pay for college or career school each year.
Learning about financial aid can seem overwhelming when you’re trying to get ready for college or career school. Well, it doesn’t have to be! We’ll walk you through how federal financial aid works, types of the available financial aid, and what you can do to keep the financial aid.
What does federal financial aid mean?
Financial aid is money to help pay for college or career school. Grants, work-study, loans, and scholarships help make college or career school affordable. Federal financial aid comes from the federal government – specifically, the U.S. Department of Education. It’s money that helps a student pay for education expenses at a postsecondary school (e.g., college, vocational school, graduate school).
Federal student aid covers such expenses as tuition and fees, room and board, books and supplies, and transportation. Aid also can help pay for a computer and for dependent care.
What are the 3 types of financial aid?
Federal financial aid offers three types of financial aid.
- Grants: Financial aid that generally doesn’t have to be repaid.
- Loans: Borrowed money for college or career school; your loans must be repaid-with interest.
- Work-Study: A federal work program through which undergraduates and graduate students at participating schools earn money to help pay for school.
How does financial aid work?
The way federal financial aid works is that students must first apply for aid by answering a series of questions used to determine their ability to pay for college.
Then, aid is awarded based on that application, and students have the choice to accept or reject the aid offered. The type of aid offered determines whether it will have to be repaid. Sometimes, students must complete additional applications to be considered for other scholarships or private aid.
What are the eligibility criteria for getting federal financial aid?
The most basic eligibility requirements are that you must:
- be a U.S. citizen or an eligible noncitizen
- have a valid Social Security number
- be making satisfactory academic progress
- be enrolled or accepted for enrollment as a regular student working toward a degree or certificate in an eligible program
- show you are qualified to obtain a post-secondary education by 1) having a high school diploma or General Educational Development (GED) certificate, 2) passing an approved ability-to-benefit test (if you don’t have a diploma or GED certificate, a school can administer a test to determine whether you can benefit from the education offered at that school), 3) meeting other federally approved standards your state establishes, and 4) completing a high school education in a homeschool setting approved under state law.
When will I receive my financial aid?
The type of aid you accepted effects when you’ll get your aid.
Grants and Student Loans
Generally, your school will give you your grant or loan money in at least two payments called disbursements. In most cases, your school must give you your grant or loan money at least once per term (semester, trimester, or quarter). Schools that don’t use traditional terms such as semesters or quarters usually must give you your grant or loan money at least twice—for instance, at the beginning and midpoint of your academic year or program.
If you’re a parent taking out a Direct PLUS Loan to help pay for your child’s education expenses, your loan funds will be disbursed according to the same type of schedule.
The following may apply if you haven’t taken out a federal student loan before:
- If you’re a first-year undergraduate student and a first-time borrower, you may have to wait 30 days after the first day of your enrollment period (semester, trimester, etc.) before your school is allowed to give you your loan money. Check with your school to see whether this rule applies.
- If you’re a first-time borrower of a Direct Subsidized Loan or a Direct Unsubsidized Loan, you must complete entrance counseling before your school can give you your loan money.
- If you are a graduate or professional student taking out a Direct PLUS Loan for the first time, you must complete entrance counseling before you receive your first loan disbursement. Note: Counseling isn’t required if you’re a parent taking out a Direct PLUS Loan to help pay for your child’s education.
If you’re going to have a work-study job, you’ll be paid at least once a month.
How do I apply for financial aid?
The first step is to file the Free Application for Federal Student Aid, known as the FAFSA. This application is used by many state agencies and colleges and universities to determine college aid. Refer to our article “FAFSA Financial Aid Explained” to understand better about how it works.
The FAFSA is available for free through the Department of Education’s website. Families can begin filling out the form as early as Oct. 1 for the following academic year. The deadline for the FAFSA is June 30. But that deadline is only for federal financial aid. Many schools use the FAFSA to determine aid set earlier deadlines.
Some schools – mostly private colleges – use a supplemental form called the College Scholarship Service Profile to determine how to give out their own financial aid funds. The form is more detailed than the FAFSA and can be time-consuming to complete.
The initial submission fee for the CSS Profile is $25; each additional report is $16. A list of schools that require the CSS Profile can be found on the website for the College Board, the organization that administers and maintains the application.
How long can I get financial aid?
You can receive the aid for no more than 12 terms or the equivalent (roughly six years). You’ll receive a notice if you’re getting close to your limit.
What do you need to do to keep the financial aid?
You’ll need to continue to meet the basic eligibility criteria, make satisfactory academic progress, and fill out the FAFSA® form every year.
Once you’ve filled out your Free Application for Federal Student Aid (FAFSA®) form and received your grant, loan, or work-study funds to help you pay for college or career school, make sure you stay eligible throughout the academic year—and in subsequent years.
Remember, the basic eligibility criteria that allow you to get federal student aid continue to apply throughout the time you’re receiving aid—not just when you first fill out the FAFSA form and are awarded aid.
Besides, you need to make satisfactory academic progress in order to continue receiving federal student aid. In other words, you have to make good enough grades, and complete enough classes (credits, hours, etc.), to keep moving toward successfully completing your degree or certificate in a time period that’s acceptable to your school.
Each school has a satisfactory academic progress policy for financial aid purposes; to see your school’s, you can check your school’s website or ask someone at the financial aid office. Your school’s policy will tell you:
- what grade-point average (or equivalent standard) you need to maintain;
- how quickly you need to be moving toward graduation (for instance, how many credits you should have successfully completed by the end of each year);
- how an incomplete class, withdrawal, repeated class, change of major, or transfer of credits from another school affect your satisfactory academic progress;
- how often your school will evaluate your progress;
- what will happen if you fail to make satisfactory academic progress when your school evaluates you;
- whether you are allowed to appeal your school’s decision that you haven’t made satisfactory academic progress (reasons for appeal usually include the death of a member of your family, your illness or injury, or other special circumstances); and
- how you can regain eligibility for federal student aid.
Many families are shocked by a college’s sticker price. While the price of tuition can be overwhelming, federal financial aid can make higher education affordable. If you need an option to fund your education, financial aid is a great opportunity for you.