How financial aid works

Financial aid is one of the most confusing processes in college admissions, but don't worry — we're here to break it down for you. Join Moriah as she walks you through every step of the process, so you can get the aid you deserve.

Want to know how much aid you could be eligible for? Find out here:
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Complete Guide to Applying for College Financial Aid — https://cv.watch/3nRYFxJ
The Ultimate Guide to Filling Out the FAFSA — https://cv.watch/3Cq7h2O

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Make it make cent$: need-based aid — https://cv.watch/3lNoU5L

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We’ve also posted a transcript below.
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Hi, I’m Moriah, and today we’re going to be talking about how to navigate the financial aid process — without having to get an accounting license.

First, let’s talk about financial aid from the federal government. There are three main types: grants, work study, and subsidized loans.

A grant is the simplest form of financial aid. The most common type of grant is Pell Grants, of which the maximum amount varies from year-to-year, depending on available funding. But just for example, this year’s maximum is $6,495 — up $150 from last year.

Some financial aid is more transactional. Work study is a job offered by your university to help you pay towards yearly expenses, including tuition. The benefit here is that the resulting paycheck isn’t considered when schools are considering your financial need, so that money won’t detract from other forms of financial aid. The income is paid directly to you, so you can choose how much to put back into your tuition.

The last form of federal financial aid is student loans. If these are subsidized as part of your aid package, you won’t have to worry about interest building up while you’re in college — the federal government will pay that off for you. You’ll also enjoy a grace period after you graduate of about six months, so you’ll have some time to find a job before your first payment is due. The total monetary amount you can get from these increases per year as you get closer to finishing college, but overall, you can get $23,000 total in subsidized loans throughout all four years.

Each of these aid types can help, but even all of them combined will rarely be enough to pay for four years at a major university.

This brings us to the other main form of financial aid — financial aid from schools themselves. But before we dive in, let’s first briefly go over how you’ll apply for financial aid.

Every student applying for financial aid will at some point have to fill out the Free Application for Federal Student Aid, or FAFSA. This form acts as a formula — kind of like a 1040. You put in how much you make, how much you own, and the online form spits out a number. That number is your Expected Family Contribution, or EFC, which is how much the federal government thinks your family can afford to pay towards college each year.

If the total cost of college for you — including tuition, room, and board — is higher than that EFC number, then the difference is called your ‘demonstrated need.’ If your family income is low enough, you could have an EFC of zero, in which case your demonstrated need will be the entire cost of college.

Okay, so you fill out the FAFSA to figure out your EFC and demonstrated need. Any federal awards you get will then form the baseline of your financial aid. If you still have demonstrated need after those Pell Grants, you’ll need to look to colleges for further help.

This brings us to school-based aid, which is there to fill in the gaps between your EFC and federal aid benefits. Keep in mind, though, that some schools calculate EFC a little differently than the FAFSA.

Once a school has calculated your demonstrated need, each of them will have its own policies regarding how much they’ll actually cover. Only 21 schools — think Harvard or Brown — offer to pay for 100% of demonstrated need without using loans. The only thing you’ll need to be on the hook for is your Expected Family Contribution, which you may still need loans to cover.

Another 54 schools, like UCLA or Tufts, will meet 100% of demonstrated need, but consider subsidized loans as part of their aid package. This means you’ll have to max out on federal subsidized loans before the school will award you any money. It’s better than having to take out loans with full interest but will still be a burden down the line.

Finally, if your school doesn’t meet 100% of demonstrated need — which, most don’t — then you’ll be left with what is called a ‘gap’ in your award offer. This is money that you’ll have to come up with on top of your Expected Family Contribution.

And that’s it! You apply for federal aid, receive what you’re qualified for, and the rest is up to your choice of school. Thanks for watching and see you again next time.

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