College Prep Financial Aid
Average college costs 2002-2003:
How Financial Aid Works:
The purpose of financial aid is to make up for
the difference between how much college costs and what you and your family can
afford to pay. Basically, the financial aid system is based on equal access –
that anyone should be able to go to college, regardless of their financial
situation. Students and their families are expected to pay for college to the
best of their abilities, but if that doesn’t cover the entire cost, then
financial aid is available to bridge the gap. The amount your family is able to
contribute is frequently referred to as the Expected Family Contribution (EFC).
This figure is determined by whoever is awarding the aid whether it is the
federal government or the individual college or university. Therefore, you
should NOT rule out colleges with higher costs.
Say your EFC is $6,000. At a college with a total cost of $8,000, you’d be
eligible for up to $2,000 in financial aid. At a college with a total cost of
$30,000, you’d be eligible for up to $24,000 in aid. In other words, you’d be
contributing the same amount at both colleges. Of course, this doesn’t mean you
should not worry about costs at all. We recommend that you don’t let
cost be a deterrent to applying to schools. However, you should apply to some
“financial safeties” – schools that you feel you can get in to and that cost low
enough that you can afford them in case you don’t get a good financial aid
package from any of your other schools.
Different Types of Financial Aid:
Financial aid is any type of assistance used to pay college costs that is based on financial need. There are three main types of financial aid:
1. Scholarships and Grants: Grants don’t have to
be repaid and you don’t need to work to earn them. Grant aid comes from federal
and state governments as well as individual colleges. Although many grants and
scholarships are awarded based on need, many are awarded based on merit. The
most common form of grant is the Pell Grant, which is worth up to $4,000 this
year.
2. Loans: Around 55 percent of financial aid
comes in the form of loans, aid that must be repaid. Most loans that are based
on need are low-interest and sponsored by the federal government. An example of
a loan is the Stafford loan, which allows an undergraduate student to borrow
between $2,625 and $23,000 and repay it over many years at a fixed rate of
interest.
3. Work: Student employment and Work-Study aid
helps students pay for education costs. Work-Study is a federal program, which
provides college students with part-time employment to help meet their financial
needs and gives them work-experience.