Personal Finance
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6 mins read
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June 10, 2021
Need-Based Financial Aid: Do You Qualify?
Headed to college? Find out what need-based financial aid is, if you qualify for it, and what your options are to pay for your education.
If you’re headed to college, you want to look at all of
The federal government offers “need-based financial aid” that can come in a variety of forms and help you cover your education costs.
Read on to learn more about need-based financial aid.
What is Need-Based Financial Aid?
In order to receive financial aid, you need to fill out the Free Application for Federal Student Aid (FAFSA®). When you do that, your Cost of Attendance (COA) will be
. On top of that, they’ll assess your
.
According to
, “The EFC is calculated according to a formula established by law. Your family's taxed and untaxed income, assets, and benefits (such as unemployment or Social Security) all could be considered in the formula. Also considered are your family size and the number of family members who will attend college or career school during the year.”
Your financial need will be determined by subtracting the Expected Family Contribution from the Cost of Attendance. Types of Need-Based Financial Aid
Once your financial need is calculated, you may qualify for various types of need-based financial aid. According to the
, the types of need-based financial aid include:
Note that the Federal Pell Grant does not have to be repaid and undergraduate students with exceptional financial need may qualify.
If your school participates in the
program, you could receive a grant between $100 to $4,000 a year. Your eligibility depends on when you apply, your financial need, as well as funds available at the school.
A Direct Subsidized Loan is a type of federal student loan where the government will subsidize your interest for a period of time.
For example, if you have a subsidized loan, the government will pay the interest while you're in school (so long as you’re enrolled at least half-time), during your grace period which is the first six months after you graduate, and during deferment, if you need to postpone your student loan payments.
Through Federal Work-Study, you
through your school to help cover educational costs.
How is Need-Based Financial Aid Calculated?
As we’ve seen above, the calculation for need-based financial aid is as follows:
Cost of Attendance for your school (COA) - Expected Family Contribution (EFC)
It’s important to note that you aren’t eligible for more need-based aid than what your financial need is.
So, let’s say your COA is $20,000 and your EFC is $14,000. Your financial need would be $6,000, so you wouldn’t qualify for more than $6,000 in need-based financial aid options.
Do You Qualify for Need-Based Financial Aid?
If you’re trying to figure out
, you might be wondering if you qualify for need-based financial aid. Whether you qualify or not is based on a number of factors — let’s review.
Need-Based Financial Aid: Eligibility Criteria
Whether you qualify for need-based financial aid is determined by your:
* Expected Family Contribution (EFC)
* Enrollment status (such as half-time or full-time)
* Cost of Attendance (COA)
Ultimately, the financial aid office will determine if you qualify and for how much need-based financial aid you can receive.
Do You Need to Pay Back Need-Based Financial Aid?
When it comes to types of need-based financial aid, you need to pay back some, while others you don’t.
For example, grants and scholarships don’t need to be paid back. In addition to this, the Federal Work-Study option is actually a job, so you don’t have to pay that back, but you have to work for your earnings to help cover costs. The subsidized loan, on the other hand, _does_ need to be paid back.
There are also other types of non-need-based financial aid, such as
and
, that do need to be paid back. These options are not based on your overall EFC.
Difference Between Need-Based Aid and Merit-Based Aid
There are two different types of aid, including need-based aid and merit-based aid. But what’s the difference between the two?
Need-based aid is determined by your overall financial need. This is based on your family’s income and assets, as well as what they may be able to contribute to your college education costs.
Merit-based aid is typically based on your achievements. For example, good grades, sportsmanship, civic participation or volunteer duties would all be considered under merit-based aid. Merit-based aid typically comes in the form of scholarships.
Bottom Line
While
and can be stressful, the good news is that there are various options to consider and avenues to pursue funding. Whether it’s need-based financial aid or merit-based aid, look into all your options.
Take advantage of grants and scholarships first, then federal loans. Private loans can be considered as a last resort, only because they don’t have the same benefits as the other options. But there are many ways to pay for college and it’s worth looking into all of the possibilities. Good luck!
