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Understanding Financial Aid: A Comprehensive Guide

Financial aid is a type of funding that can make it easier for college students and their parents to afford the cost of higher education. Here’s what you need to know about financial aid and how to get what you need to make college more affordable.

What Is Financial Aid?

Financial aid is any form of financial assistance to help you pay for college or career school. There are several different types of financial aid available to students, each with its own criteria for eligibility and amount offered.

Provided by the federal government, schools, state agencies, employers, and other organizations, financial aid can save you thousands of dollars on your college costs. Some types of aid must be repaid, such as loans, while others don’t have that stipulation, such as grants.

Need-Based Financial Aid vs. Merit-Based Financial Aid

Generally speaking, there are two types of financial aid you may receive. Here’s a quick summary of how they differ:

• Need-based financial aid: This form of assistance is determined based on your financial need. All federal student aid and some school-offered aid, such as scholarships, are need-based. Your eligibility for this type of aid depends solely on your and your parents’ financial situation.
• Merit-based financial aid: With merit-based aid, your family’s income and assets are irrelevant. Instead, your eligibility is based on other factors, such as your academic record, athletic or artistic talents, or demographics. Scholarships are often offered on the basis of merit.

What Are the Different Types of Financial Aid?

Broadly speaking, there are six types of financial aid you may be able to obtain. Each one works a bit differently, and not all are available to all students. As you navigate how to pay for college, here are some of your options.

Scholarships

Scholarships are considered a form of gift aid because you typically don’t need to repay them. Colleges and universities often offer this form of financial aid, though you can also find opportunities through private organizations. In fact, many schools offer several different types of scholarships.

Depending on the school you’re attending and the type of scholarship, you may qualify on the basis of need or merit. Additionally, some private organizations may offer scholarships based on your background—for example, you’re from a military family or you’re from an underserved community.

The value of a scholarship can range from just a few hundred dollars to the full cost of your attendance.

Grants

A grant is another type of gift aid that you don’t need to repay, though there are some exceptions. Commonly offered by the federal government, grants are usually based on the student’s financial need.

Other organizations may offer merit-based grants for things like academic achievement and community service. Award amounts could range from a few hundred dollars to several thousand dollars, though are typically not enough to cover the full cost of attendance.

Work-Study Programs

The work-study program is a federal program offered in partnership between the Department of Education and educational institutions.

College students who demonstrate financial need can obtain federal financial aid in exchange for part-time work. Work-study jobs are typically on campus, but some nonprofit organizations and public agencies may offer off-campus positions.

It’s important to note, however, that qualifying for work-study doesn’t guarantee you a job. Additionally, you can’t earn more than your work-study award, and you may be able to earn more by looking for a job on your own.

Federal Student Loans

Federal student loans are a form of financial aid that must be repaid with interest. There are several different types of federal loans, each with different eligibility requirements, loan limits, and other features.

Unlike private student loans, federal loans don’t have a minimum credit score to get approved, and most don’t require a credit check. You’ll also get access to several relief options, including loan forgiveness programs, income-driven repayment plans, and deferment and forbearance plans.

Fellowships and Assistantships

Fellowships and assistantships are also considered gift aid because you don’t need to repay them. However, they typically have a work requirement, which may include study, research, or employment at the school.

Fellowships and assistantships are typically only available to graduate students. In both cases, the amount you receive could be enough to cover your cost of attendance plus a stipend for living expenses.

Employer Tuition Assistance

Many private employers offer tuition assistance as a benefit for their employees. You can typically use the assistance to cover eligible educational expenses, such as tuition, books, and supplies, but not room and board or transportation.

The amount you can receive will depend on your employer, but you can exclude up to $5,250 of the amount you receive each year from your income for tax purposes.

Eligibility criteria can also vary by employer. For example, some may require you to work for the company for a minimum amount of time before you qualify, while others may only cover the cost of courses and programs related to your field of work.

Financial Aid Deadlines to Know

Financial aid is offered on a first-come, first-served basis, so it’s best to avoid waiting until the last minute to submit your application. That said, here are some key dates for the Free Application for Federal Student Aid (FAFSA) and the College Scholarship Service (CSS) Profile for the 2025-26 academic year:

• FAFSA: Open date: October 1, 2024; Deadline: June 30, 2025
• CSS: Open date: October 1, 2024; Deadline: January 1, 2025 — March 31, 2025

It’s important to note that financial aid deadlines can vary by college, so it’s crucial that you check with your school’s financial aid office to determine when you need to submit your application.

How to Apply for Financial Aid

It’s a good idea to apply for both federal and non-federal financial aid, which you can do with the FAFSA and CSS profile, respectively. Here’s how the process works for each.

Applying With the FAFSA

1. Create a StudentAid.gov account: You and anyone else who’s expected to provide information on the FAFSA form will need to create an account at StudentAid.gov using your full name and Social Security number.
2. Gather your documents: To provide a full picture of your family’s financial situation, you’ll need to gather tax returns; bank account balances; net worth of investments, businesses, and farms; and records of child support received.
3. Fill out the FAFSA form: You can either fill out the form online—the faster option—or print out the application and fill it out by hand. You’ll answer various questions about yourself, your family, your circumstances, your college plans, and your family’s financial details.
4. Submit the form: Once you’ve completed the form, review your answers and then submit it. If you’re filling out the application by hand, you’ll need to mail it.

Applying With the CSS Profile

1. Create a College Board account: If you don’t already have a College Board account, you’ll need to create a single account for everyone who’s expected to provide details. Only non-custodial parents must create a separate account.
2. Gather your documents: To ensure you have all of your financial details on hand, you’ll need your most recently completed tax returns, W-2 forms, and income records for the current year, as well as records of untaxed income and benefits, assets, and bank statements.
3. Fill out the application: You’ll fill out a CSS Profile application online. The provider will guide you through the process.
4. Submit the application: Once you’ve completed the application, you’ll submit it online. Note that if your family income exceeds $100,000, you may need to pay an initial application fee of $25. Additional reports cost $16 apiece.

How to Appeal a Financial Aid Award Letter

After submitting your applications for financial aid, your school will provide you with a financial aid award letter detailing the types of aid you qualify for and how much. If you believe that you should receive more aid than what your award letter shows, you can appeal the decision by writing a letter.

A financial aid appeal letter is especially worth considering if your family’s financial situation has changed since you initially submitted your application for aid, you made an error on your application, or you received a better financial aid package from another school.

With that in mind, here are some steps you can take to appeal a financial aid decision:

1. Gather your documentation: To help with your case, it’s a good idea to provide documentation detailing your reasons for appeal. This may include a competing financial aid package, proof of unemployment, an eviction notice, or any other supporting documents.
2. Write a letter: You’ll want to address the reader by name, so contact the financial aid office to find out who reviews appeals. Then, introduce yourself and clearly state why you’re requesting a review. Make a reasonable counteroffer based on your circumstances, and be sure to enclose your documentation.
3. Wait for a response: Once you’ve submitted your appeal letter, the financial aid office will review your situation and follow up with questions if necessary. It will then give you a decision.

It’s important to keep in mind that there’s no guarantee that your appeal will be successful. If it’s not, you’ll want to seek other ways to pay for college.

Do You Need to Pay Back Financial Aid?

Some, but not all, types of financial aid must be repaid. For example, student loans generally need to be repaid in full unless you qualify for loan forgiveness. However, most loan forgiveness programs require you to make monthly payments for several years before your remaining debt is discharged.

Other forms of financial aid typically don’t need to be repaid, especially if there’s a work requirement involved.

Even scholarships and grants, which usually don’t have strings attached, usually don’t require repayment. However, there are some exceptions, so make sure you understand the fine print before accepting any form of financial aid.

The Bottom Line

Financial aid can provide much-needed funding for your college experience, and the best way to maximize your eligibility is to research your different options and submit your applications on time, if not early.

As you begin your college career, it’s also important to start building your credit history. With Experian Go™, you can learn about how your financial decisions influence your credit score and get the resources you need to establish your credit history for the first time. You’ll also be able to track your progress with free access to your FICO® Score☉ and Experian credit report, making it easier to develop and maintain good credit habits.

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