A pile of financial aid (money)

Financial Aid: What is it, and how does it work?

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You’re already stressed. I’m not gonna lie – the financial aid process for going to school doesn’t help matters. A lot of students forego college altogether because they either don’t think they will qualify for financial aid, or they can’t seem to figure out how to fill out the FAFSA. Parents and students sometimes don’t realize that help is out there. It doesn’t have to be difficult.

Who is eligible for federal financial aid?

Anyone who is a U.S. citizen or eligible non-citizen is eligible to submit a FAFSA and receive financial aid.

There are private loans and scholarships that undocumented/international students can apply for, but this post is dedicated to federal aid.

What is Financial Aid?

Financial aid is any form of funding that helps students and their families pay for college; it helps cover college costs including tuition & fees, room & board, transportation, books, and supplies.

In order to see if you qualify for different types of financial aid, students must apply for aid by submitting the FAFSA, which determines their family’s ability to pay for college. ALL students who meet the citizenship criterion are eligible for some aid (unsubsidized loans), regardless of their family’s income.

The FAFSA opens on October 1st for the next academic year, and I encourage you to submit yours as soon as possible. 

What is the FAFSA?

FAFSA stands for Free Application for Federal Student Aid

The FAFSA is a required form that students complete to apply for federal financial aid. The information provided on the FAFSA can help states and higher education institutions (colleges and universities)  make their financial aid decisions. 

While the FAFSA can be used by states and colleges and universities, it’s also used by the federal government. The federal government determines a family’s eligibility for federal financial aid (work-study, grants, and loans) to pay for college.

There are different types of financial aid, and your financial aid award package may include a variety of aid types.

Types of Financial Aid

Many types of financial aid can help you and your family pay for college. The umbrella terms for these are grants, loans, and scholarships. There is also something called work-study aid. TIP: If you are not eligible for federally funded financial aid, ask your financial aid office if your institution offers any scholarships or grants for non-citizens. 


A grant is a type of award that you are not responsible for paying back after you graduate. 

There are certain instances when you will be required to give some if not all, of the Pell Grant back to your institution. For example, this will happen if you withdraw or stop attending classes before a certain point in the semester. 

The most familiar grant is called the Pell Grant. Your eligibility for this is determined by the federal government after you’ve submitted the FAFSA. 

There are also state and private grants. Ask your financial aid office for more details regarding the grants available to you. It can vary widely by state. 


There are hundreds of thousands of scholarship opportunities out there that you can apply for, if eligible.  Scholarships do not need to be repaid, but you can lose the ability to renew the scholarship if you don’t meet certain requirements as per the scholarship guidelines. 

Many scholarships are merit-based, which means your income does not factor into the eligibility requirements. However, if you don’t meet certain GPA requirements after accepting the scholarship, you run the risk of losing the scholarship. Each scholarship has different requirements, so be sure you understand them before applying for/accepting any scholarships. 

Income-based (aka need-based) scholarships are just that – scholarships based on your family’s income. These are oftentimes renewable, but not always. Again, make sure you understand the requirements before applying for/accepting a scholarship. 

Colleges typically have scholarships to give to incoming and returning students. There is usually going to be an application process to go through. You will also need to complete a FAFSA if you’re eligible for federal funds. Your institution may have a different process for students who are not eligible for federal aid.

Any scholarships outside of your institution will definitely have a separate application process.  Never EVER pay to apply for a scholarship. Any reputable scholarship will not make you pay to submit an application.

Work-Study Jobs

The federal work-study program will allow you to earn money by working part-time on campus. Talk with the financial aid office to see if you are eligible for this. 

Federal Loans

You are responsible for paying off your loan amounts, plus interest. 

1. Subsidized Loans

A subsidized loan is a type of loan that does not accrue interest while you are enrolled in classes at least half-time and for the first six months after you graduate (referred to as your “grace period”). 

2. Unsubsidized Loans

Unsubsidized loans are offered to all students, regardless of financial need. However, you need to be careful with these. An unsubsidized loan does accrue interest – from the very first day the money is disbursed to you until you pay it off (plus interest!) in full. 

Now What?

If you still have a balance remaining after all of the initial financial aid is applied to your bill, there are other options for you to pursue, including a Parent PLUS Loan or private loans. See your financial aid office for more details on additional options to fund your education.

What if I borrow more money than I need to pay off my bill?

First of all, you need to understand that if you take out loans, that is money that needs to be PAID BACK. It’s a LOAN.

Most financial aid offices refer to this “left over” money as a “refund check”. I have a hatred for the term refund check; you can read about that here: Why the term “refund check” is misleading.

There are times when you’ll get a “refund check” that won’t include loan money (because you didn’t take out loans), and that’s great! Save it for a rainy day.

Where and How Do I Apply for Financial Aid?

Obtaining financial aid is one of the most confusing parts of college for a lot of students. I’ve tried to simplify the process as much as possible. It is a complex topic, and this post may not answer all of your questions. It’s not meant to be your ultimate financial aid resource. Your best resource is your college’s financial aid office, as processes differ from school to school. That being said, I am willing to answer any questions you may ask in the comments.

Here is a quick summary of the steps U.S. Citizens and eligible non-citizens need to take in order to apply for federal financial aid.

1. Collect Required Documents

  • Taxes and W-2s from the prior-prior year
    • If you are submitting the FAFSA for the 2021-22 school year, you will need tax information for 2019.
    • Unless you will be 24 or older by December 31 of the award year you are applying for (for 2021-22 it would be December 31, 2021), you must include your parents’ tax information.
      • There are exceptions to this, but you must speak with your financial aid office.
  • Your Social Security Number or Alien Registration Number
  • Bank statements and records of investments (if applicable)
  • Records of untaxed income (if applicable)

2. Go to www.fafsa.ed.gov and Submit the FAFSA

  • Sign up for an account at fafsa.ed.gov
    • Write down all of your information in a safe place. It’s a pain in the ass to get back in if you forget your username/password! You can’t make a second account because it is tied to your SS#/Alien Registration #.
  • Submit the FAFSA
  • After you submit the FAFSA, you will be taken to the confirmation page. This page shows an Estimated Family Contribution (EFC) dollar amount. Depending on your family’s financial situation, this could be as low as $0 up to $10,000 or more. 
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TIP!!! If you have a high EFC and you have special circumstances that prevent your family from being able to contribute to your education, you will want to speak with the financial aid office. A lot can happen in the two years before filing the FAFSA. If your family’s income has drastically reduced in the last two years, the financial aid office may be able to help you with something called a Professional Judgement.

3. Apply for Scholarships

  • Once you’ve submitted the FAFSA, you will be able to apply for institutional scholarships if you have already been offered admission.
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TIP!!! You do NOT need to accept your offer of admission before you apply for financial aid/scholarships. That is a common misconception.

4. Complete Requested Forms

  • You may be notified that you have to complete more documents after the school receives your Student Aid Report (SAR). The SAR tells the financial aid office if you are eligible for Pell Grant, State Grants, or Subsidized loans. All federally eligible students are eligible to receive Unsubsidized Loans.
    • The extra documents can be the most frustrating part of the whole process. The required forms are not the same at every institution, and a lot of them can be very confusing. I urge you to reach out to an admissions advisor and/or the financial aid office for assistance. YOU ARE NOT FINISHED WITH THE APPLICATION PROCESS UNTIL THIS IS COMPLETED.

Then you wait.  You cross your fingers and hope that scholarships and grants start hitting your student account.  You will eventually receive a notification that all loans, grants, and scholarships have been awarded to you. This notification is called the “Award Letter”.  Most institutions will give you the ability to monitor your student account so that you can see the scholarships as soon as they are awarded to you.

5. Accept/Decline Loans

business, money, pounds

If you are awarded loans, you will need to either decline or accept them. You do NOT need to accept them just because they are offered to you! Also, if you need some but not all – you can accept a portion of it! At some point, I’ll tell you my horror story about my (unnecessary) loan debt.

If you still have a significant balance remaining after all of your scholarships, grants, and loans are applied, it’s time to look into other options.  The financial aid office will be able to help you with this.

6. Talk to the Financial Aid Office

I know it feels like I’ve said it a million times, but you might as well add the financial aid office number as a contact on your phone. You’ll probably be talking to them a lot. In fact, I’d be concerned if you didn’t reach out to them at least once – even if it’s only to verify that you have completed everything you need to do.

If you can get through this process, you can do pretty much anything in life. Your first college exam is complete. 🙂

Final Thoughts

There’s no point in sugarcoating things. The process of financial aid SUCKS. Deadlines, applications, different requirements, needing documentation… it can all get overwhelming if you don’t have someone to help walk you through it.

I know of families who didn’t complete the FAFSA because it was either too confusing for them or they didn’t believe they’d receive any money because of their high income. Don’t be one of those families. A lot of times, merit scholarships will require a FAFSA to be submitted. Just do it.

The next one opens on October 1st…

Leave me a comment if I can clarify anything for you!

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