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Everyone knows the cost of attending college has been increasing significantly over the past few decades. Applying for financial aid has never been more important for families of students planning to attend college. And applying for financial aid can be a daunting task for parents of college-bound students. With so much information available online, it can be overwhelming to know where to start. However, understanding the basics of financial aid can make the process much easier. In this article, we’ll cover everything parents need to know about financial aid for college, from types of financial aid to the application process.

How does Financial Aid get determined?

The amount of aid a student receives depends on a few factors. It is important to note that a student’s ‘enrollment status’ is key in determining financial aid. A student must be enrolled in a college in order to qualify. Part-time enrolled students are still eligible, but the expected cost of attending school part-time will impact the total amount of financial aid that student can expect. For enrolled students, the most important factors in determining financial aid are Total Cost of Attendance (COA) for a given school and the Expected Family Contribution (EFC) of a student and their family.

What is Total Cost of Attendance (COA)?

Total cost of attendance (COA) is the sum total amount a student is expected to pay in order to attend a given college or university. It is the estimate of:

  • Tuition and fees
  • Room & Board (housing)
  • Cost of books, supplies, and transportation
  • Costs for eligible study-abroad programs

What is Expected Family Contribution (EFC)?

A student’s Expected Family Contribution (EFC) is a number calculated and used by a student’s school to calculate how much financial aid a student is eligible to receive. It is important to note that the EFC is not the amount of money a family will have to pay for college or the amount of student aid a student will receive.

How is EFC determined?

A student’s EFC is determined using a formula that is established by law. It takes into account a family’s taxed and untaxed income, any assets, debt, and benefits (such as Social Security). It also takes into account the size of the family and if any other family members are planning on attending college. If you are interested in understanding more about how an EFC is calculated, the Federal Student Aid office posted a guide explaining exactly how it is determined. You can find it here: EFC Formula.


The Free Application for Federal Student Aid (FAFSA) is the most important application for financial aid. The FAFSA is used by the federal government, state governments, and colleges and universities to determine a student’s eligibility for financial aid.

The FAFSA asks for information about a student’s family income, assets, and other financial information. This information is used to calculate the Expected Family Contribution (EFC), which is the amount of money the family is expected to contribute to the student’s education.

The FAFSA is available online and can be completed starting on October 1 of the year before the student plans to attend college. It’s important to complete the FAFSA as early as possible, as some types of financial aid are awarded on a first-come, first-served basis.

A student must complete and submit a FAFSA in order to be considered for any financial aid packages.

For more information on the FAFSA, read our Guide to the FAFSA.

Types of Financial Aid

There are several types of financial aid available to college-bound students, including grants, scholarships, loans, and work-study programs. Overall, the different types of financial aid can be broken down into two categories – Need-based Financial Aid, and Merit-based Financial Aid

What is Need-Based Aid?

Need-based aid is a term to describe any financial aid given to a student that is determined based on a student’s financial needs. It is typically determined by calculating the COA for a given school and the students EFC. If the COA is greater than the EFC, need-based aid will likely be given to cover the difference. The key differentiator for need-based aid is that it is determined only by considering the student’s financial need, it is not based on their academic qualifications.

What is Merit-Based Financial Aid?

Merit-based financial aid is financial aid such as Grants or Scholarships that are awarded to a student based on the student’s skill or ability, not based on their financial needs. Merit-based aid is almost always awarded by the school a student will attend, not by the government. Colleges and universities will award merit-based scholarships and aid to students in an effort to make attending that school more appealing for the student.


Grants are financial aid that does not need to be repaid. They are typically awarded based on financial need, and are often provided by the federal government, state governments, or colleges and universities. The key difference between grants and loans are that grants do not need to be repaid while loans do.

For more information on grants, including the most popular grants and how to apply for them, read our Guide to Grants.


Scholarships are similar to grants in that they do not need to be repaid. However, they are typically awarded based on merit rather than financial need. Scholarships can come from a variety of sources, including private organizations, corporations, and colleges and universities.

Read our Guide to Scholarships.


Loans are a type of financial aid that does need to be repaid, often with interest. There are several types of loans available, including federal loans, private loans, and parent loans. Federal loans typically have lower interest rates and more flexible repayment options than private loans.

More information about loans can be found in our Guide to Loans

Work-study programs:

Work-study programs provide students with part-time employment to help pay for their education. These programs are often available through the federal government or colleges and universities.

More information about work-study programs can be found here: Guide to Work-Study.

Other Applications

In addition to the FAFSA, some colleges and universities require additional financial aid applications. These applications may be used to determine eligibility for institutional grants and scholarships, as well as other forms of financial aid.

It’s important to check with each college or university to determine their specific financial aid application requirements and deadlines.

For more help with financial aid, read our Tips for Maximizing Financial Aid


Navigating the financial aid process can be overwhelming, but understanding the basics can make it much easier. By understanding the types of financial aid available, completing the FAFSA and other necessary applications, and maximizing available resources, parents can help their college-bound students pay for their education.

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