While the need for financial aid is easily understandable given the requirement to meet the cost of education, it is equally important to understand how the financial aid program works. Further more, you should know the various forms of financial aid available so as to tap the resource for maximum benefit.

Understanding Financial Aid

hat do you mean by Financial Aid?

Financial aid is the financial support offered by the federal government and other private educational institutions in order to meet the gap between the cost of education and the contribution by the family of the student towards the sum.

How will you determine the Family Contribution?

The family contribution or the expected family contribution (EFC) is the share of contribution offered by the family of the student towards the cost of education. This figure is determined by the Lending Institution in order to arrive at the financial aid required by the students and finally the amount actually granted by them. This is a relative figure, whose qualification for the loan highly depends on other applicants and their contribution. The figure is arrived at considering various factors such as income, savings, assets and family size and other loan commitments.

What are the different types of Financial Aid Programs?

Financial aid programs are broadly of three different types namely Loans, Scholarships and Grants and Employment Option.

• Loans – This is the most widely used financial option. Financial aid to meet the cost of education is granted in the form of loans to students. These loans are repayable together with interest. Normally these are subsidized loans offered to students at a lower rate of interest to make it affordable. These loans are offered both by government and private agencies.
• Scholarships and Grants – Scholarships or most commonly called the free money options are offered to students based on a number of considerations. With no repayment obligation, scholarships and grants are the best form of financial aid offered to students and it clearly depends on how well this resource is utilized by the students.
• Employment – Work and study option is offered to students wherein the students work in order to meet their expenses towards their living and other personal expenses in the duration of their study.

Should I consider high cost colleges?

You can apply to colleges irrespective of their cost of education. Once your expected family contribution (EFC) is arrived at, the rest will be funded by way of financial aid. As EFC will remain the same, the aid amount will make up for the difference.
I am sure a basic insight into various types of financial aid and knowledge about how it works makes you better understand it and make it work better for you.