Applying for Financial Aid
The Free Application for Federal Student Aid (FAFSA)
The financial aid application process begins with the FAFSA: The Free Application for Federal Student Aid. All students who need to receive financial aid, whether from government loans, grants, or scholarships, need to complete this form.
The FAFSA collects information that allows the Department of Education to determine students’ eligibility for financial aid. It asks students about the financial resources that are available to them—that means savings and all kinds of income, including spousal income, investments, child support, alimony, etc.
Students can fill out the FAFSA in paper form or online. It’s ideal for students to collect information relating to their taxes and earnings as soon as possible before starting the FAFSA. Students may use income estimates if they have not completed their tax calculations in time to fill out the FAFSA, but the most accurate information is best.
The FAFSA site provides a worksheet in both English (pdf) and Spanish (pdf) to get students organized before they tackle the form.
Research comes in handy: The FAFSA asks each student to designate several schools that will receive copies of the Department of Education’s aid determination for him or her.
The Student Aid Report and Expected Family Contribution (EFC)
Officials at the Department of Education then determine each student’s EFC, or Expected Family Contribution, and send out Student Aid Reports (SAR) about four weeks later to notify families. The SAR provides a summary of the financial information students submitted on the FAFSA, as well as the EFC, which is based on what the Department of Education believes each family can afford to spend on the student’s education. The SAR is also submitted to the schools that students designated on the FAFSA in order to allow them to begin making aid determinations.
However, the EFC is merely an estimate. Individual schools may award students aid that assumes a larger or smaller family contribution. Either way, students must pay the difference between the cost of attendance and the amount of aid they receive.
For example, the annual cost of attendance (tuition, fees, and room and board) at a student’s favorite college is $20,000. The student is given an EFC of $8,000, according to her SAR—that is, she and her family are expected to contribute $8,000 each year toward the cost of attendance. However, she is only awarded $7,000 in aid from the college, meaning that her family’s planned contribution plus the financial aid she will receive add up to $15,000. That student must decide whether to find a way to contribute an additional $5,000 toward her tuition or attend a less expensive school.
Once the selected schools have received and processed the SAR, as well as any other financial aid applications they require, they will issue their own award letters. These letters explain for students exactly what the school has chosen to offer as financial assistance. This assistance may take the form of a type of loan, scholarships, grants, or work-study.
Students should examine schools’ financial aid offers closely, paying special attention to how much “free” money—that is, grants or scholarships that do not have to be repaid—each school offers. Other important questions to consider for each offer include:
- – What’s the difference between the amount of aid offered and the cost of attendance?
- – How much debt will students take on?
- – Will students need to work extra hours to afford the cost of attendance at particular schools, and will that affect their academic performance?
- – Will certain schools allow them to graduate with positive earning prospects and pay back their loans?
- – Will the positive benefits of the degree outweigh the short-term sacrifices necessary for the student to complete it?
Although adult learners encounter complex choices, they need to be reminded that education is an investment in their future—and in their family’s future. With sound fiscal advice, successfully pursuing education as an adult is possible!
The Master Promissory Note
When students accept financial aid packages that include loans, schools certify the loans. The students will then need to sign a Master Promissory Note (MPN) from their lenders before the loan may be processed and disbursed.
The MPN is a legally binding agreement between the borrower and the lender. It is the student’s agreement that he or she will repay the loan. It’s very important that students understand that MPNs are valid contracts that last until their loans are repaid.
researching > applying > budgeting > repaying
