Getting Your Share Of Federal Financial Aid

Each year more than $143 billion is awarded in financial aid. With this much money being paid out, you definitely need to make sure that you get every penny that you deserve. Unfortunately, the biggest mistake that most adults make is not applying for financial aid because they assume that they won't qualify. Some adults even assume that financial aid is only for high school students! As long as you are working toward your first undergraduate or graduate degree, you can apply for financial aid regardless of your age.

Some adults assume that their family income may be too high to qualify for financial aid. The reality is you'll never know what you truly deserve unless you apply. You may find that even if you don't get a grant, you are awarded a cushy campus job, special college scholarships or low-interest student loans. You may find that one of these sources of money is just what you need to make paying for college possible. We cannot emphasize how important it is that you spend the time to apply for financial aid.

Starting the Financial Aid Process

The financial aid process begins by providing detailed information on your personal finances through a form known as the Free Application for Federal Student Aid or FAFSA. Using your previous year's taxes you will reveal all of the money that you have in savings, investments and hidden Swiss bank accounts. If you are applying to a private college you may also have to provide additional information through the college's own financial aid form or the College Board's CSS/Financial Aid PROFILE form. Like the FAFSA, it asks similar questions about your finances.

You may download a copy of these forms and even complete them online at for the FAFSA and for the PROFILE. Also, don't forget to download your free copy of the "Student Financing Guide".

Turn in both the FAFSA and PROFILE as soon as possible after January 1 of the year in which you plan to go back to school. If you are planning on starting in September of next year, turn in the FAFSA as soon after January 1 as possible. The reason you can't turn the forms in earlier is because you need to know your prior year's income and assets. You should turn in your applications as early as possible since each college has its own deadlines, which are usually in early to mid-February. Most colleges award financial aid until they run out of money. This somewhat first come, first served process means that the earlier you turn in your forms the better.

Here's what happens. First, you submit the FAFSA to the government for processing. The government will in turn pass on the results of their calculations to you in the form of the Student Aid Report (SAR) as well as to each college that you are applying to. The SAR provides your Expected Family Contribution (EFC), the amount that you are personally expected to contribute to your education. It is important to understand that all the government does is crunch the numbers you provide on the FAFSA and pass the results to the colleges. This means that you need to indicate on the FAFSA which colleges should receive the results.

We want to point out that you are filling out the financial aid forms as many as nine months before you start school and using tax returns that will be a year old. This is an important point to keep in mind since anything that happens to your finances now won't affect your financial aid situation. In other words, your financial aid package for the upcoming school year is really based on information from last tax year. Everything that happens to you financially after the new year won't even be seen by the colleges when it comes to your financial aid forms.

What Happens after the Numbers Are Crunched

While applying for financial aid may seem like putting the fate of your future into a computer that crunches the numbers and spits out an answer, there is actually a human being behind all financial aid decisions. Once your financial aid forms have been processed, they will be sent to every college you are applying to, and this is where the computations end and human beings take over.

With a detailed picture of your financial situation, financial aid officers at each of the colleges will analyze the money you have and figure out your degree of financial need based on the cost of the college. Once they know how much you need, they put together a financial aid package, spelling out how much and in what form you will get this money.

Financial aid officers use the results as a guide when putting together aid packages. The financial aid officer has the ability to increase or decrease the amount of financial aid you receive for a variety of reasons. Therefore, it is crucial that you are open about your family's true financial situation to the financial aid officer. Remember, too, that all financial aid is based on your previous year's taxes. A lot may have happened this year that is not reflected by last year's taxes.

If you want to share additional information, you can send a letter to the college financial aid office to explain any unusual circumstances that may affect your family's finances. Most colleges include a space on their financial aid forms for you to describe any relevant information. When you are thinking about writing this letter, consider the following three points.

Don't hide the dirty laundry. Most people when filling out financial forms feel compelled to hide embarrassing circumstances. After all you are revealing your financial strengths and weaknesses to a total stranger. However, if you have extraordinary circumstances such as large medical bills, unemployment, recent or ongoing divorce, supporting extended family members or any additional expenses that may not be reflected in the FAFSA or PROFILE, tell the financial aid officer. Don't be embarrassed. It could cost you big time.

Give the college a reason to give you more money. Financial aid officers are numbers people. However, they have wide latitude for interpreting numbers and may apply a variety of standards and make exceptions, which can help or hurt your case. To get the most support from these professionals, make your case with numbers. You can't just say that you don't have enough money. You need to show it. Document with numbers why your tax forms don't accurately reflect your true income or expenses.

Don't try to trick the college. The human being in the financial aid process is also what keeps it safe from trickery. You could, for example, take all of the money in your savings account and plunk it down to buy an around-the-world vacation. On paper you'd have no savings. Yet, when the financial aid officer looks at your income, he or she will think it is very odd that someone who earns a decent living and owns a nice house is so cash poor. This is a red flag, and you'll be asked to provide additional information. Once the financial aid officer learns how you spent your savings, not only would he or she not give you more financial aid but you would also have no money left to pay for college even if you wanted to.

Financial aid officers are experts at reading financial statements. Just by looking at your 1099 interest statements they can get an estimate of the size of your assets. Trying to trick the college or not report certain income or assets will only backfire. Financial aid officers are professionals who have seen every trick in the book. Our best advice on trickery is to not attempt it.

What You Can Expect from Financial Aid

The way in which your aid is packaged will differ not only because your financial need changes with the price of each college but also because colleges have varying amounts of financial aid resources. The following is a detailed description of what you might find in your aid package. Most financial aid packages consist of a combination of these sources.

Federal Pell Grants. These grants are for undergraduate study for students who have the most financial need, typically with Expected Family Contributions of $4,617 or less. The amount varies based on your EFC, but the current maximum amount is $5,350. All students who apply for financial aid by completing the FAFSA and are determined to have financial need by their college will be considered for Federal Pell Grants.

Federal Supplemental Educational Opportunity Grants. These grants are for undergraduates with the most financial need. The government provides limited funds for individual schools to administer this program. This means there is no guarantee that every eligible student will receive an FSEOG Grant. The amount varies between $100 and $4,000 per year, and the specific amount is determined by the college on a case-by-case basis.

Grants from the college. The college itself has various need- and merit-based grants. By applying for financial aid you will be considered for these grants. Many schools also have grants reserved just for adult students.

State grants. Your state may offer both need- and merit-based grants. While some grants are administered by the state, others are distributed to the colleges to administer.

Federal Work-Study. Work-study provides jobs for undergraduate and graduate students with financial need allowing you to earn money while attending school. The focus is on providing work experience in your area of study. Generally, you will work for your school on campus or for a nonprofit organization or public agency if you work off campus. You will have a limit on the hours you can work in this program. Your wages are based on the federal minimum wage although they are usually higher.

State Work-Study. Besides the federal program, some states also have a work-study program that mirrors the operation of the federal program.

Federal Perkins Loans. Federal Perkins Loans are low-interest loans for undergraduate and graduate students with extreme financial need. Your school provides the loan from governmental as well as its own funds. You may borrow up to $5,500 per year as an undergraduate or $8,000 per year as a graduate student. The interest rate is fixed at 5 percent and there are no additional fees.

Subsidized and Unsubsidized Federal Stafford Loans. There are two types of Stafford Loans: Direct Stafford Loans and FFEL Stafford Loans. For Direct Stafford Loans, the U.S. government is the lender. For FFEL Stafford Loans, the lender is a participating bank, credit union or other lender, which you can locate by contacting your school. You may borrow up to $5,500 as a freshman, $6,500 as a sophomore and $7,500 as a junior or senior undergraduate student. Graduate students may borrow through the PLUS Loans for Graduate and Professional Degree Students.

Remember, you are free to pick and choose from your financial aid offer. When you receive an offer of financial aid, you don't have to accept or reject the whole package. For example, if you are offered a grant you'll definitely want to accept it, but you might not want to accept the loan component. By understanding how the financial aid process works, you'll be able to make the soundest decisions.