What is Need-Based Financial Aid?

An explanation of what need-based aid is and how it affects your college decision process 

By: Camryn Corbin, Senior Educational Studies Major at Rhodes College 

When applying for college a major question that arises is “how will I afford it?” Some think money for school is limited to scholarships which are in turn limited to the type of student you were in high school. Like how well you performed academically, if you played any sports, or if you had any other outstanding talents or interests. However, many colleges and universities offer need-based financial aid in addition to merit-based scholarships which can have a huge impact on reducing the cost of tuition. 

Need-based financial aid is based upon your family’s income and ability to pay. This is determined when filling out the Free Application for Federal Student Aid (FAFSA). The FAFSA is the form you need to fill out to get any financial aid from the federal government to help pay for college. 

The FAFSA determines your expected family contribution (EFC) then compares that to the estimated cost of attendance (COA) for your selected schools. Your expected family contribution is determined by several outside factors that are taken into consideration when filling out the FAFSA. Some factors include family size, income, family assets and liabilities, number of siblings in college, tax returns, and untaxed income. All of this information is crucial to calculating your family’s expected contribution. And once this is calculated the FAFSA then subtracts the cost of attendance (COA) from the EFC to create the amount you and your family would need additional help with covering. Thus the amount the college should cover is based on need. For example, if the cost of attendance of your dream college is $50,000 and your EFC is $10,000 according to the FAFSA you would need $40,000 in financial aid from that school to afford attendance. Granted this does not mean the school will give you $40,000 in scholarships. This would be through government aid and government financial aid comes in many forms. 

This need-based aid can be applied through loans, grants, pell grants, and work-study. Pell grant amounts are directly discerned by your EFC and the school's COA. Additional federal grants called Federal Supplemental Educational Opportunity (FSEOG) are given to students with extreme financial need. With loans, there are two main categories direct subsidized and direct unsubsidized. The difference between these two loans is that subsidized loans don’t acquire interest while the student is undergrad while unsubsidized loans acquire interest immediately upon being taken out. Lastly, there’s a federal work-study where a student is allowed to work on campus in any capacity and use the money they earn to go towards their cost of attendance. 

When deciding to accept certain forms of need-based aid remember that loans need to be paid back, and depending on the loan taken out it can be fairly expensive. However, you aren’t limited to the financial aid given through federal government aid. Merit aid and other outside scholarships can be complied with with financial aid to make college costs more affordable. Some extra tips to consider when applying for need-based aid are to apply early, ask your schools specifically about need-based aid, as some schools have separate applications, look locally to see if your state offers additional aid for meeting certain qualifications.