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- Most students need some sort of financial assistance to pay for college.
- Need-based financial aid is just one option students can explore.
- There are need-based options available through federal, state and individual school programs.
What is need-based financial aid?
Aid determined by financial circ*mstances
Need-based financial aid is a type of financial assistance designed to help students bridge the gap between the funds they can comfortably devote to college and the remaining costs of attending their school.
As a whole, it helps make college more accessible, particularly to students who come from lower-income families. Need-based financial aid is awarded based on your family's financial situation, not just academic merit or talent.
FAFSA is key
The Free Application for Federal Student Aid (FAFSA) is the gateway to most need-based aid.
To apply for needs-based financial aid, you'll need to fill out the FAFSA. This application requires financial and tax data, information about the schools you're applying to, and other important details, and you can fill it out online at FAFSA.gov.
Once submitted, the federal government and colleges will use it to determine your financial need and how much aid you're eligible for.
Depending on what school you attend, you also may need to complete a CSS Profile, a separate application with The College Board. This is often used by schools to determine need for non-federal student aid. This requires income and tax information, including copies of bank statements, W-2s, and other records, and can be submitted starting Oct. 1, the year before entering college.
Types of need-based aid
Need-based financial aid comes in several forms. The Pell Grant, issued by the federal government to undergraduate students, is one type. These go up to $7,395 and do not need to be repaid. To be eligible, you must display "exceptional financial need" and have not earned your degree yet. Some incarcerated students may also be eligible.
There is also federal work study, which allows you to work and earn money to put toward your education while in school. The exact amount you'll get depends on your financial need and your school's funding level.
There are also state aid programs you can apply for. In New York, for example, there's the Tuition Assistance Program; California has the Cal Grant program. You can check with your state's education department to find potential options you might be eligible for.
Need-based aid can also come from your school. "The vast majority of aid is from colleges themselves," says Jack Wang, a wealth and financial aid advisor atInnovative Advisory Group.
How is financial need determined?
Expected family contribution (EFC)
Your EFC is a number that establishes whether you qualify for specific types of federal student aid. The information you fill out on your FAFSA — including your parents' income, their assets, and information about any other family members attending college that year — determines your EFC.
Cost of attendance (COA)
"Need-based means that aid is granted based on the finances of the families," says Wang. "It uses a specific formula, taking into account the family's income and assets."
That formula looks like this: a school's cost of attendance (COA), minus the applicant's Student Aid Index (SAI), minus any other financial assistance (OFA) a student is receiving. COA includes tuition, fees, room and board, and other estimated expenses.
How to maximize your need-based aid
File the FAFSA early and accurately
To maximize your chances of receiving need-based financial aid, file your FAFSA as early as possible. Many programs have limited funding, so early submission is key. Also, be sure to triple check your application for errors, as these can further slow down the process.
Appeal your award (if necessary)
If your financial situation changes, or you disagree with the EFC, you can appeal to your school and ask them to reevaluate your financial aid package.
Look beyond federal aid
Some states, colleges, and organizations offer their own need-based scholarships and grants. To maximize how much aid you'll receive, explore and apply to as many options as possible.
Need-based aid for college FAQs
Can I get need-based aid if my parents make too much money?
While it's less likely, you may still qualify for need-based aid depending on your family size, number of siblings in college, and the cost of your school.
Do I have to pay back need-based aid?
You do not need to pay back grants or work-study. Subsidized loans do require repayment, but the government pays interest while you're in school.
What if my financial situation changes after I submit the FAFSA?
If your financial situation changes after you submit the FAFSA, you can update it or contact your school's financial aid office to explain the change.
Can I get need-based aid for graduate school?
You can get need-based aid for graduate school through federal programs (like Direct Subsidized Loans), and some schools offer need-based aid for graduate students.
Aly J. Yale is a writer and editor with more than 10 years of experience covering personal finance topics including mortgages and real estate. She contributes to Personal Finance Insider’s mortgages and loans coverage.ExperienceAly began her journalism career as reporter, and later an editor, for several neighborhood sections of the Dallas Morning News.Her work has been published in several national publications, including Bankrate, CBS, Forbes, Fortune, Money, Newsweek, US News and World Report, the Wall Street Journal, and Yahoo Finance. She’s also contributed to a variety of mortgage and real-estate publications, such as The Balance, Builder Magazine, Housingwire, MReport, and The Mortgage Reports.Her favorite personal finance tip is to schedule regular check-ins to make sure your credit cards, savings accounts, and other financial vehicles still align with your budget and financial goals. She is a member of the National Association of Real Estate Editors (NAREE).ExpertiseAly’s areas of personal finance expertise include:
- Mortgages
- Loans
- Real estate
- Insurance
EducationAly is a graduate of Texas Christian University, where she received a bachelor’s degree in radio/TV/film and news-editorial journalism.
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