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Everyone who is bound for college and/or their parents needs to know how the Free Application for Federal Student Aid (FAFSA) system works. Some may balk at the idea of applying for college financial aid because they think they make too much money to qualify. But regardless of their income, they may be eligible for some form of financial aid, including federal, state and school-based aid, as well as merit-based scholarships.
How Much Money Can Fafsa Give You
In fact, it makes sense for almost every family with a child in college to fill out a FAFSA.
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The main purpose of the FAFSA is to determine how much financial aid a student qualifies for, including both need-based and non-need-based aid. Determines eligibility for federal need-based grants, including Pell Grant and Federal Supplemental Educational Opportunity Grants (FSEOG); federally funded, need-based student loans; unsubsidized federal student loans, which most students qualify for regardless of need; federal work studies; government-based financial assistance, including grants, scholarships and loans; financial support for schools, including need-based grants and scholarships; and school-based aid (since most schools require a FAFSA to be on file before distributing aid benefits).
To determine a family’s financial need, the FAFSA asks a series of questions about the income and assets of parents and students, as well as other factors, such as how many children there are in the family. Then comes the Student Aid Index (SAI).
The confusingly named Expected Family Contribution (EFC) was renamed the Student Aid Index (SAI) for the 2024-2025 school year to clarify its meaning. It does not say how much a student must pay for college. It is used by the school to calculate how much student aid an applicant is eligible for.
In addition to changing the name, the switch to SAI will also change the formula slightly. Parents’ income was once divided if they had more than one child in college at the same time. Now each child’s SAI will use the same amount of parental income information, regardless of whether they are supporting multiple children in college or not.
College Information / Financial Aid
The FAFSA is the official form that students or their families use to apply for college financial aid from the federal government. States, individual colleges and universities, and private learning programs also rely on information provided in the application.
Regarding assets, FAFSA assumes that 20% of a student’s assets and 5.64% of parents’ assets should be available for expenses in a given academic year. These assets include bank accounts and investments, but do not include the value of retirement accounts, life insurance policies and cash receipts. Any excess value in the family home is also excluded.
The information you provide on the FAFSA determines whether you qualify for need-based aid, non-need-based aid, or a combination of the two.
If you are not ready to fill out the FAFSA yourself, you can get an estimate of your SAI and financial aid eligibility by using the Department of Education’s Office of the Federal Student Aid Estimator.
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Grants are the most attractive form of financial aid because they do not have to be repaid. Pell Grants, the primary federal grants for colleges, are for students who demonstrate exceptional financial need. They are primarily offered to students, but other teacher certification programs are also eligible. The maximum award is $7,395 for the 2024-2025 award year (July 1, 2024 to June 30, 2025). The college or university’s financial aid office determines how much money students are eligible to receive, based on their family’s SAI and the school’s cost of living (COA).
These grants are also non-refundable, but are only available to certain schools. Prices vary between $100 and $4,000 per year. As with Pell Grants, these additional grants are designed for students with limited financial resources.
These loans are government-backed, which means you won’t have to pay interest on them while you’re in school and there’s a six-month grace period after graduation. Loan amounts that can be subsidized range from $3,500 to $5,500 per year, depending on your year in school and whether you are considered a dependent or independent student as defined by the Federal Student Aid office. These subsidized loans are not available for graduate studies.
The federal work-study program makes part-time paid positions available through participating colleges and universities. Both bachelor’s and master’s students may be eligible.
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Government loans, whether subsidized or not, are generally cheaper than private loans and offer flexible payment options.
Unsubsidized loans are similar to their subsidized counterparts, with one major exception: the government does not pay interest on the loan while the student is in school or for a six-month grace period afterward. If students or their parents do not pay the interest during this period, it will be added to the principal amount of the loan.
Schools can offer these loans as part of a financial aid package, regardless of the family’s financial situation. Students with dependents are eligible for up to $31,000 in subsidized and unsubsidized loans during their undergraduate years, unless their parents are ineligible for federal PLUS loans, in which case the limit may be higher.
These loans are made for parents or graduate students. They are not subsidized by the government, so interest earned while studying will be added to the principal if not paid while the student is still studying.
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Teacher trainees may be eligible for these grants – up to $4,000 per year – even if they do not meet the need-based requirements. To be eligible, a student must take certain classes and, within eight years of graduation, have worked for at least four years in an elementary or secondary school or in an educational institution serving low-income families. These grants do not need to be paid unless the student does not meet the requirements. If so, the grant is converted into a direct unsubsidized loan.
Fortunately, for many prospective students, the actual process of applying for financial aid is simple. For added peace of mind, check out the step-by-step guide below to ensure you stay on top of your financial aid throughout your (or your child’s) academic career:
U.S. Department of Education you use the FAFSA to determine a student’s eligibility for need-based college financial aid based on their financial situation. Federal financial aid can include federal grants, scholarships, work-study, and/or loans.
FAFSA is not a loan or free money. It’s simply an application you fill out to determine your eligibility for a federal loan, grant, or work study. There are three main types of financial aid a student may qualify for after completing the FAFSA. Some of this money is free money, some must be earned through work, and some must be paid back.
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The most common requirements to qualify for various types of federal student aid include having financial need, being a U.S. citizen. or non-citizen, and enrolled in an eligible degree or certificate program at a college or vocational school. However, there are many eligibility requirements that you must meet to qualify for federal student aid and these requirements are specific, based on the type of aid. Most students qualify for some form of financial aid from the federal government to help pay for college or job training. Student’s age, race, and field of study
To be eligible for student body aid for the 2024-2025 award year, you had to complete the FAFSA form by June 30, 2025. Each state has its own deadline.
Many families will find it helpful to fill out a FAFSA, regardless of their income or wealth. If they are found ineligible for free money in the form of grants or scholarships, they may still be eligible for need-based assistance in the form of direct, unsubsidized loans from the federal government. Government student loans often have more favorable terms than loans from private lenders and offer a variety of flexible payment options.
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Independent students generally receive more financial aid from FASFA than students with dependents. Find out how much more independent students earn than dependent students and what qualifies a student as independent.
Most students rely on at least some form of financial aid.
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