Planning & Education | Financial Aid

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Financial Aid

Given the rising price tag on a college education, even families who have saved in advance must often rely on financial aid to help cover the costs. According to the College Board, over half of all college students today receive some financial aid.

Financial aid is based on need. The federal government and college financial aid offices use need-based formulas that analyze income, assets, family size and other factors to determine what they expect you to pay — which is referred to as the expected family contribution or EFC. Financial aid is then supposed to help make up the difference between the EFC and the cost of the college. Since there are no strict eligibility guidelines, it is smart to apply for aid regardless of financial circumstances. One benefit of financial aid is that it can allow a child to attend a more expensive college without increasing your share of the cost.

Gift Aid — includes scholarships and grants that do not have to be repaid and that you do not have to work to earn. Grants and scholarships can be given out by state governments and schools, based on need, merit or other criteria. Many colleges use merit-based aid to attract students they want because of their academic achievement, athletic ability, artistic talent or other reasons.

Student Employment — often subsidized through the federal work-study program, student employment allows students to earn money to help pay education expenses. However, there are frequently restrictions on how much students can earn and the hours they can work.

Loans — comprise approximately 54% of all student aid, according to the College Board in January 2007. Low-interest loans are available directly through the federal government or through private lenders participating in the federal government loan program. If federal aid is not enough, private education loans are available through banks and other student loan lenders.

Private Scholarships — may be offered by private organizations, such as corporations, civic groups and churches. One drawback of these merit awards is that they may reduce the amount of need-based grants or loans the student receives in a financial aid package.

Keep in mind that while although financial aid can be helpful, it can also put a strain on a student once they graduate. Student loan debt can have a profound impact on their financial security, retirement savings, career and lifestyle. That's why it's crucial to save as much as you can now.

If you need help getting started, a financial advisor can help. If you don't already have one, call us at 1-800-896-2645 for assistance.