Student financial aid refers to funding intended to help students pay educational expenses including tuition and fees, room and board, books and supplies, etc. for education at a college, university, or private school. General governmental funding for public education is not called financial aid, which refers to awards to specific individual students. A scholarship is sometimes used as a synonym for a financial aid award.
Financial aid may be classified into two types based on the criteriathrough which the financial aid is awarded: merit-based or need-based.
Merit-based scholarships include both scholarships awarded by theindividual college or university and merit scholarships awarded byoutside organizations. Merit-scholarships are typically awarded foroutstanding academic achievements, although some merit scholarships canalso be awarded for special talents, leadership potential and otherpersonal characteristics. Scholarships may also be given because ofgroup affiliation (such as YMCA, Boys Club, etc.). Merit scholarshipsare sometimes awarded without regard for the financial need of theapplicant. At many colleges, every admitted student is automaticallyconsidered for merit scholarships. At other schools, however, aseparate application process is required.
Athletic scholarships are a form of merit aid that take athletic talent into account.
Need-based financial aid is awarded on the basis of the financialneed of the student. The Free Application for Federal Student Aid(FAFSA) is generally used for determining federal, state andinstitutional need-based aid eligibility. At private institutions, asupplemental application may be necessary for instituitional need basedaid.
In the early 2000s, a number of colleges took steps to eliminatedebt altogether from their financial aid packages. Many of these offersare aimed at students whose parents earn less than a certain income --the exact figures vary by college or university. These new initiativeswere designed to attract more students and applicants from lowersocioeconomic backgrounds, reduce student debt loads, and provide theoffering institutions with an advantage over their rivals in attractingcommitments from accepted students. As of November 2, 2007, the list ofcolleges and universities offering such no-loan financial aid packagesincludes the following:
| School | No-loan financial aid for families meeting these eligibility requirements: |
|---|---|
| Amherst College | No max of income |
| Arizona State University | Arizona residents with family income of up to $25,000 |
| Colby College | Maine residents |
| Columbia University | Annual income below $50,000 |
| Dartmouth College | Annual income below $30,000 |
| Davidson College | No max of income |
| Emory University | Annual income below $50,000 |
| Harvard University | Annual income below $60,000 |
| Michigan State University | Michigan resident with family incomes at or below the federal poverty line. |
| North Carolina State University | Income less than 150% of the poverty line. Requires the family to have "limited assets," regardless of state residency. |
| University of Chicago | Students who demonstrate financial need and whose annual family income totals $75,000 or less. |
| UNC Chapel Hill | 200% of federal poverty line ($24,000 to $37,000) |
| University of Pennsylvania | Annual income below $50,000 |
| Princeton University | No max of income |
| Rice University | Annual income below $30,000 |
| Stanford University | Annual income below $45,000 |
| University of Virginia | 200% of federal poverty line ($24,000 to $37,000) |
| Washington and Lee University | No max of income |
| Wesleyan University | $40,000 |
| College of William and Mary | $40,000 (VA residents only) |
| Williams College | No max of income |
| Yale University | Annual income below $45,000 |
The United States, federal government provides need-based federal aid called Federal Student Financial Aid, which is composed of different programs, grants, and scholarships, work and loan programs including Federal Pell grants, Federal SEOG Grants, SMART Grants, Academic Competitiveness Grants (ACG), Federal Work-Study, Federal Stafford loans (in subsidized and unsubsidized forms), Federal Perkins Loans, and Federal PLUS loans.Federal Perkins Loans are made by participating schools per annualappropriations from the U.S. Department of Education, whereas FederalStafford Loans and Federal PLUS Loans are made by participating lendersunder the Federal Family Education Loan Program (FFELP). The U.S.Department of Education serves as a lender and guarantor under theWilliam D. Ford Direct Loan Program.
To qualify for federal student aid, a student must file the Free Application for Federal Student Aid (FAFSA). The FAFSA uses a calculation taking into account income and assets to determine a student's "Expected Family Contribution(EFC)" toward his or her college education for that year. Colleges usethe EFC to decide what types of financial aid a student is eligible toreceive. Students must complete the FAFSA each year to be consideredfor financial aid.
The EFC also takes into consideration any participation in collegesavings or pre-paid tuition plans. In the past, financial aid officersweighed pre-paid tuition plans more heavily than other 529 collegesavings plans when determining a student’s eligibility. In February2006, Congress passed legislation to treat both types of plans evenly.
State governments also typically provide some types of need- andnon-need-based aid, consisting of grants, loans, work-study programs,tuition waivers, and scholarships. Individual colleges and universitiesmay provide grants and need- and merit-based scholarships. Studentsrequiring financial aid beyond what is offered by their institution mayconsider a private (alternative) education loan, available from mostlarge lending institutions. Typically, education loans obtained throughthe federal government have lower interest rates than private educationloans. Institutions may also offer their own student financialassistance, in the form of need- or merit-based aid, as well as endowedscholarships (with varying need and/or merit-based criteria). Someschools may only require the FAFSA; some may also require an additionalneed-based analysis document, such as the CSS/Profile, to apply forsuch funds, in order to apply a more stringent need analysis for therationalization of institutional funds.
Many national governments provide student financial assistancesubsidies for students attending a university, although proposedpolicies to change such subsidies have engendered considerable debatein several countries, such as Canada, the United Kingdom, Germany, andScandinavian countries. The heavy reliance on private subsidies, as inthe United States, is not as widespread, although this may be changing.
