financial aid

Student financial aid

Student financial aid refers to funding intended to help students pay education 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.

Types of financial aid

Financial aid may be classified into two types based on the criteria through which the financial aid is awarded: merit-based or need-based.


Merit-based scholarships include both scholarships awarded by the individual college or university and those awarded by outside organizations. Merit-based scholarships are typically awarded for outstanding academic achievements, although some merit scholarships can be awarded for special talents, leadership potential and other personal characteristics. Scholarships may also be given because of group affiliation (such as YMCA, Boys Club, etc.). Merit scholarships are sometimes awarded without regard for the financial need of the applicant. At many colleges, every admitted student is automatically considered for merit scholarships. At other schools, however, a separate 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 financial need of the student. The Free Application for Federal Student Aid (FAFSA) is generally used for determining federal, state, and institutional need-based aid eligibility. At private institutions, a supplemental application may be necessary for institutional need-based aid.

The flaws of financial aid

People who save and spend conservatively are often denied financial aid. While the application is intended to evaluate financial need, it often drastically reduces the aid packages of students who really could use the money. Since much of the formula for EFC (expected family contribution) is based on parental assets, students whose parents aren't giving them money for their educations are forced to take out large student loans or send in an appeal stating their circumstances.

Financial aid is practically non-existant to upper-middle class Americans.

Debt vs. grants

No loan financial aid

In 2001, Princeton University became the first university in the United States to eliminate all loans from its financial aid packages. Since then, many other schools have followed in eliminating some or all loans from their financial aid programs. Many of these programs are aimed at students whose parents earn less than a certain income — the figures vary by college or university. These new initiatives were designed to attract more students and applicants from lower socioeconomic backgrounds, reduce student debt loads, and provide the offering institutions with an advantage over their rivals in attracting commitments from accepted students. As of March 25, 2008, the list of colleges and universities offering such no-loan financial aid packages includes 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
Bowdoin College No max of income
Bridgewater State College Offers unsubsidized or subsidized loans to any student who files the FAFSA.
Brown University Family income below $100,000
Cal Tech Annual income below $60,000
Claremont McKenna College No max of income
Colby College No max of income; all students
Columbia University All students eligible for financial aid regardless of family income
Cornell University Annual income below $75,000
Dartmouth College Annual income below $75,000
Davidson College No max of income
Duke University Annual income below $40,000
Emory University Annual income below $50,000
Haverford College First-year students with financial need.
Harvard University Annual income below $60,000
MIT Annual income below $75,000
University of Maryland, College Park Maryland resident with 0 EFC.
Michigan State University Michigan resident with family incomes at or below the federal poverty line.
Northwestern University Family income lower than approx. $55,000.
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 $100,000
Pomona College No max of income
Princeton University No max of income
Rice University Annual income below $60,000
Stanford University Annual income below $45,000
Swarthmore College Anyone with financial need
Tufts University Annual income below $40,000
Vassar College Annual income below $60,000.
University of Virginia 200% of federal poverty line ($24,000 to $37,000)
Washington and Lee University No max of income
Washington University in St. Louis Annual Income below $60,000
Wellesley College $60,000
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

Loan cap

Some universities have opted to have a "loan cap" program, which is a maximum loan — either per year or for the four years combined — designed to reduce the cost of attendance for low-income and middle-class students. The following schools have a loan cap program:
School Loan Cap for students meeting these eligibility requirements:
Brown University Family earning less than about $125,000: Caps total loans to $3,000 per year. Family earning up to $150,000: Caps total loans to $4,000 per year. Family earning up to $150,000: Caps total loans to $5,000 per year.
University of Chicago "Those whose families make between $60,000 and $75,000 will have 50% of their loans replaced."
Cornell University Undergraduates with family incomes less than $120,000 will have loans limited to $3,000 per year.
Duke University Undergraduate students with family income between $40,000 and $100,000 will have their loans limited on a graduated basis ($1,000 to $4,000 per year) and loans "frozen" at the freshman level.
Emory University "Annual assessed incomes of $50,000 to $100,000 who demonstrate need for financial aid. The program caps total need-based loans at $15,000, assuming on-time progression toward graduation with up to eight semesters of study.
Grinnell College "Beginning in the 2008-09 academic year, need-based loans for all eligible students will be capped at $2,000 per year.
University of Maryland, College Park Students with need-based financial aid will have their loans capped at $15,900 for their four years of attendance.
Middlebury College Family income below $40,000: $1,500 per year; family income $40,000 to $80,000: $2,500 per year; family income above $80,000: $3,500 per year.
Rice University Students with a family income below $60,000 will not have loans. Families with incomes over $60,000 will have their loans capped at about $14,500.
University of Virginia 200% of federal poverty line ($24,000 to $37,000). Loans are capped at 25% of the in-state cost of attendance, regardless of state residency.

In the United States

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 Grant), Federal_Work-Study_Program, Federal Stafford loans (in subsidized and unsubsidized forms), Federal Perkins Loans, and Federal PLUS loans. Federal Perkins Loans are made by participating schools per annual appropriations from the U.S. Department of Education, whereas Federal Stafford Loans and Federal PLUS Loans are made by participating lenders under the Federal Family Education Loan Program (FFELP). The U.S. Department of Education serves as a lender and guarantor under the William 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 use the EFC to decide what types of financial aid a student is eligible to receive. Students must complete the FAFSA each year to be considered for financial aid.

The EFC also takes into consideration any participation in college savings or pre-paid tuition plans. In the past, financial aid officers weighed pre-paid tuition plans more heavily than other 529 college savings plans when determining a student’s eligibility. In February 2006, Congress passed legislation to treat both types of plans evenly.

State governments also typically provide some types of need- and non-need-based aid, consisting of grants, loans, work-study programs, tuition waivers, and scholarships. Individual colleges and universities may provide grants and need- and merit-based scholarships. Students requiring financial aid beyond what is offered by their institution may consider a private (alternative) education loan, available from most large lending institutions. Typically, education loans obtained through the federal government have lower interest rates than private education loans.

Institutions may also offer their own student financial assistance, in the form of need- or merit-based aid, as well as endowed scholarships (with varying need and/or merit-based criteria). Some schools may only require the FAFSA; some may also require an additional need-based analysis document, such as the CSS/Profile, to apply for such funds to apply a more stringent need analysis for the rationalization of institutional funds.

Outside the United States

Many national governments provide student financial assistance subsidies for students attending a university, although proposed policies to change such subsidies have engendered considerable debate in several countries, such as Canada, the United Kingdom, Germany, and Scandinavian countries. The heavy reliance on private subsidies, as in the United States, is not as widespread, although this may be changing.

In Germany, the main source of financial aid is provided by the Bundesausbildungsförderungsgesetz, colloquially known as BAFöG.

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