Understanding financial aid for college

Do you think you make too much money for your child to receive financial aid? You probably don’t. While 77% of students and their parents completed the Free Application for Federal Student Aid (FAFSA) during the 2018/2019 school year, nearly 40% of those who didn’t fill it out said they thought they wouldn’t qualify.1 But over 60% of families earning more than $100,000 a year received financial aid. 


FAFSA has no income limits, but instead uses a calculation to determine a student’s expected family contribution (EFC). The EFC calculation includes taxed and untaxed income, investments (not including your primary residence or retirement savings), and the amount you pay for other children’s tuitions. It then subtracts the EFC from the cost of attendance for the school your child is going to attend to determine if you have a financial need. You can see the specific factors that go into the EFC here.

It takes about 30 minutes to fill out the FAFSA form online, and it’s worth the time because every year, the U.S. Department of Education provides over $120 billion to help students pay for college.3 Not all of this allowance is free; some is allocated toward grants and scholarships, while other funding sources include federal student loans, which much be repaid, and work-study programs. The application process for the 2020–2021 school year opens on October 1, 2019.

You also may want to complete The College Board’s CSS Profile. This online form collects information about you and your child that more than 400 colleges, universities, professional schools, and scholarship programs use to award financial aid. You can find out if the schools your child is interested in require a CSS Profile on The College Board's website. Note that there is a fee to submit, which may be waived in certain cases. 

Types of federal loans available through FAFSA

  • Stafford: Both undergraduate and graduate students are eligible for Stafford loans. The loans are fixed rate, typically have lower interest rates than private loans, and are backed by the U.S. government. They can be subsidized or unsubsidized. With subsidized loans, the government pays the interest while the student is enrolled in school and during the six-month grace period after graduation. The interest on unsubsidized loans accrues while the student is in school; the student isn’t required to pay while enrolled, but the interest is added to the principal amount. There are limits on the amounts that can be borrowed, which are adjusted annually for inflation.
  • PLUS: Biological or adoptive parents of undergraduate students as well as graduate students can apply for PLUS loans. Applicants must have solid credit histories and must sign a promissory note. The interest rates on PLUS loans are significantly higher than Stafford loans. As with Stafford loans, there are limits on the amounts that can be borrowed. 

Don’t qualify?

What should you do if you don’t qualify for FAFSA assistance or if you haven’t received enough? You still have other options. The first thing you should do is search for scholarships. There are thousands available through universities, vocational organizations, family foundations, and businesses. You should also consider less expensive options, such as community colleges and/or state schools.

You can also take out a private loan; however, private loans are often costlier and offer little of the consumer protections that federal loans do. If you’re considering a private loan, be sure to check with multiple lenders to compare interest rates and repayment terms.

As always, it’s a good decision to sit down with your financial professional, who can help tailor a plan that’s right for you.