FAFSA, Grants, Scholarships, and Work-Study
Emma sees two numbers for the same college: a "sticker price" of $\$24{,}000$ a year and a letter saying she can attend for much less. Which number is the real price? And what does she have to fill out to find out? By the end of this page you will be able to answer both questions, and to plan how to pay for college without borrowing more than you need.
The real price of college
The cost of attendance (COA) is the college's estimate of one year's total cost: tuition and fees, housing and food, books and supplies, transportation, and personal expenses. It is the "sticker price."
Most students do not pay the sticker price, because they receive gift aid: money that does not have to be repaid (grants and scholarships). What is left after subtracting gift aid is the net price.
$$\text{net price} = \text{cost of attendance} - \text{gift aid}$$The net price is the number to compare between colleges, not the sticker price.
A college has a total cost of attendance of $\$24{,}000$ per year. Sophia receives grants and scholarships worth $\$9{,}500$ per year. Find her net price per year and…
A college has a total cost of attendance of $\$24{,}000$ per year. Sophia receives grants and scholarships worth $\$9{,}500$ per year. Find her net price per year and for four years.
The FAFSA and the Student Aid Index
The FAFSA (Free Application for Federal Student Aid) is the form that the U.S. Department of Education uses to decide who qualifies for federal aid: Pell Grants, federal work-study, and federal student loans. Many states and colleges also use it to award their own aid. It is free, and the official site is studentaid.gov. Never pay a website to file it.
To fill it out, a student and family usually need:
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Social Security numbers (and an FSA ID account for the student and a parent)
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Federal tax returns and income records
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Bank balances and investments
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Information about the colleges the student is applying to
The FAFSA uses this information to calculate the Student Aid Index (SAI). The SAI is an index number that colleges use to decide how much need-based aid to offer. It is not a bill, and it is not a promise of what the family will pay. A lower SAI generally means more need-based aid.
Whose information goes on the FAFSA?
A dependent student reports information about parents. If the parents are divorced or separated, the student reports the parent who provided more financial support during the past 12 months. A student who qualifies as independent (for example, age 24 or older, married, or a veteran) reports only their own information.
What if the family's situation changes?
The FAFSA uses past tax information. If a parent loses a job, income drops, or there is another major change (illness, divorce, death), the family can contact each college's financial aid office and ask for a professional judgment review (also called a special circumstances appeal). The college can adjust the aid based on the new situation. The family should submit documentation, such as a layoff letter.
What does FAFSA stand for? Explain its purpose in two sentences and name two pieces of information a student and family usually need to complete it.
What does FAFSA stand for? Explain its purpose in two sentences and name two pieces of information a student and family usually need to complete it.
Gift aid and self-help aid
Financial aid comes in two broad groups.
| Type | What it is | Repay? | Examples |
|---|---|---|---|
| Gift aid | Money given to you | No | Grants, scholarships |
| Self-help aid | Money you earn or borrow | Earned by working, or repaid with interest | Work-study, student loans |
Grants are usually based on financial need. The Pell Grant is a federal grant for undergraduates with high financial need. States (for example, the TEXAS Grant) and colleges also give grants.
Scholarships are awards often based on merit (grades, test scores, talent, athletics) but also on community service, a field of study, or background. Sources include colleges, employers, nonprofits, and community groups. They may have conditions, such as keeping a minimum GPA to renew.
Federal work-study gives students with financial need a part-time job, usually on campus or with a nonprofit. The student earns a paycheck, so it is not a lump sum handed over, and it is earned, not repaid.
Student loans are borrowed money that you repay with interest. (See the page on federal versus private loans.)
In Texas, students who are not eligible for the FAFSA, for example some undocumented students, can file the TASFA (Texas Application for State Financial Aid) to apply for state and college aid. Scholarship sources include state governments, schools, employers, and nonprofits, so search several.
Classify each of these as gift aid (does not have to be repaid) or self-help aid (earned or borrowed): a Pell Grant, a merit scholarship, a federal work-study job, and a…
Classify each of these as gift aid (does not have to be repaid) or self-help aid (earned or borrowed): a Pell Grant, a merit scholarship, a federal work-study job, and a federal student loan.
Isabella's cost of attendance is $\$26{,}000$. Her aid package includes a Pell Grant of $\$4{,}000$, a state grant of $\$2{,}500$, a scholarship of $\$3{,}000$,…
Isabella's cost of attendance is $\$26{,}000$. Her aid package includes a Pell Grant of $\$4{,}000$, a state grant of $\$2{,}500$, a scholarship of $\$3{,}000$, work-study of $\$2{,}000$, and a federal loan of $\$5{,}500$. Find the total gift aid, the total self-help aid, and the remaining gap she must still cover.
Work-study and scholarship decisions
Work-study
A work-study award is the maximum a student can earn. To find the hours needed, divide the award by the hourly wage.
$$\text{hours} = \frac{\text{award}}{\text{hourly wage}}$$Which scholarship is worth your time?
Scholarships are uncertain, so compare them with expected value: the prize times the chance of winning. Dividing by the hours of work shows how well your time pays off.
$$\text{expected value} = \text{prize} \times \text{probability of winning}$$Jayden receives a federal work-study award of $\$2{,}400$ for the year. The campus job pays $\$12$ per hour. How many hours must he work to earn the full award? If he…
Jayden receives a federal work-study award of $\$2{,}400$ for the year. The campus job pays $\$12$ per hour. How many hours must he work to earn the full award? If he works 10 hours per week, how many weeks will that take? Explain one advantage of a work-study job compared with a regular off-campus job.
Valeria is deciding which scholarship to apply for. Scholarship A is worth $\$5{,}000$, takes 10 hours of work, and she estimates a $1$ in $20…
Valeria is deciding which scholarship to apply for. Scholarship A is worth $\$5{,}000$, takes 10 hours of work, and she estimates a $1$ in $20$ chance of winning. Scholarship B is worth $\$1{,}000$, takes 3 hours, and she estimates a $1$ in $4$ chance. Find the expected value of each scholarship and the expected value per hour of work. Which is the better use of her time?
Building a plan to pay for college
Put it together: find the gap, then decide how to close it. A good plan uses gift aid first, then earnings and savings, and borrows last.
For Noah's decision between two colleges, compare net prices and think about risk. College X: $38{,}000 - 12{,}000 = 26{,}000$ per year, or $\$104{,}000$ over four years. College Y: $22{,}000 - 3{,}000 = 19{,}000$ per year, or $\$76{,}000$. College Y costs $\$28{,}000$ less overall, so it is usually the better choice unless College X offers something the family values more.
Noah's parents are divorced, and he lives mostly with his mother. He is a dependent student. College X has a cost of attendance of $\$38{,}000…
Noah's parents are divorced, and he lives mostly with his mother. He is a dependent student. College X has a cost of attendance of $\$38{,}000$ per year and offers him $\$12{,}000$ in grants. College Y has a cost of attendance of $\$22{,}000$ and offers $\$3{,}000$ in grants. Explain whose financial information he generally reports on the FAFSA and what the Student Aid Index (SAI) is used for. Find the net price of each college per year and over four years. Then explain what the family could do if a parent lost a job after the FAFSA was filed, and recommend a college with your reasoning.
Camila's college costs $\$28{,}000$ per year. Each year she expects a Pell Grant of $\$3{,}500$, a scholarship of $\$4{,}000…
Camila's college costs $\$28{,}000$ per year. Each year she expects a Pell Grant of $\$3{,}500$, a scholarship of $\$4{,}000$ (renewable only if she keeps a 3.0 GPA), work-study earnings of $\$2{,}500$, and a family contribution of $\$6{,}000$. Her family also has a 529 plan with $\$10{,}000$ to spread evenly over four years. Find the yearly gap and the total she must borrow over four years. Then find how the gap changes if she loses the scholarship. Write a plan with at least two actions that could lower her borrowing.
Back to the start: Emma's real price is the net price, the cost of attendance minus gift aid, and she finds out what aid she qualifies for by filing the FAFSA.