Paying for college includes financial aid for most families. The world of financial aid seems to have a vocabulary all its own. What does it all mean? Here's your financial aid terms "cheat sheet". In this video we'll define common terms used by college financial aid offices and what they mean for your family when figuring out how to pay for college. Happy viewing!
How financial aid works
Paying for college includes financial aid for most families. And the world of financial aid seems to have a vocabulary all its own. So here are the terms you should know.
Let's start with financial aid. It's money that is either gifted or lent to students and their families to help pay for tuition, fees, books, housing and other college expenses.
Tuition and fees. This is the cost of classes by semester or year.
Free Application for Federal Student Aid. This is a federal government application that determines how much financial aid your student is eligible for. Your student should fill out the FAFSA every year. And the earlier the better to maximize the amount of gift aid they might receive.
Grants. This is need-based gift aid based on your personal financial situation that doesn't need to be paid back.
Scholarships. These are funds given based on need, academic accomplishments or other factors.
Federal Work-Study. This is a program where your student, if they qualify, can work a part-time job on or off campus that helps pay for college.
Loan. This is money you borrow that has to be paid back with interest. There are subsidized and unsubsidized loans.
Cost of attendance. That's the estimated total cost of attending a college or university.
Net price. This is the annual cost of attendance, minus any gift aid, tuition waivers or scholarships your student receives. It does not include loans or money they earn from working.
Gap. This is the amount of money not covered by financial aid that your student will need to pay to meet the cost of attendance.
Expected family contribution. EFC will be renamed the Student Aid Index. This is a calculation all colleges and universities use to determine how much financial aid a student receives. It's the same for every school and takes into consideration your household income and other factors captured in the FAFSA.
Now that you know the important terms, you're ready to help your student compare college costs and narrow down their college list.