With higher education costs at unprecedented levels, financial aid has become more important than ever. College financing has evolved into a familiar issue that millions of American families find themselves struggling with. Unfortunately, the severity of this issue does not seem to be waning. With rising college costs and the increased competitiveness for the small amounts of aid available, it is crucial for parents and students alike to have a strong understanding of their specific financial aid eligibility in order to maximize the amount of aid they can receive.
Financial aid is best known as funding granted to students to be used specifically for costs associated with a post-secondary educational institution, a professional school, community college, four-year college or university. Aid can consist of grants and scholarships, low-interest government-subsidized loans, work-study, and education tax benefits. A common misconception pertaining to financial aid is that grants and awards are only for those who cannot afford the costs associated with higher education. This fallacy is easily reconcilable as there are two main types of aid; merit-based and need-based financial aid.
Merit-based aid is awarded on the basis of student achievements or accomplishments. This type of aid is usually awarded for outstanding academic achievements, such as high SAT or ACT scores. There are also some instances where this type of aid can be awarded for special talents, leadership potential and other personal characteristics.
There is also need-based financial aid. This type of aid is awarded on the basis of the student’s financial needs and circumstances. One’s eligibility to receive federal, state and/or institutionally need-based financial aid is determined by the FAFSA form. The FAFSA form contains the formula that calculates how much need-based financial aid a student is eligible to receive.
To maximize the amount of aid you receive, it is vital that you take on a proactive mindset. Being cognizant of who holds assets can actually affect the amount of aid you can receive down the stretch. According to the FAFSA form and the expected family contribution (EFC), roughly 25% of assets held in the child’s name are expected to be used for higher education. While only 6% of assets held in the name of the parent are expected to be used for higher education costs. It is important to begin applying for financial aid very early on. It is also very beneficial to keep your eyes open for non-need-based aid that can supplement whatever you are granted from a needed basis standpoint.
A common theme associated with financial aid is the fact that many families are unable to afford college costs and yet are considered to be earning ‘too much’ to be eligible to receive financial aid. This paradoxical double-standard has led many students into great amounts of student loan debt, as they are left with no other option but to take out high interest loans.
Financial aid can be a very powerful tool when implemented strategically. Given there are many variables and financial scenarios involved in the financial aid qualification process, it is crucial that you review your specific situation with a financial professional prior to applying for financial aid. Contact us today at Mitlin Financial to have your unique circumstances reviewed to make sure that you are on the correct track to receiving optimal financial aid and ultimately affording the costs of today’s higher education. Also, be sure to check out the latest Mitlin Minute to learn more about financial aid. Let Mitlin Financial assist you with your early planning and help to facilitate your financial future!
Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.