Basics of Financial Aid

College financial aid is money given by the federal and state governments and the colleges to help students pay for the cost of a college education.



There are two basic types of financial aid:

  • Self-Help, which consists of loans and work-study.
  • Gift Aid, which consists of grants and scholarships.

The two factors determining the amount and type of financial aid are:

  • The merit of the student (scholastic, athletic, musical talent, etc.).
  • The financial need of the student. Financial need is the most important factor in determining financial aid.
 Items  Private  Public
 Cost of Attendance (COA)

-Expected Family Contribution (EFC) 





 = Financial Need (FN) 

– Financial Aid





 = Total Amount of Unmet Need $2,000 $5,000
 Total Out of Pocket / Year

(EFC + Unmet Need = Your Cost) 

$7,000 $10,000

This example highlights some important basics concerning “need-based” financial aid and how it is determined. In this example we have a private school and a public school.

The cost of attendance (COA) for the private school is $25,000 and $15,000 for the public school.

In this example, the family/individual has filled out the appropriate financial aid applications (FAFSA and/or PROFILE) and has an assessed Expected Family Contribution (EFC) of $5,000.

Recall that this is the amount that the schools say you should be able to afford for college based on the information submitted on the financial aid application.

Each school uses the EFC of the family/individual to determine whether or not it can cover the total cost of the school, or if financial aid is necessary to make up the difference.

For the private school, there is $20,000 in financial need and for the public school there is $10,000 in financial need.

It is the responsibility of the Financial Aid Officer (FAO) at the school to attempt to fill the need by offering available institutional and/or federal pools of money.

These pools include two basic types of aid: Gift Aid (grants and scholarships) and Self-Help (loans and work-study).

Your goal should be to maximize your overall aid package and for it to contain a greater percentage of Gift Aid than Self-Help Aid (because any aid in the form of loans must be repaid over time).

All schools vary in their ability to meet the need of the student. In the example, the private school meets 90% of the need and the public school is only able to meet 50%.

The percentage of unmet funds remains your responsibility. Your total contribution is determined by adding the EFC to the amount of need that the school can or will not meet.

This is the amount that you will be required to pay each year (not accounting for any merit-based or other type of non-financial aid scholarships).

Notice that although the private school has a COA that is $10,000 greater than the public school, your total contribution at the private school is $3,000 less than the public school.

This is because the private school had greater availability of funds for financial aid than did the public school.

It met 90% of the need whereas the public school was only able to meet 50%.

Although it is not shown in the example, the private school may likely offer a greater percentage of Gift Aid in their financial aid package that will not have to be paid back.