How Qualifying For Financial Aid Works

There are several different types of financial aid available for students.
There are several different types of financial aid available for students.
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Type "financial aid" into any search engine and you'll return a dizzying number of results. You'll find tips, tricks, tools, financial calculators, offers of help in optimizing aid applications and more. This article summarizes the different types of financial aid and provides you with a handy reference guide on how to qualify for that aid.

The first step in qualifying for financial aid is simple: apply. Many students and parents talk themselves out of applying because they think they make too much money, or because there are blemishes on a high school record, or because they've applied before and been denied. If you don't apply, you are guaranteed not to receive aid.


Now that you're all fired up to apply, the next step is to decide which sort of financial aid will work best for you. There are several types of aid:

  • Free Money -- Grants and Scholarships: Grants and scholarships are gifts of money and don't need to be repaid. Grants are generally based on financial need, while scholarships are available for just about any imaginable reason. Some are need-based; others, such as athletic, arts, and academic scholarships, are merit-based.
  • Loans: Loans must be repaid. There are several types of federal student loans available including Stafford loans, PLUS loans and Perkins loans. Some of these loans subsidize interest while the student is enrolled; others require students to pay interest.
  • Work-Study programs: Federal work-study programs provide jobs so that students can earn income to help offset educational costs [source: FAFSA].

Later in this article, we'll talk more about the different types of financial aid and how to qualify for each. First, let's explore the general eligibility requirements for federal aid.


Qualifying For Federal Financial Aid

Workers staff the front desk of the University of Michigan's Undergraduate Admissions office.
Workers staff the front desk of the University of Michigan's Undergraduate Admissions office.
Bill Pugliano/Getty Images

In order to qualify for federal financial aid, you need to meet several standardized eligibility requirements.

  • Prove You Have Financial Need -- To prove you have financial need, you'll first need to know your expected family contribution (EFC) score. To get this, fill out the Free Application for Student Aid (FAFSA). Subtract your EFC from the cost of attendance (COA) at your school of choice. The result ranks your financial need [source: Department of Education]. Many people worry that their EFC doesn't take into account all of the variables that can affect individual situations. For instance, what if medical expense offsets a high salary? What if you're considered a dependent, even though you aren't living with your parents? In specialized situations, the financial aid administrator (FAA) at your school has the flexibility to adjust your COA or the information used to calculate your EFC [source: Department of Education].
  • Meet Educational Requirements -- You must have a high school diploma or a General Education Development (GED) test certification, or prove eligibility by passing an ATB (ability-to-benefit) test or by meeting other guidelines your state has imposed. You also need to be enrolled (or accepted) at an eligible school, and you must be working toward an eligible degree program. Finally, you'll need to meet academic progress standards set by your school [Source: Department of Education].
  • Meet Legal and Other Requirements -- You must be a U.S. citizen or an eligible non-citizen, you must have a valid Social Security Number (exceptions include citizens of the Republic of the Marshall Islands, Federated States of Micronesia and the Republic of Palau), and you can't be in default on a federal student loan or owe a refund on a federal grant. Males aged 18 to 25 must also comply with Selective Service registration [Source: Department of Education].

For more information, grab a copy of the Department of Education's annual publication, "Funding Education Beyond High School." It provides more detail on the items summarized here and answers many frequently asked questions [source: Department of Education].


Now that we've discussed general eligibility, let's tackle how to qualify for free money -- grants and scholarships.

Free Money: Qualifying for Grants

Grants and scholarships are generally considered the most favorable type of student financial aid, because they don't have to be repaid. In this section, we'll focus on the different types of grants and how to qualify for them.

Eligibility requirements for state, institutional and other grants vary, so check with your financial aid administrator to see which non-federal grants are available to you.


In order to qualify for a federal grant, you must meet the eligibility requirements outlined in the previous section. (If you don't meet the requirements, talk to your FAA about any special circumstances you might have.) You'll also need to submit the Federal Application for Student Aid (FAFSA). Grants are generally need-based and are available to students with lower expected family contribution (EFC) scores. Types of federal grants include:

  • Pell Grants: Pell grants, generally available to undergraduates, form the foundation of all federal student aid. The award amount varies from year to year.
  • Federal Supplemental Opportunity Grants (FSOGs): FSOGs are awarded to students with the very lowest EFC scores. The award amount is $100 - $4,000 per year; however, the grant amount may be reduced if you're awarded other financial aid. Also, because funds are limited, not all students who qualify for an FSOG will be awarded one.
  • Academic Competitiveness Grants (ACGs): First or second year undergrads who complete a "rigorous program of study," are Pell Grant eligible and enrolled at least half-time may be eligible for an ACG. Each state defines rigorous programs of study differently, so check with your FAA.
  • National SMART Grants: SMART grants are similar to ACGs, but they're for undergraduates in their third or fourth year. You need at least a 3.0 grade point average to qualify.
  • Teacher Education for Assistance in College and Higher Education (TEACH) Grants: $4,000 per year TEACH grants are available to students who agree to teach high-need subjects in low-income schools after they graduate. This grant requires you to be in the 75th percentile or higher on admissions tests and to maintain at least a 3.25 grade point average [Source: Department of Education].

If you're unsure whether you'll be able to demonstrate enough financial need, if you hope to supplement a grant with additional aid, or if you have special skills and talents, you'll want to look into another type of free money -- scholarships. We'll explore scholarships the next section.

Free Money: Qualifying for Scholarships

Grants and scholarships don't have to be repaid.
Grants and scholarships don't have to be repaid.
RK Studio/Katie Huisman/Getty Images

There are thousands of scholarships awarded each year for a variety of reasons. Scholarships are gifted to athletes, performers, artists, scientists, the academically exceptional, students from a variety of ethnic backgrounds, students from particular regions, students with financial need and for almost any other imaginable reason. The Frederick and Mary Beckley Scholarship awards up to $1,000 each year to two left-handed students [source: College and Finance]. Free databases, such as, match parents and students with dozens of applicable scholarships.

Although need is generally determined by your expected family contribution (EFC) score, need-based scholarships sometimes have more flexible eligibility requirements than federal grants. Families who find themselves ineligible for federal grants should check with a financial aid advisor (FAA) to see if they might qualify for non-federal need-based scholarship fund.


Eligibility requirements for merit-based scholarships vary widely, so be careful to make sure you meet all of the necessary criteria before applying. Here are a few general tips that will improve your odds of qualifying for a merit-based scholarship:

  • Start Now: Begin your research early, in your junior year of high school or before. Deadlines for non-federal aid are often much earlier than federal deadlines. Starting your research early can give you a leg up on other applicants.
  • Emphasize Your Uniqueness: If you have a special skill, exceptional grades, or a certain religious, racial or national background, ask your guidance counselor, the FAA at your future college, and your coaches, instructors and community leaders if scholarships are available for a person with your unique qualities and gifts.
  • Get Active: Even if you don’t have a special skill, you may qualify for a scholarship simply by getting involved in your local community and participating in service events.
  • Shine on Paper: Your application, especially your essays and letters of recommendation, should really set you apart from the crowd.
  • Apply Yourself: Apply for every scholarship for which you are eligible -- regardless of how esoteric it may seem -- and you'll improve your odds of snagging one [source: FinAid].

You're not always required to fill out the Federal Application for Student Aid (FAFSA) when applying for scholarships; however, most sources strongly recommend you do, since most aid -- both federal and nonfederal -- requires a completed FAFSA.

When free money doesn’t work out or won't cover all of your expenses, there are still plenty of options for financing your education. In the next section, we’ll explore student loans and work-study options.

Qualifying For Student Loans and Work-study Programs

Loans and work/study programs are slightly different than grants and scholarships.
Loans and work/study programs are slightly different than grants and scholarships.
Kevin Jordan/Getty Images

Unlike grants and scholarships, loans must be repaid. If you're ineligible or need additional aid beyond grants and scholarships, federal student loans are the way to go. In order to apply for federal loans, you'll need to fill out the Federal Application for Student Aid (FAFSA). Types of federal loans include:

  • Stafford Loans: Undergraduate, graduate or professional degree students who are enrolled at least part time may be eligible for Stafford loans. Stafford loans are available through banks, credit unions and, in the case of "direct" Stafford loans, the U.S. Department of Education. Subsidized Stafford Loans are given to students with financial need. The interest that accrues on these loans is subsidized while you're in school and for a short period of time after graduation. Unsubsidized Stafford Loans don't require financial need. You can defer payment on the interest that accrues while you're in school; however, once you graduate, you'll need to repay both interest and principle in full.
  • Perkins Loans: Participating schools have the discretion to loan undergraduate and graduate students funds based on financial need. Talk to your financial aid advisor to see if you might qualify.
  • PLUS Loans: These are awarded to parents of dependent undergraduates, graduate students and professional degree students with good credit. Banks and other credit institutions offer PLUS loans. The maximum amount of the loan is equal to the cost of attendance (COA) at your school less the amount of other aid you receive [Source: Department of Education].

The Department of Education's guide, "Funding Education Beyond High School," offers a lot of information about federal loans.


Students who demonstrate financial need and meet the general eligibility requirements outlined in the second section of this article may qualify for the Federal Work-Study (FSW) Program. The FSW Program provides jobs to undergraduate and graduate students who are enrolled at least part time. Unless you request that your wages apply directly toward your educational expenses, your school will pay you directly, and you can use the income at your discretion. Generally, you'll work for your school, a nonprofit or a public agency. Community service and work related to your field of study is encouraged.

Still have questions about how to qualify for financial aid? We wrap things up and answer a few more questions in the next section.

Wrapping Up: More Options for Financial Aid

High school students should start applying for financial aid as early as possible.
High school students should start applying for financial aid as early as possible.
Supernova/Getty Images

If you've read through the previous sections and still have questions about your eligibility, here are a few more options to consider.

  • Veterans: Under the GI bill, veterans, their spouses and dependents may be eligible for comprehensive educational benefits, including full payment of tuition, fees, a housing stipend, and a stipend for books and supplies.
  • Convicted Criminals: If you've been convicted of a felony, federal grants and loans may still available to you -- unless you have a drug conviction. Even if you have a drug conviction, however, you may still be eligible if you complete a program of rehabilitation or if you didn't receive your conviction while you were receiving federal funds.
  • Eligible Noncitizens: A non-U.S. Citizen may be eligible for federal aid if he or she is: a U.S. national; a U.S. permanent resident with a permanent resident card; or a U.S. permanent resident with an arrival/departure card designation of "refugee," "asylum-granted," "U.S.-Haitian entrant," "conditional entrant," victims of human trafficking, T-visa holders and their dependents, and "parolees." Citizens of the Republic of the Marshall Islands, the Federated States of Micronesia and the Republic of Palau are only eligible for certain types of federal aid [source: Department of Education].
  • Special Circumstances: Many families and individuals have special circumstances that need to be considered.

It's extremely important to discuss any special circumstances with your financial aid advisor. Not only can your FAA help you navigate the application process; he or she also has some flexibility when there are special circumstances to make judgment calls that could increase the amount of aid received.


Plenty of college financial aid is available for those motivated enough to look. Whether you're angling for a grant, scholarship, loan or work-study program, plan early. Apply for all of the aid you can in order to improve your odds. Be sure to see the Lots More Information section on the next page for more great links on financial aid and how to qualify for it.

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More Great Links


  • "32 Weird Scholarships Almost Anyone Can Get." 8.20.2007. (01.16.10)
  • "FAQs: Eligibility." Free Application For Federal Student Aid (FAFSA). (01.15.10)
  • "Federal Student Aid Programs." Free Application For Federal Student Aid (FAFSA). (01.16.10)
  • "Other Types of Aid." Free Application For Federal Student Aid (FAFSA). (01.16.10)
  • "The EFC Formula 2010-2011." US Department of Education. (01.16.10)
  • "Funding Education Beyond High School: The Guide to Federal Student Aid 2009-2010." US Department of Education. (01.16.10)>
  • "How to Win a Merit Scholarship." (01.16.10.)