Borrowing for College

Financial Aid: Are You Missing Out on Free Money?

College student looking out of the window

A college degree may be more expensive today than ever before, but a school’s price tag shouldn’t deter you from pursuing a higher education.

Consider these seven steps to help you find funding that meets your financial and academic needs:

Step 1. Calculate your Expected Family Contribution (EFC)

Your EFC depends on multiple factors, including your family’s income and assets, says Sean Moore, a Certified Financial Planner with SMART College Funding. Search for EFC calculators online to determine exactly how much your family is expected to contribute toward your college education.

Step 2. Determine the difference between your EFC and college expenses

Once you know your EFC, determine the cost of attendance, or total expense, for each school you are considering. This should include the cost of tuition, room and board, books and school supplies and transportation. Then, subtract your EFC from the cost of attendance to determine your family’s financial need. If your school’s cost of attendance is greater than your EFC, you could qualify for need-based grants to cover the remainder of your education costs, Moore says.

Step 3. Consider assets to cover your Expected Family Contribution

A family could consider using a portion of non-retirement assets—such as a 529 college savings plan or investments—to help fund the EFC portion of college tuition, says Eun Fenton, a financial advisor with SunTrust Investment Services.

Step 4. Fill out the FAFSA

In order to qualify for federal student aid, including grants, student loans and work-study, your family needs to fill out the Free Application for Federal Student Aid, or FAFSA. Even if your family’s EFC is greater than your school’s cost of attendance, you should still fill out a FAFSA to see if you are eligible for federal funding, Moore says.

Step 5. Apply for gift-based aid 

Gift-based aid, including grants and scholarships, is funding that doesn’t have to be repaid. While grants are awarded based on financial need, scholarships are awarded based on merit (think good grades and volunteer work).

Both grants and scholarships are available through federal and state governments, as well as your college or university.

Step 6. Apply for federal student loans

After applying for grants and scholarships, consider taking out federal student loans. A loan is money you borrow and must pay back with interest.

While you may have to demonstrate financial need to qualify for some types of federal loans, others are offered to students across the board. Parents can also take out a loan from the federal government, called a PLUS loan, to help pay for their child’s education, Fenton says.

Step 7. Apply for private student loans

Finally, consider applying for private student loans—which are available through many banks and financial institutions—to cover any remaining expenses. It’s wise to comparison shop to lock in the most competitive interest rate.

By using a combination of family contributions, gift aid and student loans, it’s possible to keep your college expenses manageable—and minimize post-graduation debt.

Think you’ll need to borrow money for school?

Use our college loan calculator to find out how much you may need to borrow.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.