The Only College Financial Aid Guide You’ll Ever Need

Figuring out how to pay for college is often the most difficult part of the application process. Just as the need for a college education is rising, the cost of tuition is skyrocketing. Between 2003 and 2013 alone, the cost of tuition rose by 79% above inflation. Since 1982, the cost has increased by a total of 500%. As a result, about 40% of soon-to-be college students end up turning down their first-choice school and going for a cheaper option

Why has the cost gone up so much? One major reason for such drastic increases in college costs is a lack of funding from state and local governments. As more and more funding is being taken away from universities and colleges, upping tuition rates is an easy way to make up the difference. Other factors have also contributed to this, such as the ‘recreation parks arms race’ to attract students and rise up college rankings.

What Can I Do About It?

Luckily, when it comes to figuring out how to pay for college, there are various options available. Whether you decide to take advantage of federal aid and scholarships, take out student loans, enter a work-study program, or a combination of them all, help is available. The key is deciding which option is the best for you and your situation.

So, let’s start with the basics!

What is Financial Aid?

In short, financial aid is money to help you pay for college. It can come in a variety of forms, such as grants, scholarships, work-study, and federal and private loans. All these types of aid can also come from a range of sources, including the federal government, state government, nonprofits, your college, and private companies or organizations.

A great tool to help you figure out how much financial aid you’ll need in order to attend school is the Financial Aid Calculator. It calculates the difference between the cost of the school and your expected contribution, which comes from the FAFSA (see below).

What is the FAFSA?

Now let’s dive into the holy grail of all financial aid forms—the FAFSA (Free Application for Federal Student Aid). The FAFSA is used primarily to determine the financial aid you’re eligible to receive from the federal government, but many schools also rely on it to determine their own financial aid packages.

The good news is that the form is relatively simple and only takes around 30 minutes to fill out, and you can check out our handy guide on everything you need to know about the FAFSA, as well as our advice on how to handle the trickiest FAFSA questions.  

Shortly after submitting the FAFSA, you’ll receive an electronic or paper copy of your Submission Summary. The Submission Summary lists basic information about your financial aid eligibility as well as your answers to all the FAFSA questions. However, the most important part of your Submission Summary and the key indicator of your financial aid eligibility is the Student Aid Index (SAI). It is an estimate of the amount of money your family can contribute towards your education. We’ll talk more about how it’s used below.

This year, the FAFSA will become available to students like you in December 2023. Once it’s available, it’s recommended that you fill it out as soon as possible to avoid missing any state- or college-specific deadlines and to ensure you have enough time to plan for how to pay for college. Some schools also grant financial aid awards on a first-come, first-served basis. 

University-Based Aid

Many schools also use the FAFSA to determine how much financial aid to award their students. As part of this, they take three factors into account: enrollment status (part-time or full-time), cost of attendance, and the SAI . Generally, they subtract the SAI from the cost of attendance to determine your financial need. Then the college may offer to help meet your need with a “financial aid package” comprised of scholarships, grants, work-study options, and more. Awards can differ wildly from school to school, since each institution has its own requirements and a different amount of funding available.

Alternatively, some private colleges and universities use the CSS Profile to determine financial aid eligibility. The CSS Profile is provided by the College Scholarship Service, which is the financial aid sector of the College Board. Unlike the FAFSA, the CSS Profile asks questions related to the specific school or program that the student is applying for and takes additional factors into account, including minimum student contribution. Financial aid officers are also able to weigh in on individual student circumstances. The CSS Profile can be completed online and costs $25 for the first school and $16 for subsequent schools. 

Other Items to Keep in Mind with University-Based Aid

It is also important to check if you qualify for completely tuition-free admittance to a school.  Some of the top schools in the country such as Dartmouth now guarantee free tuition if your family makes under $100,000 in total income. Harvard does the same if your family makes under $65,000 a year. (However, note that “free tuition” does not necessarily mean “free ride,” as there are other costs of attending college, like accommodation, meal plans, books, and school supplies.)

It’s also worth discussing the differences between need-aware admission and need-blind admission (some schools also use a blend of both approaches).

Need-blind schools don’t consider students’ financial need during the application process. This likely benefits poorer students, who might not be able to pay the school as much. However,  it may also mean getting admitted to a school that can’t offer you enough financial aid. Need-aware schools, on the other hand, do take financial need into account. While this can result in better financial aid packages overall, it can also lead to wealthier students being chosen over financially needy students when limited spaces are available. 

One last distinction is between need-based aid and merit-based scholarships. Some schools only offer financial aid packages based on your demonstrated need (often, this is the case with the most elite universities), while other colleges offer a blend of need-based aid and merit-based scholarships. These merit scholarships can be guaranteed to students as long as they meet certain SAT/ACT or GPA requirements (like this $10,000 scholarship from the Daniel G. Calugar Foundation Merit Scholarship Program), or require separate essays and applications. 

Now that we’ve covered all the background info, let’s dive deeper into the different types of financial aid available!

Government Grants

When it comes to figuring out how to pay for college, grants and scholarships are arguably the best way, since they both offer free money with no strings attached! But what’s the difference?

To begin, grants are generally awarded by the federal government and are based on financial need.

The main grants that the U.S. government currently offers are the Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG). Both apply to participating public and private universities as well as four-year and two-year degree programs and some vocational training programs.

In order to apply for either of these federal government grants, students simply need to complete the FAFSA each year. They’ll automatically be considered for any grants and federal student aid that they qualify for and will be notified in their award letter.

What is the Pell Grant?

In short, a Federal Pell Grant is free money, usually awarded to low-income undergraduate students, to help fund their college tuition.  Students can use the money on room and board, tuition, transportation, school supplies, textbooks, fees, and more.

What determines Federal Pell Grant eligibility?

To be eligible for the Pell Grant, a student must:

  • Be a current undergraduate or vocational student
  • Be enrolled in or accepted to be enrolled in a participating college, or be a post-baccalaureate student in certain teacher certification programs
  • Have not previously earned a bachelor’s or professional degree
  • Be low-income (usually $60k or less) – See more details here

To be considered for the grant, you’ll need to fill out the FAFSA. Your Submission Summary is then shared with the colleges and universities you select in your application. Each college’s financial aid office will go on to determine your financial need and your eligibility for a Federal Pell Grant.

How much will I get in Pell Grant money? What’s the maximum Pell Grant award?

Your Estimated Financial Need (remember, calculated by each college as the Cost of Attendance minus your Student Aid Index) helps determine how much Federal Pell Grant aid you’re eligible to receive.

Each year, the maximum cap changes, but is usually around $6,500.

In some situations, a student may receive up to as much as 150 percent of the student’s Pell Grant award for the award year, often referred to as “year-round Pell.” This could happen in a situation where a student is enrolled in both the fall and spring semesters, but receives an award for the summer semester as well. For example, the student receives the Pell Grant award for $2,000. The student would most likely receive $1,000 for the fall semester, and $1,000 in the spring semester. Some circumstances might allow the student to receive $1,000 for the summer semester as well, resulting in 150 percent of the student’s Pell Grant award. However, even the year-round pell is subject to that roughly $6,500 maximum.

How and when will I receive the funds?

Keep in mind, schools follow the Federal Pell Grant Payment and Disbursement Schedules to distribute the funds. The schedules depend upon the student: full-time, half-time, etc. to help determine how much money each student will receive.

Your college will determine how the grant will be paid. They may apply the funds directly to your school costs, pay you the funds, or combine the two options.

Students may only use funds from their Federal Pell Grants at one participating school at a time. Any funds left over may be used for school-related expenses, such as textbooks, room and board, etc.

Check out the list of participating schools that accept Federal Pell Grants.

What about the Federal Supplemental Educational Opportunity Grant?

The Federal Supplemental Educational Opportunity Grant (FSEOG) is a campus-based aid program (i.e. it’s administered directly by each school’s financial aid office rather than by the government itself) that offers additional aid to students with a high amount of financial need. Award amounts range from $100 to $4,000 and students with a Student Aid Index of 0 are given highest priority. Participating colleges and universities receive a set number of FSEOG funds from the federal government each year, meaning that the number of awards, award amounts, and award availability vary by school.


Scholarships are also free money to help you pay for college and are generally offered by nonprofits, individuals, corporations or universities and colleges. Anyone can apply for scholarships and deadlines vary throughout the year, meaning there are always some available!

Luckily, figuring out how to find scholarships is an easy task. The first step to finding excellent scholarship opportunities is to talk to your guidance counselor or financial aid advisor. They should have the most up-to-date information on local scholarships, allowing you to start your search off on the right foot.

After discussing possibilities with your advisor or counselor, continue your search online with Going Merry! Inspired by what the Common App has done for college applications, we make the scholarship application process much simpler by allowing you to apply directly for some scholarships through our site. Simply fill out your profile, then we’ll match you with the scholarships that are best for you and then you can apply. You can even upload documents, like letters of recommendation or transcripts, and reuse them for every application.

The best part about scholarships is that they’re available to all sorts of people in all different situations and can be applied to both traditional and online colleges. Whether you’re transferring schools, majoring in marketing, or just looking for scholarships that only apply to residents of your state, there’s something for you! Most scholarship applications take some time to complete, but if you’re short on time, check out our list of essay-free scholarships! For more information, here’s our step-by-step guide on applying for scholarships.


Work-study is a type of financial aid that provides you with a part-time job while you’re enrolled in school. Part-time or full-time undergraduates, graduates, and professional students who express financial need and attend one of 3,400+ participating schools are eligible for this federal program. 

Through this program, students earn at least minimum wage, though they can only work a limited number of hours. Jobs can be on- or off-campus and, if possible, are related to the student’s field of study—meaning you can get some relevant work experience under your belt at the same time! Examples include working at the school library or as a departmental research assistant. 

In general, undergraduates are paid by the hour, while graduate and professional students are either paid by the hour or paid a fixed salary.

Student Loans

Student loans strike fear into the hearts of college students all over, and they’re the least desirable option to pay for college. After all, who wants to be saddled with thousands of dollars of student debt after graduation? 

But realistically, many students rely on some amount of loans to fund college. While you should always try to get financial aid from other sources first, student loans can make higher education a real possibility for many people in cases where it wasn’t before.

Here’s a step-by-step guide through the different types of loans and all of the important information that you should know about them. First, let’s talk about federal versus private loans.

Federal Loans: Subsidized and unsubsidized

Federal loans are, unsurprisingly, issued by the federal government. When you’re considering taking out student loans, it’s a wise choice to target federal loans first since they offer more benefits than private ones.

One benefit is that federal loans don’t require a cosigner or guarantor, so you can apply independently. And most importantly, interest rates are generally lower than with private loans, meaning you’ll end up paying less in the long run. For the 2019-2020 school year, the interest rate is 4.53% for undergraduate loans and 6.08%% for graduate and professional loans. These interest rates are fixed for the life of the loan, so you always know the interest rate you’ll be paying.

When you receive a federal loan, it will either be subsidized or unsubsidized. Subsidized loans don’t accumulate interest for the entire time you’re in school, while unsubsidized loans do. Unfortunately, you don’t have much say in which type of loan you receive since it’s heavily based on financial need. Only students with financial need are eligible to receive subsidized loans, while demonstrated financial need is not a requirement to receive unsubsidized loans. Federal interest rates are currently the same for both undergrad subsidized and unsubsidized loans.

Loan amounts vary considerably based on a student’s year in school and their level of financial need. Take a look at the table below to get an idea of your eligibility.

Year in SchoolDependent Students (Except students whose parents are unable to obtain PLUS loans) Loan LimitIndependent Students (and dependent undergraduate students whose parents are unable to obtain PLUS loans) Loan Limit
First Year Undergraduate$5,500 (Up to $3,500 of this amount may be granted in the form of subsidized loans while the rest is granted in unsubsidized loans)$9,500 (up to $3,500 of this amount may be granted in the form of subsidized loans)
Second Year Undergraduate$6,500 (up to $4,500 of this amount may be granted in the form of subsidized loans)$10,500 (up to $4,500 of this amount may be granted in the form of subsidized loans)
Third Year & Beyond Undergraduate$7,500 (up to $5,500 of this amount may be granted in the form of subsidized loans)$12,500 (up to $5,500 of this amount may be granted in the form of subsidized loans)
Graduate or Professional StudentsAll graduate and professional students are considered to be independent$20,500 (unsubsidized only)
Subsidized and Unsubsidized Aggregate Loan Limit$31,000—No more than $23,000 of this amount may be in subsidized loans.$57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.


What are PLUS Loans?

PLUS loans are another type of loan that you can apply for online. These are federal loans offered to independent students or to parents of dependent students, and they are intended to make up for any gaps between the cost of attendance and financial aid. PLUS loans can be a convenient option for covering the remaining cost of tuition as they have fixed interest rates and virtually no borrowing limit. However, keep in mind that PLUS loans do require a credit check, an origination fee (i.e. a fee for processing the loan), and payments are expected to begin immediately after the loan funds are disbursed (although applying for student loan deferment is an option).

Many students prefer federal loans because of the flexible payment plans available. When paying back student loans, most monthly payments are based on a 10- or 15-year payment plan, but sometimes the monthly payments are just too high for new graduates. Federal loans work with you to find the best payment plan for your situation.

The best way to determine which payment plans you qualify for is to talk to your student loan servicer. They’ll be able to provide you with the most up-to-date information and guide you on the repayment plan that’s best for your situation.

One of the most common repayment plans is income-based repayment, and the process of switching plans is quick and painless. Income-based repayment can help lower your monthly payments for your student loans so the loans are more affordable. Students need to submit their most recent tax information to determine their eligibility. Each year that they’d like to continue with the income-based payment plan, they simply need to recertify by sending their latest tax records.

To see if you qualify for income-based repayment, check out the Department of Education’s Repayment Estimator Tool. If the calculated cost of your payment is lower under an income-based repayment plan than it is under the standard repayment plan, you likely qualify and should discuss options with your student loan servicer.

What about loan forgiveness?

Contrary to popular belief, it is possible to discharge student loans if you go bankrupt (although it’s much more difficult than with traditional loans). In order to have loans discharged, it’s required to file for Chapter 7 or Chapter 13 bankruptcy and prove that loan repayment would impose undue hardship on you and your dependents during an adversary proceeding in bankruptcy court. However, what makes it difficult in practice is that undue hardship has never been defined. For more information, head over to the FSA website.

For the latest information on federal loan forgiveness options, please visit the Federal Student Aid Loan Forgiveness page.

Private Loans

Private loans are often used as the last option after all other financial aid options have been exhausted. While they can be helpful in providing that little extra bit of money needed to fund your education, they shouldn’t be your first choice when deciding how to pay for college.

Private loans are issued by banks, credit unions, or private companies and the rules, interest, and repayment terms can vary wildly depending on the lender. Some private loans also have variable interest rates, meaning that your interest, and your loan payment as a result, can increase.

Another downside to private loans is that they’re based on credit, so a cosigner or guarantor is generally necessary.

Frequently Asked Questions

Should I apply for aid even if I don’t think I qualify?

Yes! The FAFSA is a free form and you never know what type of student aid is available to you until you apply…you might be pleasantly surprised! Thirty minutes of your time could save you thousands of dollars on your tuition bill and make paying for college much simpler. To apply for Federal Student Aid, head over to the FAFSA website.

Do I need to be accepted into a university or college to apply for financial aid?

No. You can apply for financial aid at any time you want, regardless of whether you’ve been accepted into a school or not. However, you do need to be enrolled and accepted in order to receive financial aid. Applying early can be a great option and provide you with a clearer picture of how to pay for college.

Is the FAFSA a one-time thing or do I need to reapply every year?

The FAFSA is based on the previous year’s tax records, so it’s necessary to fill it out once a year to qualify for financial aid. Luckily, it’s quick and easy and should become even easier after the first time.

When do I need to start repaying my student loans?

Most federal loans allow a six-month grace period after graduation (except the Perkins loan which allows a nine-month grace period). In other words, you’ll be required to start paying back your federal loans six months after graduation. Private loan repayment terms vary, so it’s best to check with your lender for the most accurate information.

Where can I get more info about financial aid?

The Federal Student Aid Information Center (FSAIC) is the best place to get the most up-to-date information on financial aid. Reach out to them with one of the methods below:

Federal Student Aid Website

FAFSA Website

Phone: 1-800-4-FED-AID (1-800-433-3243)

Phone (if hearing impaired): 1-800-730-8913

Federal Student Aid Information Center
PO Box 84
Washington, DC 20044

Financial Aid Glossary

Let’s face it, financial aid terms can be confusing and unclear. We put this glossary together to turn you from clueless into a financial aid expert.

Cosigner → A second person (i.e. not the original borrower) who also signs for a loan and assumes the same amount of financial responsibility for the loan. Having a cosigner can often help make loans possible for those with bad or no credit.

Deferment → Allows you to stop making your monthly federal loan payments for a determined amount of time.

FAFSA → The Free Application for Federal Student Aid. It’s a free form used by the federal government and many universities to determine if you qualify for financial aid and, if so, how much.

Federal Supplemental Educational Opportunity Grant (SEOG) → A need-based grant offered by the federal government for students with the greatest need of financial aid.

Financial Aid → Financial assistance to help students and their families pay for school.

Financial Aid CalculatorA free tool that allows you to estimate your Student Aid Index (SAI) before completing the FAFSA. This tool can simplify the process of deciding how to pay for college. 

FSA → Federal Student Aid. Known as “the largest provider of student financial aid in the U.S.”

Forbearance → Like deferment, forbearance allows you to stop making your monthly loan payments for a determined amount of time. The difference is that deferment doesn’t always require you to pay interest, but forbearance does.

Grants → Money for college, generally awarded by the federal government, that doesn’t need to be paid back.

Guarantor → Similar to a cosigner, a guarantor agrees to pay for a loan if the original borrower defaults or is unable to pay. Having a guarantor can help make loans possible for those with bad or no credit.

Loan Forgiveness → Options for saying goodbye to student loans in exchange for non-profit, government, or volunteer work. For more information on current requirements, visit the FSA website

Payment Plans → Options for repaying your student loans based on income or other factors. To find out which payment plan is best for you, check out this article or discuss options with your student loan servicer.

Pell Grant → A need-based grant offered by the federal government for undergraduate students who express financial need.

PLUS Loan → An unsubsidized loan offered by the federal government to students’ parents. It’s intended to cover remaining education costs not covered by other forms of financial aid. This loan is available only to parents of dependent undergraduate students or independent graduate/professional students and, as of 2018, the interest rate is 7.0%.

Tuition → The amount of money a university, college, or institution charges students for education.

Scholarships → Money for college, generally awarded by corporations, nonprofits, schools, or individuals, that doesn’t need to be paid back.

Student Aid Index (SAI) → A number that represents your family’s ability to help you pay for college. It’s determined by a number of factors, including taxed and untaxed income. It’s used in determining financial aid eligibility on the FAFSA.

Student Debt → The type of debt that is accumulated from taking out federal or private loans in order to attend a college, university, or institution.

Student Loans (Federal) → Financial assistance in the form of a loan from the federal government. Student loans accrue interest and must be paid back.

Student Loans (Private) → Financial assistance in the form of a loan from a private provider. Student loans accrue interest and must be paid back.

Subsidized Loans → A type of federal student loan in which the federal government pays the interest while the student is in school or while the loan is in deferment.

Unsubsidized Loans → A type of federal student loan in which interest begins accruing as soon as the loan is taken out.

Work-study → A type of federal student aid that provides students with part-time jobs while in school.

Useful Resources

Keep it simple.

We know that was a LOT of information, so take some time to digest it. We also understand you’ve got enough on your plate: homework, clubs, college essays, and now federal student aid? Plus, you might still have a financial gap, after your federal and college grants, so it’s important to understand all of your financial aid options and to tackle them one at a time

At Going Merry, we like to make things easy for you. Have questions about how to pay for college or financial aid that we didn’t answer in this article? Let us know!

Streamline your scholarship application process. Sign up for a free profile today and get matched with thousands of scholarships. We’re your one-stop shop for all things scholarships and federal student aid!

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.



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