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A Simple Guide to College Financial Aid

For parents of high school seniors, late winter to spring is intense. While the rest of us are enjoying more sunshine and new blooms, you’re frantically shuffling priorities for the months to come. There’s prom, graduation, last-minute college decisions and the dreaded paperwork for college financial aid.

Your son or daughter is about to make the magical transformation from teen to young adult. As the one charged with sending them off into the world, it’s no wonder you’re stressed!

We’d love to help. No, we can’t slow time. What we can do is simplify one part of the process.

Terms of College Financial Aid

Below, we’ve broken down what you need to know about college financial aid by defining key terms and listing deadlines, starting with the FAFSA. It’s a pretty detailed list, so let’s get started!


The FAFSA (Free Application for Federal Student Aid) is a form that must be completed before a student receives any funding for college. Keep in mind that if your FAFSA paperwork is not processed by the time the fall semester begins, you may be required to pay tuition costs out of your own pocket, and then be reimbursed when your funding arrives. States and colleges have their own deadlines, many of which have recently passed or are just around the corner. If you’d like to receive state or college-specific aid in addition to federal funding, you must apply early! 


Once the FAFSA is complete, you should see something called an EFC (Expected Family Contribution). Breathe easy. That number isn’t the amount of funding your teen will receive or the amount you’re required to pay. The score simply helps colleges determine how much aid a student is eligible to receive.

As a general rule, the lower the EFC score, the more funding your teen can get. Of course, nothing is set in stone at this point—you’ll find out the details once an award letter arrives.

Federal Grants

Grants are free money, meaning they don’t have to be paid back. Pretty awesome, right? The most common federal grants include the Pell Grant and the SEOG Grant.

The Pell Grant is awarded based on financial need, cost of attendance and whether or not a student plans to attend school full time. Students who qualify for a Pell Grant will receive it no matter where they go to school or when they complete their paperwork. The SEOG Grant is awarded on a first-come basis to students who are already getting the Pell Grant and are in extreme financial need. Unlike the Pell Grant, these funds do run out. That’s why it’s important to complete the FAFSA as soon as possible.

Work Study

Work study opportunities are awarded based on need and provide federal funding in exchange for work. Most offices on campus have openings, so it should be easy for students to find a job in an area that interests them. Students receive a paycheck to help with tuition and occasionally have time to study at work.

Federal Loans

Loans are not free money. Taking out a student loan means going into debt, with repayment typically beginning just six months after a student graduates or stops attending college. That’s right—some students pay for a degree without the benefit of actually having one.

There are two main types of loans a student will be offered: subsidized and unsubsidized. On subsidized loans, the government pays the interest while a student is in school. On unsubsidized loans, the interest accrues and is included in the cost when repayment begins.

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Why do you need to know this if you’re going to decline the loans anyway? Well, it’s easy to be convinced that keeping subsidized loans is a good idea since they don’t incur interest. Unfortunately, interest is only part of the problem when it comes to debt. Smart parents realize that all debt is bad debt, even when it comes with a "No interest for four years!" sticker.

Award Letter

After you are accepted to a college, you’ll receive an award letter detailing what kind of financial aid you can receive. Remember, this includes grants, work study and student loans. The letter should explain how to accept and decline funds from your school. Follow the steps and don’t be pressured into taking on debt.

If you’ve already accepted loans, don’t panic! You’ve got 120 days from the start of the fall semester to cancel your federal loan without being charged interest or fees. Of course it’s best to cancel the loan now, before you’ve actually got a check in hand.

Simplify the College Financial Aid Process

As the parent of a high school student, you need a clear understanding of the terms above. After all, that’s the trickiest thing about the college financial aid process. The words used, the paperwork required and the way student loan debt is sold as "good," all make for an overwhelming experience.

We hope it’s a little clearer now—and a little less stressful. This process takes time, but the payoff is so worth it. Your child will graduate without the weight of student loan debt. And that’s something that the majority of today’s graduates can’t say.

Want to learn more about how to go to school without loans? Debt-Free Degree is the book all college-bound students—and their parents—need to prepare for this next step. Grab a copy today or start reading for free to get plenty of tips on going to college debt-free!

Or connect with an investing professional can help you figure out a college savings plan that won’t lead to debt.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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