Where does financial aid come from?

I know, I’ve been harping on the FAFSA lately. (Did you fill it out yet? If not, go here to do so.) For those who still have some time before applying to schools, let’s switch gears and talk about where aid comes from.

Refresher: Three primary sources of aid: federal government, state governments, and institutions. (Yes, there are private scholarships and you should pursue them, but those represent the smallest piece of the aid pie.) And with federal aid, there’s a catch: a lot of it is loans. Who gets what aid? It depends on where you go to school.

The National Center for Education Statistics gives this breakdown of who is getting what type of aid:

figure-cuc-2

(Read the full report here.)

Although this data is from the 2012-2013 school year (and only includes first-time, full-time freshmen at four-year institutions), it’s been reasonably consistent the last few years. Unfortunately, most students are receiving aid in the form of loans. But almost half of public school attendees are getting some form of institutional grant, and 81% of those in private non-profit schools are.

Those institutional grant numbers are big, so one of your considerations in school selection should be, “Does the school offer grant aid for which I’m eligible?” Most schools publish their available grants, usually in the financial aid section of their website. Many families skip this section of a college’s website on the mistaken impression that it is only about need-based aid, when in fact most colleges that offer merit aid awards will also list the awards and their qualifications here. And unless you want to pay full price for college, you should be looking for private schools with merit aid for which you qualify.

What isn’t included in these statistics? Parent (PLUS) loans and private loans. So, sadly, it’s safe to assume that actual borrowing rates are much higher than what’s shown here.

(What’s the difference between a nonprofit and for-profit private school? Generally, nonprofits are what we think of as “traditional” private colleges. For-profit schools are difficult to cover under one label as they operate in many different ways. In general, they operate more like a traditional business, especially insofar as they do not receive government subsidies or donations. While there are plenty of bad apples in the for profit education sector which are rightfully under scrutiny, many of these schools provide courses and degrees in ways that are more accessible for nontraditional students– courses offered online, evenings or weekends, or in more convenient locations than a college campus, for example– and often they can be quicker to adapt to labor-market needs than a traditional college.)

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