How do you begin the process of finding college scholarships? Step 1 is finding out what type of scholarship you’re eligible for: need-based or merit.

Need-based financial aid is aid that meets the difference between Cost of Attendance (COA) at a college and your Expected Family Contribution (EFC) (which is being renamed to Student Aid Index or SAI). Your EFC is calculated by the FAFSA or CSS Profile, depending on the college. If it’s less than the COA, then you are eligible for need-based aid. If your EFC is more than the COA, then you are not eligible for need-based aid. Instead, you could be eligible for merit scholarships.

To estimate your EFC, use the Department of Education’s Student Aid Estimator for the FAFSA, or the College Board’s EFC Calculator for the CSS Profile. These aren’t definitive– especially not for the CSS Profile since colleges have leeway in using the data points– but as long as your income doesn’t vary dramatically from year to year, they can be a great starting point. One key point to make your calculation more accurate: the Student Aid Estimator only asks for your adjusted gross income. If you made pre-tax retirement contributions to a 401k or IRA, you’ll need to add those back to your income since the FAFSA and CSS Profile include those dollars.

Many students are eligible for both types of aid, or eligible for need-based at some colleges and merit at others. For example, a student with an EFC of $35,000 who’s applying to public and private colleges is not likely to be eligible for need-based aid at the public colleges but eligible at the private colleges.

Similarly, not all colleges offer both types of scholarships, so just being eligible doesn’t guarantee anything. If your family has a high EFC and you don’t want to pay full price for college, then “offers merit scholarships” needs to be one of your search criteria. On the other hand, if you’re eligible for need-based aid, make sure you apply to colleges that meet financial need.

And whatever your financial status, be sure to complete the FAFSA every year for every student. You might be surprised where you end up, and you won’t be eligible for any need-based aid if you don’t.

Here’s a shameless plug: my online course, The College Financial Plan, helps families of high school students find colleges that will offer scholarships to their student, and so much more! Or check out my book, How to Pay for College, to develop a financial plan to get your kids a great education without putting your other financial goals at risk.