Different Types of Need-Based Financial Aid, Explained

Hey high schoolers! Getting ready to dive into the world of college financial aid? Building your list of potential colleges isn’t just about numbers – it’s about knowing the lingo, too. From different types of loans to understanding need-based and merit-based aid, the college financial aid system has its own language.

To make things easier, here’s some handy information to help you decode the terms related to financial aid policies and need-based aid.

What Does “Meet Full Need” Mean?

Imagine a college says it costs $65,000 a year. If the financial aid formulas decide your family can chip in $18,000, a college that meets full need will cover the rest – yep, all $47,000*! They’ll make sure it’s taken care of through a mix of federal, state, and college-specific aid.

*Example is for illustrative purposes only.

Here’s the scoop: The federal formula calculates something called the “Student Aid Index” (SAI) using the FAFSA®. Some generous colleges also use a second form – the CSS Profile – to get a better picture of your financial situation. These formulas determine your family’s “demonstrated financial need,” which can vary depending on how each school views your income and assets.

Schools that promise to meet full need usually start with federal student loans and work-study opportunities, then cover the remaining amount with scholarships.

But there’s a twist! You don’t get to decide how much financial aid you need; the FAFSA® or CSS Profile does. Even if you think your expected contribution is too high, that’s the number colleges use to figure out your aid.

Now, here’s where it gets interesting: Some colleges go above and beyond by meeting your full need without requiring any loans – just work-study, scholarships, or grants. On the flip side, some colleges might say they meet full need but exclude certain fees from their cost calculations. And just because a college promises to meet full need doesn’t mean they accept a lot of students who need a lot of aid.

Need-Blind and Need-Aware Colleges

Alright, let’s dive into the world of financial aid and admissions policies. You might have heard about “need-blind” and “need-aware” colleges, but what do these terms really mean?

Need-Blind Colleges

A need-blind college doesn’t consider your financial situation when deciding if you get in. Sounds great, right? However, only a few super-selective and wealthy colleges can truly afford to be completely need-blind. These schools look at your application without a thought about your wallet.

Here’s a list of the 115 need-blind colleges in the US as of 2024. However, only about two dozen colleges in the US are wealthy enough to be truly need-blind and meet the full financial need of their students. The rest have to balance their budgets carefully, which means they might not cover all your financial needs even if they don’t consider them during admission.

Here’s a twist: even need-blind colleges can often guess your financial background based on clues like your home address or the school you attended. And some need-blind colleges might still leave a “gap” in financial aid, meaning they can’t cover everything you need.

Need-Aware Colleges

On the flip side, need-aware colleges do take your ability to pay into account, but not always in the same way. Some well-known need-aware colleges are Tufts University, the University of Miami, Washington University in St. Louis, Ohio State University, and Texas A&M. If you’re an academic superstar, you’re likely to get in regardless of your financial need. But if your application is on the fence, your financial situation might come into play.

How to Navigate This Maze

Need-Blind Colleges: Don’t consider your financial need during admissions but may not always cover your full financial need.
Need-Aware Colleges: Consider your ability to pay, especially if you’re a borderline applicant.

Remember, understanding all of these terms can help you make more informed decisions about where to apply and how to plan for your college expenses. Happy college hunting!

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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Daniel Bod

Writer at Going Merry

Daniel Bod is a seasoned higher education professional with two decades of expertise in financial aid. He began his career at Hofstra University in 2004, after completing his Bachelor's degree from Stony Brook University in 2000, where he provided comprehensive financial aid support to families from diverse backgrounds. In 2007, he transitioned to LIU Post and advanced to Senior Assistant Director of Enrollment Services, dedicating over ten years to assisting students and families in various capacities. During his tenure at LIU Post, Daniel also earned a Master's degree in Childhood Education. Transitioning to St. George's University in 2019, he spent over four years focusing on the financial needs of medical students. Daniel excels in advising on loan options and empowering students and families to make informed decisions about educational finances.