The Basis of Financial Aid and the Pell Grant
Most students need to get some amount of financial aid in order to pay for college, and while there are work-study programs and other sorts of specialized types of aid that may be accessible to certain segments of the student population, most students either receive a scholarship, a grant, or perhaps even a student loan as part of their final award package.
A clear distinction can be made among these various kinds of aid, as some financial aid instruments need to be paid back, while others do not.
Scholarships and grants do not have to paid back of course, while student loans do. That being said, most students would prefer to get a scholarship or grant because of this, and because scholarships are very difficult to acquire, most students look to educational grants when they need aid, and don’t want to go into debt.
Among the vast assortment of college grants that are available, the Pell Grant is the most popular federal educational grant in existence, and currently 10 to 12 percent of graduating seniors have received at least some Pell Grant aid during their college experience.
How Financial Aid Is Based
While most students want to get the Pell Grant, very few can actually become eligible for the award, as it is based heavily on financial need, with only the neediest of students getting the majority of Pell Grant awards. Financial aid is typically based on need, merit, or credit, and it is important to understand what this means exactly. If financial aid instruments like the Pell Grant weren’t based on anything then students would simply be able to apply for their aid and get their funding with no problem.
This however is not how it works, and because each financial aid instrument is based on some sort of criteria, each applicant must fulfill such criteria in order to get such aid. As was stated previously, most financial aid instruments are based on need, merit, or credit.
Financial Need Based Aid
Aid that is based on financial need typically involves federal instruments like the Pell Grant, which may, or may not have to be paid back. The Department of Education uses financial need as a direct indicator of how much additional funding a student may require in order to attend a particular institution, and it is defined more clearly via the following formula:
- Financial Need = Cost of Attendance (CoA) – Expected Family Contribution (EFC)
The most important variable in this equation is the EFC, as a student’s expected contribution is supposed to stand as an indicator of the amount of money their family is able to contribute towards their education related expenses. The lower the EFC is, the higher the level of financial need is, and the greater the likelihood at becoming eligible for federal financial aid and the Pell Grant.
Merit Based Financial Aid
Merit based financial aid is unlike any aid that is based on financial need in that it has nothing to do with the amount of money you have available to put towards your college expenses, and is rather simply reliant on your achievements in some particular area that may be relevant to your college career.
Most scholarships and some educational grants are based on merit, while most student loans are not. Common types of merit based aid include scholarships that are given to exceptional athletes who have achieved on the field, or students have excelled academically.
Financial Aid that is Based on Credit
The last category of aid is based on credit, and typically includes most private student loans. The majority of grants, scholarships, and federal student loans are not based on credit, while the preponderance of private education loan funding is. This means that to get approved for a private student loan you must have a high enough credit score, and perhaps an extensive credit history and profile.