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TYPES OF FINANCIAL AID Financial aid may be classified into two types based on the criteria through which the financial aid is awarded: merit-based or need-based. Merit-based Merit-based scholarships include both scholarships awarded by the individual college or university and merit scholarships awarded by outside organizations. Merit-scholarships are typically awarded for outstanding academic achievements, although some merit scholarships can also be awarded for special talents, leadership potential and other personal characteristics. Scholarships may also be given because of group affiliation (such as YMCA, Boys Club, etc.). Merit scholarships are sometimes awarded without regard for the financial need of the applicant. At many colleges, every admitted student is automatically considered for merit scholarships. At other schools, however, a separate application process is required. Athletic scholarships are a form of merit aid that take athletic talent into account. Need-based Need-based financial aid is awarded on the basis of the financial need of the student. The Free Application for Federal Student Aid (FAFSA) is generally used for determining federal, state and institutional need-based aid eligibility. At private institutions, a supplemental application may be necessary for instituitional need based aid. No loan financial aid In the early 2000s, a number of colleges took steps to eliminate debt altogether from their financial aid packages. Many of these offers are aimed at students whose parents earn less than a certain income -- the exact figures vary by college or university. These new initiatives were designed to attract more students and applicants from lower socioeconomic backgrounds, reduce student debt loads, and provide the offering institutions with an advantage over their rivals in attracting commitments from accepted students. As of late August, 2007, the list of colleges and universities offering such no-loan financial aid packages includes the following: IN THE UNITED STATES The United States, federal government provides need-based Federal Aid called Federal Student Financial Aid, which is composed of different programs, grants, and scholarships, work and loan programs including Federal Pell Grant s, Federal SEOG Grant s, SMART Grants, Academic Competitiveness Grants (ACG), Federal Work-Study, Federal Stafford Loan s (in subsidized and unsubsidized forms), Federal Perkins Loans, and Federal PLUS Loan s. Federal Perkins Loans are made by participating schools per annual appropriations from the U.S. Department of Education, whereas Federal Stafford Loans and Federal PLUS Loans are made by participating lenders under the Federal Family Education Loan Program (FFELP). The U.S. Department of Education serves as a lender and guarantor under the William D. Ford Direct Loan Program. To qualify for federal student aid, a student must file the Free Application For Federal Student Aid (FAFSA). The FAFSA uses a calculation taking into account income and assets to determine a student's " Expected Family Contribution (EFC)" toward his or her college education for that year. Colleges use the EFC to decide what types of financial aid a student is eligible to receive. Students must complete the FAFSA each year to be considered for financial aid. The EFC also takes into consideration any participation in college savings or pre-paid tuition plans. In the past, financial aid officers weighed pre-paid tuition plans more heavily than other 529 college savings plans when determining a student’s eligibility. In February 2006, Congress passed legislation to treat both types of plans evenly. State governments also typically provide some types of need- and non-need-based aid, consisting of grants, loans, work-study programs, tuition waivers, and scholarships. Individual colleges and universities may provide grants and need- and merit-based scholarships. Students requiring financial aid beyond what is offered by their institution may consider a private (alternative) education loan, available from most large lending institutions. Typically, education loans obtained through the federal government have lower interest rates than private education loans. Institutions may also offer their own student financial assistance, in the form of need- or merit-based aid, as well as endowed scholarships (with varying need and/or merit-based criteria). Some schools may only require the FAFSA; some may also require an additional need-based analysis document, such as the CSS/Profile, to apply for such funds, in order to apply a more stringent need analysis for the rationalization of institutional funds. OUTSIDE THE UNITED STATES Many national governments provide student financial assistance subsidies for students attending a university, although proposed policies to change such subsidies have engendered considerable debate in several countries, such as Canada, the United Kingdom, Germany, and Scandinavian countries. The heavy reliance on private subsidies, as in the United States, is not as widespread, although this may be changing. EXTERNAL LINKS
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