MONEYSCHOOL'S Simplified Guide
to FAFSA and Federal Student Aid

Section 2: Federal Student Aid Basics and Eligibility

One thing that confuses many aid-seekers is the variety of financial aid programs offered by the federal government.  In addition, many colleges and universities use the information in your FAFSA to determine your eligibility for non-federal programs, including state-funded grants.  But let’s start with the basics.  There are three general types of federal financial aid programs: 

  1. Grants, which don’t have to be repaid
  2. Federal Work-Study, which allows you to earn money for school through     either on-campus or off-campus employment
  3. Loans, which must be repaid with interest.

There are several different types of federally-sponsored grant and loan programs.  We’ll get into more detail later, but you really don’t have to worry much about those options when you fill out your FAFSA, because you don’t get to choose which ones will be offered to you.    

Except for certain types of loans, federal student aid is awarded based on your financial need, as determined by the Department of Education’s Office of Federal Student Aid (FSA).  Much of the information you are required to provide in your FAFSA is used to figure out how much the government thinks you, and your parents if you are a dependent student, can afford to contribute to the cost of your education.  That’s called your “Expected Family Contribution” or “EFC.”  Remember that acronym.

Your EFC is critical, because the total amount of financial aid you can receive from most federal programs is limited to the difference between: (1) the cost of attendance at your school, and (2) your EFC.  Your EFC will probably be higher than you expect it to be.  Fortunately, some federal loan programs allow you to borrow money to cover a portion of your expected family contribution.  More on that below.

By the way, your family’s financial situation may change over time, so you have to submit a new FAFSA for each year that you will want to receive financial aid. 

In addition to financial need, there are some other eligibility requirements for federal financial aid.  You must:

  1. Be a U. S. citizen or eligible non-citizen
  2. Have a valid social security number
  3. Have a high school diploma or GED, or otherwise demonstrate that you are qualified to obtain a post-secondary education
  4. Be working toward a degree or certificate in an eligible program
  5. Register with Selective Service If you are a male between 18 and 25 (The Selective Service System is the agency responsible for instituting a military draft if it should become necessary. See 
  6. Maintain satisfactory academic progress once you are in school

Important Tip: The Office of Federal Student Aid does not consider the credit history of undergraduate students when determining eligibility for federally-guaranteed student loans.