Need-based aid

Generally, the level of need for federal grants and scholarships is calculated using a form known as the Free Application for Federal Student Aid (FAFSA). A form known as the Profile form is also necessary for several extremely selective universities. Using the data you provided on your tax returns, the FAFSA and Profile forms offer questions about the parent’s and students’ incomes. Your savings and investment balance may also be questioned on these forms. Compared to the FAFSA form, the Profile form is more thorough. The government utilizes the FAFSA form, which you must complete after submitting these documents, to calculate how much your family can afford to spend for college. This is referred to as your EFC or expected family contribution. No matter how much a college will cost, your EFC will remain the same. In a similar vein, the many universities that utilize the Profile use that form to ascertain how much your family can afford to put toward education.

The cost of the institution you’re considering minus your EFC equals your need. Your need at that institution, for instance, would be $10,000 if it costs $14,000 per year and your EFC is $4,000.

On the other hand, merit-based financial aids are for students who demonstrate academic excellence or possess a unique gift, such as the musical or athletic ability. Few or no merit-based financial assistance is often available at extremely selective universities.