Understand The Language of Financial Aid

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One of the biggest obstacles students encounter in trying to get the financial aid due to them, is understanding the very formal and utterly complicated language used in describing the application process and many the terms and conditions. Many students, who are otherwise eligible for financial aid, end up not availing of a large portion of it only because they did not understand what it meant.

We’ve put together some of the more common terms and acronyms you are likely to come across in your search for financial aid along with an explanation for each.

Commonly Used Terms:


FAFSA stands for Free Application For Federal Student Aid. All students need to complete the FAFSA to be eligible for most kinds of financial aid, including state and federal grants, loans and work-study.

To apply, you first need to file your Income Tax returns. This data can then be transferred directly to the FAFSA site.

The FAFSA becomes available on October 1. It helps to complete your FAFSA as early as possible as this enables you to apply for several financial aid applications which may have early deadlines. In seeking financial aid, you must make the most of every chance you get and it all starts with filling and submitting the FAFSA.


CSS Profile

The CSS or College Scholarship Service profile is run by the College Board, which is also in charge of conducting the SAT. While this is not required by all schools, more than 350 schools already use it and the list is growing each year.

The FAFSA provides most of the information, while the rest of the details and gaps are filled by the CSS profile. The profile needs to be filled at least two weeks before any major scholarship deadline to allow for processing. It costs $25 to send the profile to a single college and $16 for every college thereafter.


SAR stands for Student Aid Report. This is a report that is generated based on the information provided by your FAFSA. This includes a lot of information, including details of your ECA (Estimated Cost of Attendance) and EFC (Estimated Family Contribution). You will receive your SAR about three to ten days after you submit the FAFSA.

Cost of Attendance (COA)

The COA is the total cost of the duration of your college course. Most people are shocked by how high the amount can actually be. You must keep in mind that this number includes not only the cost of the tuition but also the cost of boarding and lodging, books, travel expense, personal expense, sometimes a computer and a lot more.

This cost varies significantly for different people based on the location of the college, cost of living in that area, number of times or the distance a person needs to travel back home etc.


The calculated EFC or Estimated Family Contribution is a part of the SAR and is an indicator of what percentage of your education costs are to be borne by your family. This number is based on several financial factors provided in the FAFSA including the taxed/ untaxed income, your parents’ jobs, the assets your family owns, size of the family and other mandatory financial obligations including outstanding loans, medical expenses, number of children currently in college etc.

The EFC is a good indicator of how much financial aid you can expect to receive, which will be the Estimated Cost of Attendance (ECA) minus the Estimated Family Contribution (EFC).

Long-term Planning

Despite availing financial aid, it is highly probable that your parents may not be able to fund your college education completely. However, if you are planning several years ahead for college, there are some ways for your parents to ease the burden. There are several ways in which one can plan for this scenario:

529 Plans

529 plans allow your parents to set aside money to pay for your future tuition fees. These are long-term savings plans and with any other long-term saving plan, they give the best results over longer durations. These are of two types- Prepaid tuition plans and College savings plans.

Prepaid Tuition Plans

Prepaid tuition plans basically allow your parents to make tuition payments before you even start college, at the existing rates. This might not seem like a very good investment. But when you consider the fact that tuition fees have grown at approximately 42% the past decade for private colleges and about 47% for public colleges, this might end up becoming a great investment, especially when you consider that tuition fees are expected to increase by 5% each year for the next decade.

When redeemed, their maximum value depends upon the average tuition of in-state public colleges. If you choose to go to a private college, or out- of- state public college, you will need to pay up the difference, if any, in the fees. Also, these plans also negatively impact your chances for financial aid.

College Savings Plans

529 College savings plans allow your parents to set aside some money each year towards your college fees, along with some tax benefits. However, these savings plans do not come with guarantees, unlike prepaid tuition plans and may either appreciate or depreciate, depending upon market conditions.

Your parents can choose how to invest their money with options ranging from high- risk, high- return equity funds to the much safer fixed-income investments with modest growth rates when it comes to a shorter investment horizon.

Another benefit of college savings plans is that this amount can be used for almost any COA expense like books, boarding, and lodging, supplies etc. unlike prepaid tuition plans.

Coverdell ESAs

Coverdell Educational Savings Account is another great option for long-term savings towards college. They are quite flexible with unlimited investment options, lesser limits on where you can spend the funds, easy set- up at almost any brokerage firm, no expiration for tax benefits and tax- free withdrawals for qualified educational expenses.

However, there are certain drawbacks as well with an annual contribution limit of $2000, administrative costs and fees and limitations on who can participate among others. They also significantly affect eligibility for financial aid.

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