UK Accounting Glossary
Financial aid refers to funding intended to help students pay tuition or other costs, such as room and board, for education at a college, university, or private school. General governmental funding for public education is not called financial aid, which refers to awards to specific individual students. A scholarship is sometimes used as a synonym for a financial aid award.
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 financial aid includes both academic and athletic scholarships.
Need-based financial aid is awarded on the basis of the financial need of the student.
In the United States, to receive federal need-based financial aid, the student must file a FAFSA application. The FAFSA uses a calculation taking into account income and assets to determine a student’s Expected Family Contribution (EFC). Colleges use the EFC to decide what types of financial aid a student is eligible to receive. Students must complete the FAFSA each year in order to be considered for financial aid.
The United States government provides need-based financial aid in the form of Pell grants, SEOG Grants, SSIG Grants, Federal Work-Study, subsidized Stafford loans and Perkins Loans. The US government also provides non-need-based financial aid in the form of unsubsidized Stafford loans and Parent (PLUS) loans.
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) educational loan, available from most large banks.
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This glossary post was last updated: 13th February 2020.