Financial Aid

Business, Legal & Accounting Glossary

Definition: Financial Aid

Full Definition of Financial Aid

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.

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 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.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Financial Aid. Payroll & Accounting Heaven Ltd. September 16, 2021
Chicago Manual of Style (CMS):
Financial Aid. Payroll & Accounting Heaven Ltd. (accessed: September 16, 2021).
American Psychological Association (APA):
Financial Aid. Retrieved September 16, 2021, from website:

Definition Sources

Definitions for Financial Aid are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 1st April, 2020 | 24 Views.