Stern, Kory, Sreden & Morgan, AAC
Do colleges offer financial aid?


Yes, most do. Next to the federal government, colleges are the second-largest provider of financial aid. Such aid can be one of two types: need-based aid and non-need-based aid (also known as merit aid). Though aid based on financial need is more prevalent, a trend in recent years has been for colleges, especially private colleges, to offer more merit aid. This trend stems in part from the flight of top students to less expensive public colleges.

College financial aid most often comes in the form of grants, scholarships, and work-study programs. Grants and scholarships are preferred types of financial aid because they don't need to be repaid. Generally speaking, private colleges have greater endowment funds than public colleges from which to provide financial aid. They're also not as restricted in the manner they choose to spend it. Though private schools are generally more expensive than public schools, an especially generous aid package from a private school can translate into lower out-of-pocket costs compared to a public school.

To determine which students are the most deserving of financial aid, colleges can use either a standard aid application known as the PROFILE or their own institutional application. Most colleges use the PROFILE form. The main difference between the PROFILE form and the federal government's aid application is that the PROFILE digs deeper into your family's financial background. For example, the PROFILE application may require you to note the value of your retirement accounts and home equity, whereas the federal government's application does not. This is because colleges want to insure that their aid is awarded to the most financially deserving students.

On a side note, colleges also receive money from the federal government that is then distributed as financial aid. For example, the Perkins Loan program is a federally funded loan program that is administered by individual colleges. Each college receives a certain amount of money for this program and awards the funds on a first-come, first-served basis. Once the funds are dispersed, no more are available until the following year's appropriation. The federal Supplemental Educational Opportunity Grant, known as SEOG, is also administered this way. This should serve as an incentive to submit your application for financial aid as early as possible.

Prepared by Broadridge Investor Communication Solutions, Inc, Copyright 2011