In a previous article, I told you that there are only five places to get money for college:

1. The federal government.
2. Your state government.
3. The colleges and universities themselves.
4. Outside scholarships.
5. Mom and dad’s pockets.

In this article, I want to spend more time on the first, the federal government.

How to pay for school with help from the federal government.

Let’s say you walked into my office and said, “My child is finishing 11th grade. I want to send her to college, but I haven’t saved a dime and school is going to cost $25,000 a year. I want to borrow as little money as possible. What do I do?” Conversations like this happen more often than you’d think.

Here’s what I’d tell you: Before you think about anything else, know that it’s never too late. There’s always a way.

(Do I wish you had invested in a 529 plan when your child was born? Of course I do. Because you can either save your money now and earn interest, or borrow money from the federal government later—and pay it back with interest. So why not make payments now? But when that’s not an option, there are others. So let’s proceed.)

The first thing we need to look at is parental income. Is your student going to qualify for any need-based money from the federal government? That means either a Pell Grant (currently capped at $7,395 as of 2023-2024 award year*) or a Supplemental Educational Opportunity Grant (SEOG), which maxes out at $4,000.

Unlike loans, grants don’t require repayment. Awards of these grants are based on your family income. If your family income is low— somewhere under $50,000—you will likely qualify for grant money.

The higher your expected family income, the lower the grant money you’re likely to receive.
 

Now let's look at FAFSA

To know if you’re eligible, you need to fill out the FAFSA, the Free Application for Federal Student Aid. The FAFSA is based on your prior year’s income. (In other words, if you were filling out the form for October 2023, your information would be your tax information from 2022). Good news is, they have made the process much easier with a direct link into the IRS database that pulls parents income into the FAFSA form.

The application opens October 1, and you should start applying for aid October 1 the year before your child is going to school (the first day you could apply for aid for August 2023 was October 1, 2022). Don’t procrastinate. Financial aid is given out on a first-come, first-served basis. The quicker you can get your financial aid information in (your child has to be admitted first) the quicker they can start making you an offer.

When you fill out the FAFSA, you will get an instant estimate of how much aid you will be eligible for. The report will provide your expected family contribution (EFC), and whether you can expect to receive any grant or loan money.

When you submit the FAFSA, it goes to the universities your student is applying to. Then each university will make you a customized financial-aid offer. It’s possible that a student will also qualify for need-based aid from individual schools. That’s based on a formula: