How financial aid actually works, in plain English

Colleges advertise a “cost of attendance,” the sticker price. It is tuition plus housing, food, books, and fees. Almost no one pays it. The number that matters is the net price: the sticker minus the grants and scholarships you do not pay back. Two colleges with an identical sticker can land twenty thousand dollars a year apart in net price for the same family, because they give different aid. Judge colleges on net price, never the sticker.

Aid comes in two flavors, and the difference is everything.

• Grants and scholarships are free money. You do not pay them back. This is the aid you want.
• Loans are borrowed money. You pay them back with interest. A financial aid “award” that is mostly loans is not generosity, it is a bill with a delay.

When you compare aid offers, separate the grants from the loans. A smaller offer that is all grants can beat a bigger offer that is half loans.

To get aid you file forms. The FAFSA (Free Application for Federal Student Aid) is the main one, it is free, and nearly every college requires it for aid. Some private colleges also require the CSS Profile, which digs deeper into your family's finances. File them as early as you can in the fall of senior year, because some aid is first come, first served. Missing a form is the most common way students leave money on the table.

There are two reasons a college gives you money.

• Need-based aid is based on what your family can afford. The forms calculate a number for your family, and aid fills the gap between that number and the cost.
• Merit aid is based on what you bring: grades, scores, talents. It does not depend on your family's income.

The best colleges for your budget are often the ones where you are a strong applicant, because that is where the merit money is. A student in the top of a college's applicant pool gets courted with aid. The same student at a reach gets nothing extra.

Every college is required to post a net price calculator on its website. Use it. Enter your family's rough numbers and you get an estimate of what that specific school would cost you. Do this for every school before you apply, not after the aid letter arrives in the spring, when your list is already set. Planning for the money at the start is the entire game.

A financial safety is a school you can afford even if no extra aid comes through, and that you would be happy to attend. It is the most important school on your list and the one most families forget. Everything else can be a stretch if you have one place that is certain and affordable underneath it.