Paying for College: FAFSA, Financial Aid and Scholarships Explained

For most American families, the question isn't just “Where can I get in?” but “How will we pay for it?” The financial aid system can feel like a maze of acronyms — FAFSA, SAI, Pell, CSS Profile — yet once you understand how the pieces fit together, it becomes far more manageable. This guide explains the main sources of money for college, how to apply for them, and how to compare offers so you borrow as little as possible.

What college really costs

Colleges publish a cost of attendance (COA), which includes tuition and fees, housing, food, books and supplies, transportation and personal expenses. For context, the College Board reports that average published tuition and fees in 2025–26 were about $11,950 for in-state students at public four-year colleges, about $45,000 at private nonprofit four-year colleges, and about $4,150 at public two-year colleges. Housing and food add significantly to those totals.

Financial aid is designed to fill the gap between the COA and what your family can contribute. Aid comes in four main forms:

Grants — free money, usually based on financial need. You don't repay it.
Scholarships — free money based on merit, talent, background, field of study or need.
Work-study — part-time jobs, often on campus, that help you earn money for expenses.
Loans — borrowed money that must be repaid with interest.

Always use grants and scholarships first, then work-study, and only then loans.

The FAFSA: your most important form

The Free Application for Federal Student Aid (FAFSA) is the gateway to federal grants, work-study and federal student loans. Most states and colleges also use it to award their own aid. Even if you think your family earns too much to qualify, file it: some scholarships and all federal student loans require it.

The FAFSA for the 2027–28 school year opened on September 24, 2026, at StudentAid.gov — the earliest launch in the program's history. The 2027–28 form is for students attending college between July 1, 2027, and June 30, 2028.

How to complete the FAFSA, step by step

Create your StudentAid.gov account. You (and each contributor, such as a parent) need your own account and FSA ID. Set these up a few days before you plan to file, because identity verification can take time.
Gather documents. The FAFSA uses tax information from two years before the school year (“prior-prior year”). For 2027–28, that's your 2025 tax information. Have Social Security numbers, records of untaxed income, and current balances of savings and investments ready.
Invite contributors. Dependent students invite their parent(s) to complete their sections. Contributors can be invited by email or text.
Consent to share tax data. Each contributor must give consent for the IRS to share federal tax information directly. Without consent, you won't be eligible for federal aid.
List your colleges. Add every school you're applying to, even ones you're unsure about. You can add up to 20.
Submit and review your FAFSA Submission Summary. Check it for errors and make corrections quickly.

File early. Some states and colleges award aid on a first-come, first-served basis until funds run out. Filing in the fall of your senior year gives you the best chance at limited money.

Understanding your Student Aid Index (SAI)

After you file, you'll receive a Student Aid Index (SAI). The SAI is not the amount you will pay; it's a number colleges use to determine your eligibility for need-based aid. It can range from -1,500 up to large positive numbers. Generally, the lower your SAI, the more need-based aid you can receive. The formula considers family income, family size, and certain assets.

Federal grants: free money you should claim

The largest federal grant for undergraduates is the Federal Pell Grant, awarded to students with financial need who haven't earned a bachelor's degree. For the 2026–27 award year, the maximum Pell Grant is $7,395 and the minimum is $740. Pell Grants generally don't have to be repaid and can be used at most accredited colleges, including community colleges.

Other federal programs include the Federal Supplemental Educational Opportunity Grant (FSEOG) for students with exceptional need (funds are limited and awarded by colleges) and TEACH Grants for students planning to teach in high-need fields, which come with a service requirement.

State and institutional aid

Don't overlook money from your state and your college — together, they often provide more aid than federal programs.

State grants and scholarships: Many states have need-based grants and merit scholarships for residents attending in-state schools. Some offer “promise” programs that cover community college tuition. Check your state's higher education agency website and note its deadline, which may be earlier than you expect.
Institutional aid: Colleges use their own funds for need-based grants and merit scholarships. Some private colleges are very generous, especially to students from low- and middle-income families.
The CSS Profile: Many private colleges also require the CSS Profile, an additional aid application run by the College Board, to award their own money. Check each school's financial aid page to see whether it's required and when it's due.

Scholarships: how to find them and win them

Private scholarships come from businesses, community organizations, foundations, religious groups and employers. Here's how to approach them efficiently:

Start local. Scholarships from your high school, community foundation, local clubs and employers have far fewer applicants than national contests.
Ask your school counselor for a list of scholarships previous students have won.
Use free search tools such as the U.S. Department of Labor's scholarship finder at CareerOneStop. Never pay for a scholarship search service.
Recycle your essays. Many prompts ask similar questions about goals, challenges and community. Adapt strong essays instead of starting from scratch each time.
Track deadlines in a simple spreadsheet with requirements and status.

Watch out for scams. Legitimate scholarships never require you to pay an application fee or give bank account details to “claim” an award. If something sounds too good to be true, it probably is.

Federal student loans: borrow wisely

If you need to borrow, start with federal student loans before private loans. Federal loans offer fixed interest rates, income-driven repayment options and protections like deferment that most private loans don't.

Direct Subsidized Loans are for students with financial need. The government pays the interest while you're in school at least half-time.
Direct Unsubsidized Loans are available regardless of need. Interest starts building immediately.
Annual limits for dependent undergraduates are $5,500 in the first year (up to $3,500 of it subsidized), $6,500 in the second year and $7,500 in the third year and beyond.
Parent PLUS Loans let parents borrow for a dependent student's education. Federal rules for PLUS borrowing have changed recently, including new limits for new borrowers, so check current terms on StudentAid.gov before relying on them.

A useful rule of thumb: try to keep your total student loan debt below your expected first-year salary after graduation. The College Scorecard shows typical earnings by college and field of study to help you estimate.

How to compare financial aid offers

In spring, colleges send aid offers (sometimes called award letters). They can look very different from one school to the next, so put them side by side:

Write down each school's total cost of attendance.
Add up only the grants and scholarships — the money you won't repay.
Subtract to find your net cost. This is the number to compare.
Note which scholarships are renewable and what GPA you must maintain to keep them.
Treat loans and work-study as ways to pay the net cost — not as discounts.

If an offer falls short, or your family's finances have changed (job loss, medical bills), contact the financial aid office and ask for a professional judgment review. Be polite, specific and ready to provide documents. Colleges can't always increase aid, but many will review your situation.

Keep your aid after you enroll

Financial aid isn't a one-time event. To keep it, you must file the FAFSA every year and meet your college's Satisfactory Academic Progress (SAP) standards, which typically include a minimum GPA and completing a certain percentage of the credits you attempt. Dropping classes without understanding SAP can put your aid at risk, so talk to an advisor first. Our first-year success guide covers how to stay on track.

Your financial aid checklist

Create StudentAid.gov accounts for you and your contributors.
File the FAFSA as early as possible after it opens.
Check whether your colleges require the CSS Profile.
Look up your state grant deadline.
Apply to at least five local scholarships.
Compare offers by net cost, not by total aid.
Renew the FAFSA every year you're in school.

Paying for college takes planning, but with the right steps, a degree is within reach for far more families than the sticker price suggests. Still deciding where to apply? Start with our guide to choosing the right U.S. university.

Ali Uni Editorial Team
Our editors research U.S. higher education using official sources such as the U.S. Department of Education and the College Board. Spotted something out of date? Tell us.