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Financial aid starts with the FAFSA and turns into three kinds of money: grants, scholarships and loans. Grants and scholarships are gift aid you never repay; loans are borrowed money you repay with interest. Aid can be need-based, tied to your family's finances, or merit-based, tied to achievement. When you subtract the gift aid from a college's cost of attendance, what's left is your net price, the number that actually matters.
The FAFSA, the Free Application for Federal Student Aid, is the form that opens the door to almost all financial aid. It collects your family's financial details and produces a measure colleges use to decide how much need-based aid to offer. Most colleges and states also use the FAFSA to award their own grants and scholarships, so filing it is the single most important step, even for families who assume they won't qualify. Some private colleges additionally require the CSS Profile; our guide on CSS Profile vs FAFSA explains the difference.
These three words get lumped together as "aid," but only two of them reduce what a college actually costs you.
| Type | Repay it? | Usually based on | Lowers net price? |
|---|---|---|---|
| Grant | No | Financial need | Yes |
| Scholarship | No | Merit or need | Yes |
| Loan | Yes, with interest | Eligibility, not need | No |
Grants and scholarships are gift aid: money you keep. Loans are money you pay back. This distinction is the whole reason net price is defined as cost minus gift aid only. A college that "meets your need" heavily with loans has not made itself cheaper, it has arranged for you to borrow. Always separate the loans back out. See what net price means.
Federal grants like the Pell Grant flow from the FAFSA and go to lower-income families. States run their own grant programs on top, also keyed to the FAFSA. Colleges add institutional grants from their own funds, which is where the biggest awards at well-resourced private schools come from. Scholarships can come from the college, from your state, or from outside organizations, and they can be need-based, merit-based, or a mix. All of it, from whatever source, counts as gift aid and lowers your net price the same way.
Need-based aid is awarded on your family's financial situation, calculated from the FAFSA. Lower income generally means more need-based grant aid, which is why net price falls as income falls. Merit aid is awarded for achievement, grades, test scores, talent, regardless of need, and some colleges use it to attract strong applicants. A single offer often blends both. This is why two students at the same college can face very different net prices.
Put simply: the college names a total cost, the FAFSA and any merit awards determine your gift aid, and the leftover is your net price. Here's the arithmetic.
| Line | Amount |
|---|---|
| Cost of attendance (sticker) | $62,000 |
| − Need-based grant | $34,000 |
| − Merit scholarship | $8,000 |
| Net price you pay | $20,000 |
| (Loans offered, repaid later, not a discount) | $5,500 |
Read the loan line carefully. In the example above the true net price is $20,000. If a college's letter subtracts the $5,500 loan too and shows "$14,500," that's what you'd pay this year out of pocket, not the real cost, because you still owe the loan. When comparing offers, always compare true net price.
Honest caveat. The net price shown in our report is a US Dept of Education income-band average from a past reporting year, useful for comparing colleges and deciding where to apply. Your real aid depends on your full financial picture and comes from your FAFSA and each college's aid letter. This is information, not financial advice.
Our report gives you the average net price by income for every college on your list up front, so you can see which schools are worth an application before you file. See our methodology for the sources.
Net price shown is an income-band average from US Dept of Education data; your FAFSA and aid letters give the exact figure.
