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WalletPrep worksheet · Life events

How does the FAFSA and financial aid work?

Name ____________________ Date __________

Key ideas

  1. The FAFSA is free and opens October 1. The 2027-28 form opened October 1, 2026. Never pay to file it. State and school deadlines can come much sooner.
  2. Net price is what really matters. Cost of attendance minus grants and scholarships is your net price. A school with a higher sticker price can cost you less.
  3. Accept aid in the right order. Grants and scholarships first, then work-study, then federal loans. Private loans come last, only if there's still a gap.

Vocabulary

Net price
What college really costs you: the full cost of attendance minus grants and scholarships.
Student Aid Index
The number the FAFSA produces from your family's finances. Schools use it to decide how much need-based aid to offer.
Pell Grant
Federal grant money for undergraduates with financial need. It usually doesn't have to be repaid.
401(k)
A retirement savings plan offered through an employer. Money comes straight from your paycheck, often with an employer match.
IRA
Individual retirement account: a tax-advantaged retirement account you open yourself at a bank or brokerage, separate from your job.
529 plan
A state-sponsored investment account for education. Growth is free of federal income tax when withdrawals pay qualified school costs.

Work it out

Jordan, a high school senior, gets an aid offer from a state college with a total cost of attendance of $28,000 for the first year.

  1. Cost of attendance
  2. Pell Grant
  3. School grant
  4. Net price
  5. Work-study
  6. Federal loan
  7. Gap to cover

Check yourself

  1. A school costs $30,000. The offer has $8,000 in grants, a $1,500 scholarship, $2,000 of work-study and a $5,500 loan. What is the net price?

    • A. $13,000
    • B. $20,500
    • C. $22,000
    • D. $30,000

  2. What does a Student Aid Index (SAI) of −1,500 mean?

    • A. The family owes $1,500
    • B. The student has high financial need
    • C. The form was filled out wrong
    • D. The student can't get aid

  3. In what order should you usually accept aid?

    • A. Loans, then grants, then work-study
    • B. Work-study, then loans, then grants
    • C. Private loans, then federal loans
    • D. Grants and scholarships, then work-study, then federal loans

Your turn

Create StudentAid.gov accounts for the student and any parent who has to take part. Then find the FAFSA deadline for your state and for each school on your list, and put the earliest one on your calendar.

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Answer key

How does the FAFSA and financial aid work?

Work it out

  1. Cost of attendance$28,000
  2. Pell Grant− $3,000
  3. School grant− $6,500
  4. Net price= $18,500
  5. Work-study− $2,000
  6. Federal loan− $5,500
  7. Gap to cover= $11,000
  1. Grants are free money: $3,000 + $6,500 = $9,500. Net price is $28,000 − $9,500 = $18,500. That is the number to compare across schools.
  2. Work-study is pay Jordan earns during the year, and the $5,500 loan must be repaid. $18,500 − $2,000 − $5,500 = $11,000 still to cover.
  3. Jordan's family can cover the $11,000 from savings, cash flow, outside scholarships or a cheaper school before thinking about a private loan.

Check yourself

  1. B. $20,500 Net price is cost minus grants and scholarships: $30,000 − $8,000 − $1,500 = $20,500. Work-study and loans don't lower the price.
  2. B. The student has high financial need A negative SAI signals higher need. The SAI is an index schools use to build aid offers, not a bill.
  3. D. Grants and scholarships, then work-study, then federal loans Free money comes first, then money you earn, then federal loans. Private loans, if any, go last.