Even though college financial aid may seem like free money, you can’t spend it on anything you want. You can only spend your federal financial aid money on purchases that are necessary for you to continue your studies. These necessary purchases may be defined under your school’s itemized cost of attendance.
Be careful about spending too much, especially if your school is expensive. In that case, your extra financial aid dollars (if you have any) won’t go far.
College financial aid can be used for expenses that are directly related to your education, such as tuition and fees, transportation, books, room and board, supplies and related expenses like child care.
FAFSA Definition Explained
To receive college financial aid, make sure you fill out the Free Application for Federal Student Aid before the beginning of the school year. Applying for federal student aid is free. The FAFSA takes your parents’ income and investments into account as well as your own situation in order to determine how much money you will need to go to college.
The American federal government’s FAFSA definition includes three types of student aid: federal grants, work-study jobs and student loans. Federal grants and work-study jobs give students a limited amount of money that they don’t have to pay back. However, if you borrow money with a student loan, you will have to pay it back with interest.
Financial Aid Definition: Types of Aid
In the realm of higher education, financial aid by definition is any grant, scholarship, loan or work-study job that helps students pay for their education. Financial aid comes from a number of sources, including foundations, corporations, community fundraisers, schools, state agencies and the federal government.
The U.S. Department of Education’s financial aid definition includes funding that a student will have to pay back (loans) and funding that a student can keep (from grants and employment). The Department of Education pays out more than $120 billion annually in these three types of financial aid.
Grants and scholarships are financial aid that doesn’t have to be repaid. Work-study is a type of employment, usually on campus, that allows students to work part time to earn money for school. Loans are money that students borrow from the federal government (or private sources). Students have to repay loans with interest, so borrowing too much is never a good idea.
How Do I Apply for College Financial Aid?
Applying for financial aid is an easy process if you have the right materials. Before you open the FAFSA application, find your Social Security number or Alien Registration number if you aren’t a citizen. Gather up your FSA ID and income information, such as tax returns from the previous year or a record of investments. You will need this information from your parents as well as your own information.
Apply online at fafsa.gov. Follow the directions and make sure you fill out the FAFSA form thoroughly. Ask for help at your school or local library if you need it.
Don’t forget that you need to fill out the FAFSA every year while you’re still in college. If you don’t, you will lose your financial aid eligibility, and you won’t receive the grants, loans or work-study funding on which you might be counting.
How Can I Spend My College Financial Aid?
You can only spend college financial aid on expenses that are directly related to your education. Such expenses include tuition and fees, transportation, books, room and board, supplies and related expenses like child care.
Even though you will have to sign documents that say you promise to use financial aid only for these items, most schools usually do not keep track of students’ purchases. Outside of serious financial aid fraud, which may involve other crimes like identity theft, most instances of misuse of financial aid go unpunished.
This means you can spend the money on anything, right? Not quite. You should still be careful with your money, especially funds obtained from student loans. Don't borrow more than you really need or else you will be paying for it later.