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The US awards $120 billion to students every year—here are 5 ways to get the most financial aid

CNBC logo CNBC 10/10/2018

Estimating the cost of college is not as straightforward as you might think. Tuition may seem shockingly expensive, but the majority of students will receive some form of financial assistance in the form of grants, scholarships or federally subsidized student loans. Factors such as household income, family size and academic and extracurricular accomplishments can all impact how much college costs for a given student.

The key to reducing the cost of college is getting the most out of your financial aid offers, but applying for financial aid can be a daunting process.

CNBC Make It spoke with Charlie Javice, founder & CEO of Frank, to make the process of applying for financial aid as simple as possible:

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Step 1: Fill out the FAFSA

Every year, the U.S. Department of Education gives over $120 billion in federal grants, loans and work-study funds to more than 13 million college students, making it the largest provider of student financial aid in the country. In order to receive their share of these funds, students must complete the Free Application for Federal Student Aid (FAFSA).

Students who complete the FAFSA can qualify for up to $30,000 in aid. Nearly every student is eligible for some form of financial assistance, and it costs nothing to apply.

"Aid is available for anyone with a household income below $250,000 a year," says Javice. "So it's really important as FAFSA season comes up that people don't forget that there is no such thing as being too rich to file FAFSA."

To complete the FAFSA, students will need a copy of their family's tax returns as well as a bank statement in order to illustrate how much your family earns and how much you are able to pay. Eventually, students will need to send their FAFSA information to the schools they are interested in attending.

But your chance to maximize your college aid package doesn't end once you've submitted your FAFSA application.

"There is an appeal process," college admissions expert Danny Ruderman tells CNBC Make It. "Once you submit the FAFSA, be sure to submit supplements or new addendums." The Department of Education allows families to appeal because, he says, "you can fill out the FAFSA in December, and by the time that your child is going [to college] the next fall, things can change."

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Step 2: Apply for state aid

The FAFSA allows students to receive federal student aid, but states also provide significant financial assistance to students, often in the form of grants and scholarships that do not need to be repaid.

If you have been living in the same state for more than five years, you may qualify for even more aid than expected, and students who do not qualify for federal financial aid may still qualify for aid from their state.

Each state has a different process for providing assistance to students. In order to apply for state financial aid, be sure to reach out to your state grant agency for more information.

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Step 3: Send your information to schools

In order for schools to calculate how much your family is able to pay and how much aid the school should provide you, students need to send information about their financial backgrounds including their FAFSA and state aid packages.

According to Javice, 30 to 50 percent of students will be asked to provide additional information to schools. This can can include participating in a FAFSA verification process and/or completing a College Scholarship Service (CSS) Profile.

The FAFSA verification process involves students providing documents such as income tax returns, W-2 statements and 1099 forms in order to verify that the information submitted via the FAFSA is accurate.

The CSS Profile, administered by The College Board, is used by hundreds of schools across the country and can help students access their share of $9 billion in non-federal financial aid. The upside to creating a CSS profile is that it can provide a more detailed picture of a family's financial situation than a FAFSA form can. For instance, if a student's parents are divorced or have recently faced financial hardship, the CSS Profile can help students show schools why they will need institutional aid in addition to their federal assistance.

In order to complete a CSS Profile, families will need to submit their most recently completed tax returns, W-2 forms and other records of current year income, records of un-taxed income and benefits for the current and previous years as well as current bank statements.

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Step 4: Review your aid packages

College acceptance season means that students will get big envelopes full of congratulations letters and financial aid package summaries. Each school's offer will differ and the amount of loans, grants, scholarships and work-study provided to the same study can vary greatly from school to school.

"Review and evaluate each financial aid package thoroughly before deciding your course of action," Kat Cohen, CEO and Founder of college guidance company IvyWise, tells CNBC Make It. "Make sure you note the amount of aid you receive through grants and scholarships, which you will not have to pay back, versus loans, which are borrowed money that you will have to ultimately repay."

There are three main figures that students need to consider when assessing their financial aid packages.The first thing that students need to look for is the expected family contribution, this is the amount that families will be expected to pay out of pocket and it can vary from school to school. Next, students should calculate how much gift aid — funds that do not need to be repaid — each school is offering. Third, students should look at how much in loans each school expects a student to take out. In an ideal situation, students will want a low expected family contribution, a high level of gift aid and a low level of student debt included in their financial aid package summary.

Be sure to look carefully at the kinds of loans that a financial aid package offers. Federal subsidized loans often have the lowest rates and offer the most flexible repayment options.

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Step 5: Appeal

"Once you have finally deciphered this aid award letter, you're going to want to appeal your aid" says Javice. "Everyone should appeal their aid package." She says that schools reserve roughly 20 percent of their funds for people who appeal their packages.

Cohen says that students are actually in a position of power when appealing for more financial aid. Schools want all accepted students to attend in order to increase what is known as "yield."

"Generally, once a school admits a student, the institution is very eager for the candidate to attend, so do not be afraid to speak candidly if the school's aid package is hindering your decision to enroll," she explains. "If you review your financial aid offer and decide to appeal for additional money, it is best to contact the financial aid office at the school with which you want to negotiate. If possible, go to the school's financial aid office in person, so you can discuss your specific offer package and your current financial situation."

During the financial aid appeal process, students will want to provide a more detailed description of their backgrounds in order to supplement the information they have already provided. Students should mention if there has been a change in their family structure such as a death, deportation or a divorce and they should also mention if they have been impacted by any environmental events such as a drought, hurricane or flood.

Another way that students can appeal for more aid is by leveraging their other offers. If you received a particularly generous offer from a competing college, students should mention how much the other school is offering. This may lead the school to match or even surpass your biggest financial aid package.

During this appeal process, students should be sure to reiterate how excited and interested you are in attending that school, and stress that they are just doing their best to make their collegiate dreams a reality.

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