Financial Aid is money supplied by some source outside of the family to help pay for the cost of a student's education beyond high school, commonly referred to as postsecondary education. Postsecondary education includes college and universities, postsecondary vocational schools and technical, trade, and business schools.

There are two basic categories of aid: need-based and non need-based. Non need-based aid may also be referred to as merit-based aid and is generally given to students in recognition of special skills, talent, or academic ability. Qualifications for merit-based aid are usually competitive in nature, and recipients are chosen because of their superiority in whatever criteria used for selection. Non need-based aid may also be awarded based on other criteria such as field of study, community service, or leadership abilities.

Need-based aid, however, constitutes the major portion of assistance available for postsecondary education. When a student does not have sufficient family resources to pay for an education beyond high school, that student is considered to have financial need. Having financial need is the primary requirement for receiving need-based aid, although the student will have to meet other eligibility criteria as well., Whether or not the student has sufficient family resources to meet the cost of attending a postsecondary school is usually determined by collecting financial data about the student and his or her family. The data is analyzed that data according to a standard set of calculations. This need assessment, or need analysis as it is generally called, results in an Expected Family Contribution, which is abbreviated as EFC. The EFC represents the amount of resources, in dollars, that the student and his or her family is expected to have available to contribute towards postsecondary educational expenses for a given year. (Reprinted from The Advisor: A Counselor's Guide to Student Financial Assistance, 1998-99 Edition)