The Federal Government is the single largest source of funding in education. This Federal aid is primarily need-based assistance. Need-based assistance is financial aid that supplements a family's ability to pay for a college degree. In essence, the government attempts to close the gap between college expenses and the amount of money a family is able to provide for the cost of higher education.

Federal aid is the most common type of financial aid awarded through Financial Aid Offices across the nation. A student’s eligibility for federal aid is determined by the information provided on the Free Application for Federal Student Aid (FAFSA). Using the information on the FAFSA, the Federal Department of Education determines a student’s Expected Family Contribution (EFC). This number is the amount that your family, according to the federal government, should be able to contribute toward a student’s higher education over the course of an academic year.

Federal aid includes the Pell Grant, Federal Supplemental Educational Opportunity Grant (SEOG), the Federal Work-Study Program, the Federal Perkins Loan Program, the Federal Subsidized and Unsubsidized Loan Programs, and the Federal PLUS Loan Program. These awards are considered federal funding and the maximum amounts offered in a student’s award package are based on the institution’s specific cost of education or determined by federal regulation .