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The current college financial aid (FA) system is similar to the tax system. Congress makes the laws that govern the distribution of FA funds. Like the IRS, the Dept. of Ed. interprets the laws & regs.
Congress has granted the authority of "professional judgement" to the college's FA offices. They have broad authority to distribute federal FA funds as they deem appropriate.
To further complicate the FA process, some private colleges distribute their institutional funds based on rules established by the College Scholarship Service causing some parents to be faced with two different sets of rules to determine eligibility for FA funds.