Financial Aid 101

1 Star2 Stars3 Stars4 Stars5 Stars (3 votes, average: 1.67 out of 5)

What is Financial Aid?

Financial aid is financial assistance to help students and their families pay for college tuition and other educational expenses such as books, transportation, housing and fees. It can come from a variety of sources such as private organizations and donors, community organizations, federal and state government and colleges and universities.

Types of Financial Aid

Scholarships –  are gift awards and do not need to be repaid. There are scholarships for just about everyone! Some scholarships are awarded based on merit, financial need, athletic or religious affiliation. Many scholarships are awarded based on answers to essay questions. There are scholarships for minorities, women and students with disabilities. There are scholarships for adults returning to school, single parents and children of veterans/military scholarships.

Award amounts can range anywhere from $200-$60,000. You can apply for as many scholarships as you want as long as you meet the eligibility requirements and the application deadline. Note: Sometimes scholarship awards can affect the amount of aid you will receive from your college or university so it is best to check with the financial aid office at the school you are planning to attend or are attending.

Grants – financial aid that is mostly awarded based on financial need and usually does not need to be repaid. Grants are awarded by the federal government, state government and by some educational institutions. They may be need-based grants, merit-based or awarded to specific students such minority students or students with a disability. The federal government provides the largest number of grants.

4 Main Types of Federal Grants for College Students

1. Pell Grants – a tuition assistance initiative for low-income students. These are financial need-based grants funded by the U.S. Department of Education and do not need to be repaid. They are awarded based on information supplied on the FAFSA (Free Application for Federal Student Aid). They are awarded to undergraduate students who have not yet received a Bachelor’s degree.

2. Federal Supplemental Educational Opportunity Grants (FSEOG) – Supplemental grants for undergraduate students with exceptional financial need who have not yet received a Bachelor’s degree. These grants are administered by participating schools and are based on available funding. Students who have been awarded Pell Grants receive priority.

3. Teacher Education Assistance for College and Higher Education (TEACH) Grants –Grants that are awarded to students enrolled or planning to enroll in classes that will lead to a career in teaching. The grant is provided in exchange for a service agreement after graduation. The teacher must agree to teach full-time in a high-need area that serves low-income students for a total of at least four academic years within eight years after completion. The grant recipient must also meet certain requirements in order to continue receiving the TEACH grant.

4.  Iraq and Afghanistan Service Grants – grants awarded to students whose parent was in the U.S. Military and died in Iraq or Afghanistan after the events of 9/11.

In addition to grants and scholarships, there are other forms of financial aid.

Work-Study – allows students with financial need to work-part time to help pay for college tuition and expenses. Federal work-study programs are available to undergraduate, graduate and professional students and are administered by participating schools. Jobs are available on-campus and off-campus and students are encouraged to participate in work-study programs that serve the community or are related to his or her field of study.

Loans –money that is provided to students and their families by the federal government, banks or private lenders and must be repaid with interest. Loans provide immediate funding to students and families to help pay for college and related expenses.

Federal Loans – Loans that are provided to students and parents by the federal government.

Main Types of Federal Loan Programs

Direct Subsidized Loans – are federal loans provided to undergraduate students with financial need. Subsidized loans have some benefits with payment flexibility and repayment terms. The U.S. Department of Education pays the interest of the loan while the student is still in school at least part-time. The student is given a 6-month grace period after graduation and is not required to make any repayments on the loan during that time. Another benefit of subsidized loans is the option of applying for temporary deferment or forbearance during periods of financial hardship. During a deferment period, students are not required to make payments. Keep in mind that interest still accrues during the deferment period and can substantially make it more difficult for the student to pay off the loan in the long-term.

Direct Unsubsidized Loans – are federal loans provided to students regardless of financial need. They are available to undergraduate, graduate and professional students. Unsubsidized loans do not have the same flexibility as subsidized loans but can be a good option to help students cover the cost of tuition and expenses. With Unsubsidized Loans, students are responsible for paying for the accrued interest at all times.

Direct PLUS Loans – loans for graduate or professional students or dependent undergraduate students who are not eligible for other federal loans. To learn more about PLUS Loans.

Federal Perkins Loans – loans that are administered by participating schools to undergraduate, graduate and professional students with exceptional financial need. Students who attend school at least part-time are given a 9-month grace period after graduation, leaving school or attending less than part-time to start repaying loans.

In addition to federal loans, students and parents may apply for private loans.

Private Loans – loans provided by banks, credit unions or other financial institutions. The loans must be repaid with interest. The interest rates may be fixed or variable and will vary according to the loan terms and loan servicer.