Financial aid is an important part of making college affordable for most students and their families. If you need help paying for college, you must be familiar with the types of financial aid available. With this knowledge under your belt, you’ll know exactly what to look for when you apply for financial aid. You’ll be better equipped to understand your financial aid offers and college bills , and how to pay for college.
What are the main sources of financial aid?
- Federal Government: The federal government provides financial aid for college. Federal financial aid eligibility is based on the information you report on the FAFSA®.
- State Government: Most states offer financial aid to residents who live in and attend college in that state. You may need to fill out a state-based financial aid form in addition to the FAFSA to be eligible for any aid your state offers. If you have questions about state aid forms and eligibility, you can search online or reach out to your financial aid office.
- Institutions: Colleges have their own financial aid funds to give students. Some colleges may require the CSS Profile or an institutional aid form to award this aid, while others may only require the FAFSA.
- Other sources: Although federal and state governments and institutions are the 3 main sources of financial aid, other sources are available. For example, there are outside scholarships or private loans that can be used to pay for college.
What are the main types of financial aid?
- Grants: Grants don’t need to be repaid and are sometimes called “gift aid” or “free money.” Grants are need-based, which means your ability to receive them is determined by the financial resources you report on your financial aid forms.
- Scholarships: Scholarships also don’t need to be repaid and can be awarded for a variety of reasons, including need or merit. Merit scholarships are usually based on characteristics such as academic achievement, athletic ability, or talent. College scholarships can come from your institution or an outside source. Although some may be automatically awarded, many require an application.
- Work-study: Work-study is a type of financial aid that requires you to work to earn money in the form of a paycheck.
- Loans: Loans are borrowed money that needs to be repaid with interest, meaning that you’ll pay back more than the amount you borrowed. Here are some types of loans:
- Federal Direct Loans are distributed by the U.S. Department of Education and come with certain benefits, such as fixed interest rates and different repayment options. Federal Direct Loans can be subsidized, meaning that the government pays any accrued interest throughout your time in college, or unsubsidized, meaning that you’re responsible for any interest accrued while in college.
- Federal Direct PLUS loans, more commonly known as Parent PLUS Loans, are available for parents to borrow for their child’s education. They require an application and credit approval. Repayment is the sole responsibility of the parent.
- Private loans, which come from banks and other financial institutions, usually require an application, credit check, and cosigner. They tend to have higher interest rates than federal loans.
- Institutional loans are offered by some colleges and universities. Their rates and repayment options vary depending on the institution. If you’re interested in an institutional loan, check to see if your college offers them.
These different types of financial aid are available to help make your college plans a reality. Explore your eligibility for these options. Determine the next steps you need to take to access them. Identifying the different types of financial aid you may be eligible for is an important step to complete while planning and paying for college.