There are three types of federal financial aid: grants, loans, and work-study. Grants are given to students who meet a variety of requirements and do not need to be repaid. Loans are generally offered to undergraduates with financial need but are also offered to graduate and doctoral students as well as parents of undergraduates. Loans need to be paid back with interest. Work-study is the fair exchange of money for work. Students with financial need are offered work-study positions for a specified number of weekly hours and, in turn, can choose to apply their wages to tuition or keep it for other uses.

Grants are similar to scholarships in that they are essentially a gift. Money received in the form of federal grants does not have to be repaid. Grants can be awarded to students for a variety of reasons: demonstrated financial need, an interest in teaching or serving as a medical professional in a low-income community, a history with the foster care system, or the death of a parent or guardian in Post 9/11 combat. Federal grant amounts vary.

There were originally two federal loan programs: the William D. Ford Federal Direct Loan Program and the Federal Perkins Loan Program. Perkins Loans are no longer offered to students, but were originally given to those who could demonstrate a significant amount of financial need. Direct Loans are offered to both undergraduate and graduate students as well as parents of undergraduates. Loans borrowed from the federal government have better interest rates than private loans, but will eventually have to be repaid.

Federal work-study is a federal program in which students work while simultaneously going to school. Work-study jobs are typically campus jobs, though some students may work off campus in a position related to their degrees. While employed in a work-study position, students will make at least federal minimum wage, but the positions are all part-time. Any wages that a student earns are theirs to do with what they choose; wages are not required to be applied to tuition and fees.

Once you’ve received a financial aid award from an institution, you have a choice to make. You should always accept any money that you receive in the form of grants; these don’t have to be repaid. Federal work-study should be accepted only if you have faith in your ability to manage a full academic workload and a part-time job. Federal awards typically include more loans than you need, so only take out what is necessary.