Financial aid makes it possible for many students to attend the college of their choice. The single largest provider of financial assistance in the United States is the federal government, via the U.S. Department of Education. State governments, educational institutions, private organizations, and banks also provide students with financial aid by offering scholarships, grants, and loans. It’s important to understand the basics before delving into each source of aid. This section will boil this daunting topic down to the essentials.

What are the sources of financial aid?

The largest source of student financial aid is the federal government, but aid is available through a wide variety of other channels. It can be state- or institution-based. It can also be given by an individual, local society, or national organization. Students should start by applying for financial aid from the federal government and then try to supplement their federal financial aid packages with money from other sources.

• The federal government: The U.S. Department of Education manages and distributes federal aid. Most federal aid is need-based, meaning that if your financial situation shows that you and your family cannot afford to pay for college by yourselves, you will receive aid. The U.S. Department of Education offers mainly need-based loans, grants, and work-study.
• Your state of residence: Each state has a different protocol for administering aid to in-state students. Traditionally, at public institutions, students going to school in their home states will receive in-state tuition rates. These are less than what the school would charge out-of-state students. However, in-state tuition isn’t the only form of aid offered; there are also grants and scholarships for qualified students, often based on high school GPA. Contact your state’s education department to learn more.
• Your institution: Institutions typically have an endowment, or a pool of money formed by investments and donations. They can pull from it each year to provide scholarships and grants to eligible students. Institutions offer both need-based and merit-based grants and scholarships. Grant and scholarship programs vary by school, though, so contact each institution to which you’re applying to learn more.
• A private organization, bank, or credit union: This is where things get interesting. There is educational funding everywhere if you know where to look for it. Organizations such as Girl Scouts and Rotary Club may offer financial assistance to members who apply for scholarships. Your employer or your parent’s employer may have a financial aid program as well. Niche organizations also offer scholarships for off-the-wall things, like having red hair or being left-handed. Additionally, banks and credit unions offer private loans to students. The options are endless!

When should I apply for financial aid?

The earlier the better! You can apply for private scholarships throughout high school (sometimes even earlier). The more often you apply, the more chances you have of winning. While you can’t access the money until you are an incoming college student, winning scholarships will decrease the overall cost of your education when the time comes. Be sure to read the fine print, apply for everything, and good luck!

When it comes closer to the time to apply for college, you can begin exploring federal, institutional, and state-based financial aid. The federal financial aid application opens on October 1 each year, so you’ll want to fill it out while you’re also working on your college applications. Reach out to admissions counselors to find out if your prospective schools require additional information before they will make financial aid awards. State-based financial aid is often automatic, but it doesn’t hurt to shop around for scholarships if you’re hoping to up your financial aid package. Financial aid applications are going to keep you busy during the fall of your senior year (or the fall before you start college).

Even after you’ve been accepted to college, your financial aid journey doesn’t end. You can continue to apply for private grants and scholarships throughout your postsecondary education. If you want to continue to receive federal financial aid too, you must reapply each year that you are in school. You may be asked to submit updated institutional financial aid forms as well. The amount of federal (and sometimes institutional) aid you receive each year will depend on your family’s financial situation, the cost of attendance, and your level of enrollment. You must maintain at least half-time enrollment to be eligible for many forms of financial aid.

What kinds of financial aid can I get?

There are four main types of financial aid: loans, grants, scholarships, and work-study. In a given financial aid package, a student may qualify for multiples types of aid depending on how much financial need they (and their family) demonstrate and their academic merit. Most aid that comes from the federal government is based on financial need, while aid from other sources may be either need- or merit-based.

What are loans?

A loan is a sum of money borrowed from either the federal government or a private organization. The money is then used to help pay for school-related costs. Loans need to be repaid with interest. Federal loans offer more benefits and are more student-friendly than private loans.

• Federal loans: There is currently only one federal loan program: the William D. Ford Federal Direct Loan Program (Direct Loan Program). Direct Loans are managed by the U.S. Department of Education and allow undergraduate students to take out up to $12,500 annually, depending on a variety of factors. Financial need is not a prerequisite for all federal loans. For the most part, repayment doesn’t begin until you’ve completed school or dropped below half-time enrollment and interest is covered until this time as well.
  • The Federal Perkins Loan Program, which provided loans to students with financial need, expired on September 30, 2017. Perkins Loans were administered by individual institutions instead of the U.S. Department of Education. This program may be reinitiated at some point, but previous attempts to extend the life of the program did not make it through Congress.
    
• Private loans: These loans come from banks, credit unions, private companies, and even individuals. Their interest rates are higher than those of federal loans and dependent on the borrower’s credit score. Unlike federal loans, many private loans are not eligible for loan forgiveness, deferments, or forbearance. Repayment often begins shortly after taking out the loans and all interest is the responsibility of the borrower.

What are grants?

Grants are a form of funding awarded to a student to pay for school and school-related expenses. They do not need to be repaid. Often grants are need-based, meaning they are distributed based on a student’s financial situation, but there are grants for students interested in teaching and those whose parent or guardian died as a result of military service after September 11, 2001.

• Federal grants: There are four types of federal grants. Pell Grants and Federal Supplemental Educational Opportunity Grants are need-based. TEACH Grants and Iraq and Afghanistan Service Grants are not. Federal grants do not need to be repaid.
• Institutional grants: These grants are specific to each school and are often lumped in with scholarships. Institutional grants do not need to be repaid. Contact your prospective institutions for more information.

What are scholarships?

Like grants, scholarships are awarded to students and do not need to be repaid. However, they are often merit-based, meaning they are awarded to students who meet specific requirements: academic, artistic, athletic, cultural, ethnic, gender, religious, or another unusual characteristic. Scholarships are typically either privately or state funded, or institutional.

What is work-study?

Work-study is a federal program in which students work part-time for their schools (e.g., at the school library or in a science lab) and, in return, earn money that can be applied to their educational costs. Students must demonstrate financial need to be eligible for work-study. They will be paid at least federal minimum wage, but schools adhere to higher state minimum wages as well. There is a limit to how many hours students can work each week so as not to interfere with their schoolwork. Work-study awards are given either in number of hours or dollar amounts that equate to how much a student can work in one academic year.

Page last updated: 05/2019