What College Financial Aid Is and How it Works
Average student loan debt is $39,950, which is 26% higher today than it was in 2008.
*Experian Credit Report Surveys 2019
College financial aid helps students and their families by covering higher education expenses, such as tuition and fees, room and board, books and supplies, and transportation.
Different types of aid are provided through various sources, such as federal and state agencies, colleges, high schools, foundations, and corporations, to name a few. The amount of aid a student receives depends on federal, state, and institutional guidelines.
Then, aid is awarded based on that application, and students have the choice to accept or reject the aid offered. The type of aid offered determines whether it will have to be repaid. Sometimes, students must complete additional applications to be considered for other scholarships or private aid.
There are several types of financial aid:
1. Grants
The federal government provides grants for students attending college or career school. Most types of grants, unlike loans, are sources of free money that generally do not have to be repaid.
The U.S. Department of Education (ED) offers a variety of federal grants to students attending four-year colleges or universities, community colleges, and career schools. Check out the grant programs for more details and to learn how to apply:
b) Federal Supplemental Educational Opportunity Grants (FSEOG)
c) Iraq and Afghanistan Service Grants
d) Teacher Education Assistance for College and Higher Education (TEACH) Grants
2. Scholarships
Scholarships are gifts. They do not need to be repaid. There are thousands of them, offered by schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations.
Some scholarships for college are merit-based. You earn them by meeting or exceeding certain standards set by the scholarship-giver. Merit scholarships might be awarded based on academic achievement or on a combination of academics and a special talent, trait, or interest. Other scholarships are based on financial need.
You can learn about scholarships in several ways, including contacting the financial aid office at the school you plan to attend and checking information in a public library or online. But be careful. Make sure scholarship information and offers you receive are legitimate; and remember that you don't have to pay to find scholarships or other financial aid. Check out our information on how to avoid scams.
Try these free sources of information about scholarships:
a) the financial aid office at a college or career school
b) a high school or TRIO counselor
c) the U.S. Department of Labor’s FREE scholarship search tool
e) your state grant agency
f) your library’s reference section
g) foundations, religious or community organizations, local businesses, or civic groups
h) organizations (including professional associations) related to your field of interest
i) ethnicity-based organizations
j) your employer or your parents’ employers
3. Work-study
Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study.
The program provides part-time employment while you are enrolled in school and is available to undergraduate, graduate, and professional students with financial need. It is available to full-time or part-time students, administered by schools participating in the Federal Work-Study Program.
4. Federal or private loans
If you apply for financial aid, you may be offered loans as part of your school’s financial aid offer. A loan is money you borrow and must pay back with interest.
If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.
The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program, the U.S. Department of Education is your lender.
There are four types of Direct Loans available:
a) Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.
b) Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.
c) Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.
d) Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.
Keep in mind that the way federal financial aid works is that students must first apply for the aid by answering a series of questions used to determine their ability to pay for college. This is only possible through the FAFSA program which opened on October 1st 2020. Please fill out your FAFSA as soon as possible.
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