Types of Financial Aid

When savings and income aren't enough to meet your education expenses, financial aid is designed to fill the gap. Financial aid is money that is given or loaned to you to help pay college expenses.

The single largest source of financial aid is the federal government, followed by colleges, then state government and private organizations. Financial aid falls into three general categories: Free Aid, Work Aid, and Loan Aid. To be considered for most types of financial aid, you must file a Free Application for Federal Student Aid (FAFSA). The FAFSA is the common factor that helps a variety of resources evaluate the aid eligibility of a diverse number of applicants.

FREE AID

Grants, which do not need to be repaid, are typically awarded based on financial need. The largest grant programs are offered through the federal government. Additional grants are awarded by state governments, colleges and independent organizations.

Scholarships are awarded for a variety of reasons, including academic achievement, financial need, community involvement, organizational membership, and ethnicity, to name a few. Scholarships do not need to be repaid and are typically awarded on an annual basis. While the federal and state governments award some scholarships, the majority of funds are offered by colleges and private organizations.

WORK AID

Work-study programs, offered by federal and state governments as well as individual colleges, provide part-time jobs on and off campus so students can earn funds to pay their education expenses. Many work-study students also gain valuable work experience and greater exposure on campus.

LOAN AID

Many families rely on loans to cover a portion of their education expenses. Education loans come in three forms: federal, private, and institutional.

You must file a FAFSA to be eligible for federal loans.

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  Federal Perkins Loans are available to families with extreme financial need. These loans carry a fixed 5% interest rate, are funded by the federal government, and are administered by the school.
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  Federal Stafford Loans are low-interest loans for students enrolled in college at least half time. The funds borrowed can generally be repaid over a 10-year period. Subsidized Stafford Loans are available to students with demonstrated financial need. Students are not responsible for paying interest while enrolled in school. Unsubsidized Stafford Loans are available to most students regardless of family income. Payments are not required while in school, but interest does accrue and is factored into your monthly payments, which begin six months after you graduate or drop below half-time enrollment.
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  Federal Parent PLUS Loans allow parents to borrow up to the full cost of education, less other aid received, for dependent students enrolled at least half time.
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  Federal Graduate PLUS Loans allow graduate students enrolled at least half time to borrow up to the full cost of education less other aid received.

Institutional loans are made available by individual colleges. Each school determines its own loan characteristics and eligibility requirements. Check with the financial aid office at the college you will attend for more information.

Private loans are provided to students by banks and loan companies. Each provider determines its own loan characteristics and eligibility requirements. Always review the loan information and promissory note before signing for any loan. Be sure you fully understand all of your obligations including the rates and fees charged, and your repayment term.

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