Financial aid is money to help pay for college or career school. Aid can come from
- the U.S. federal government,
- the state where you live,
- the college you attend, or
- a nonprofit or private organization.
Types Of Financial Aid Programs
Work-Study
A federal student aid program that provides part-time employment while you are enrolled in school to help pay your education expenses.Interest
A loan expense charged for the use of borrowed money. Interest is paid by a borrower to a lender. The expense is calculated as a percentage of the unpaid principal amount of the loan.Federal Student Aid
Financial aid from the federal government to help you pay for education expenses at an eligible college or career school. Grants, loans and work-study are types of federal student aid. You must com...Room and Board
An allowance for the cost of housing and food while attending college or career school.Federal Student Aid Programs
The programs authorized under Title IV of the Higher Education Act of 1965 that provide grants, loans and work-study funds from the federal government to eligible students enrolled in college or ca...Financial Aid Office
The office at a college or career school that is responsible for preparing and communicating information on financial aid. This office helps students apply for and receive student loans, grants, sc...Scholarship
Money awarded to students based on academic or other achievements to help pay for education expenses. Scholarships generally do not have to be repaid.Financial aid is available from federal, state, educational institutions, and private agencies (foundations), and can be awarded in the forms of grants, education loans, work-study and scholarships. Please note that in order to apply for any federal financial aid students must first complete the Free Application for Federal Student Aid (FAFSA).
Grants
Grants are a form of financial aid that normally does not have to be repaid. Sources of educational grants can be the U.S. Department of Education, state agencies, the educational institution, and private agencies. Grant eligibility is determined by financial need, academic merit, and sometimes both. The application process is set by the agency providing the funds, however, for most agencies do rely on data submitted to the U.S. Department of Education via the FAFSA. The results will have influence on determining eligibility and how much an individual is eligible to obtain.The most sought after grants are listed below:
- Federal Pell Grant, the largest of the federal grant options and based on an individual’s EFC (estimated family contribution) as determined by the FAFSA.
- Federal Supplemental Educational Opportunity Grant (FSEOG), federal grant program that is need-based, but directed towards students whose FAFSA results exhibit exceptional financial need, such as being among the lowest Expected Family Contribution (EFC).
- Institutional Grants, grants provided by educational institutions. Some institutional grants are based on academic achievement (merit awards or merit scholarships), while others are based on financial need, and some are a combination of the two.
- Private and Employer Grants, grants provided by the private sector, for students who meet specific criteria for eligibility related to the private organization.
- State Grants, public funds received from state agencies that are completely separate from those listed in the federal sector. These grants vary by state and awarded based on financial need.
Education loans
An education loan is borrowed by the student (or parent) in order to pay for educational expenses. Unlike scholarships and grants, this money must be repaid with interest. Educational loan options include federal student loans, federal parent loans, private loans, and consolidation loans.Federal student loans are loans directly to the student; the student is responsible for repayment of the loan. These loans typically have low interest rates and do not require a credit check or any other sort of collateral. Student loans provide a wide variety of deferment plans, as well as extended repayment terms, making it easier for students to select payment methods that reflect their financial situation. There are federal loan programs that consider financial need. For more information on federal student loans please visit: https://studentaid.ed.gov/sa/types/loans.
Federal parent loans are a federally funded loan option if the student is dependent on his or her parents. Parent Loans allow parents to take out loans and the parent is responsible for repaying these loans. The parents use these loans to pay for educational expenses on behalf of the student. For undergraduate students there is the Parent Loan for Undergraduate Students or PLUS Loan available. This loan allows parents to borrow up to the total cost of attendance, considering the difference caused by any other financial aid. Eligibility for the federal parent loan is largely dependent on a credit check done on the parent. Form more information on federal parent loans please visit: https://studentaid.ed.gov/sa/types/loans/plus.
Private loans are offered by private lenders (financial institutions). Heavily advertised, they should be used only as a last resort, after exhausting federal student loans. They have dramatically higher interest rates, have fewer repayment/deferment options, and are not supervised by any agency.
For information comparing federal loans to priviate loans see: https://studentaid.ed.gov/sa/types/loans/federal-vs-private.
Consolidation Loans combine several student and/or parent loans into one lump sum amount, which is then used to pay off the balances on the other loans. They are an option for those who find themselves struggling with multiple payments for a variety of loans. Consolidation loans are available for most federal loan types, and some private lenders offer private consolidation loans for private education loans. There is no additional cost to consolidate loans.
