FAFSA
Types of Financial Aid
For most students, financial aid is the key to acquiring a higher education. But many students and their parents do not take the time to understand what may seem, at first glance, an extremely complex procedure. “Financial aid” refers to the entire gamut of programs that help students pay for higher education, ranging from the largest federal programs to the smallest locally sponsored scholarships.
Understanding exactly what kinds of financial aid you can get and where that money is coming from will put you in a much stronger position where it comes time to evaluate financial aid awards from different colleges and negotiate for more aid. Financial aid can be broken down into four broad categories: grants, loans, work-study programs, and scholarships.
Grants
Grants are awards that you do not have to repay. They are typically based on financial need. That is, you must prove that you need the grant money to pay for college in order to receive a grant. Grants typically come from public sources of financial aid, such as the federal government and your state’s government.
Loans
Loans are aid that must be repaid, and they usually make up the largest part of the financial aid package. The federal government sponsors the largest student loan program, called the Stafford Loan program. These loans are a very good deal; they carry lower interest rates and more flexible repayment terms than private loans, and you don’t even have to start repaying them until six months after you get your degree. You may be eligible for federal student loans whether or not you have financial need, and our parents can even borrow under this program. If you are not eligible, you can take out a private loan, which usually must be cosigned by your parents. While it is a bit more expensive to borrow from private banks and other organizations than through the Stafford Loan Program, these loans still carry lower interest rates than consumer loans, such as the kind of loan you would get to buy a car.
Work-study Programs
Work-study programs enable you to earn your keep. In return for financial aid dollars, you must work a part-time job on-campus. You may get a job in the library or the cafeteria, or you may actually do work that is relevant to your field, such as working in a lab or assisting a professor. While the federal government sponsors the largest work-study program, your college decides what job to give you. Work-study awards typically make up the smallest part of the financial aid package.
Scholarships
Scholarships are gift aid, just like grants. But unlike grants, scholarships are usually awarded based on merit, not the financial need. You may receive scholarships because you get good grades, are an excellent athlete, perform service in your community, or have an artistic talent. You may also receive scholarships based on who you are. Scholarship money goes to minorities, women, members of religious groups, veterans and dependants of veterans, and the disabled. Scholarships typically come from private sources, such as corporations, foundations, nonprofit groups, churches, and the schools themselves. Usually you must apply for them separately from other forms of financial aid.
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