With today’s soaring college tuition expenses, most families cannot afford the entire amount on their own. Financial aid can help to close the gaps. Here’s what you should know.
What is financial aid?
Financial assistance is any type of support that helps you pay for education, such as scholarships, grants, loans, and work-study programs.
To be eligible for most kinds of financial help, you must first complete the Free Application for Federal Student help, or FAFSA. We go into further depth about the many sorts of help below.
How to qualify for financial help.
In general, there are two methods to qualify for financial aid: need and merit.
Need-based aid: The federal government determines your financial need using the information you supply on the FAFSA. The majority of work-study funds and grants are based on need.
Merit-based aid: Colleges and private organizations provide scholarships to students who demonstrate intellectual, athletic, or creative skill.
Student loans do not fall neatly into either group. Some, such as government direct subsidized loans, are need-based. Others, like private student loans, are based on your credit score. In addition, every student attending an approved institution, regardless of financial need or merit, is eligible for federal direct unsubsidized loans.
Where to Get Financial Aid
You can get financial help from a variety of sources, including the federal government, your state, your college, and private groups such as your local Rotary club.
Filling out the FAFSA will put you in the running for all federal help, as well as potential state and institutional aid. After that, check with your state’s higher education agency and the financial aid departments of the institutions where you’re applying to determine if you’re qualified for any additional state or institutional grants and scholarships. Then, using a scholarship search engine, such as the U.S. Department of Labor’s Scholarships Search engine, find any other prizes for which you may be eligible.
Types of Financial Aid
Grants are financial aid monies that you do not have to repay. You can obtain them from the federal or state governments, and you must normally demonstrate a financial necessity to be eligible.
Scholarships are additional forms of financial help that do not need repayment, although they are often awarded based on merit rather than financial necessity. Scholarships are available from colleges and universities, as well as private groups like the local Elks Lodge.
Work-study is a government program that provides part-time work to low-income undergraduate and graduate students. If you qualify for work-study, you must locate a suitable employment on or near your campus and work to earn the funds.
Federal student loans are government loans with fixed interest rates. The direct loan program is the primary government lending program. Undergraduates can obtain direct subsidized or unsubsidized loans. Graduate students can borrow unsubsidized or direct PLUS loans, while parents can obtain direct PLUS loans.
Private student loans are fixed- or variable-rate loans provided by a bank or credit union. To qualify, you usually need an excellent credit score or a cosigner with good credit. Your APR will vary based on your or your cosigner’s credit.
How to find out how much financial help you’re granted
After you complete the FAFSA, you will get a financial aid award letter from each school that has accepted you. The award packages may vary, but they will most likely comprise a combination of federal, state, and institutional help. If you are looking for financial assistance for 2023-24, you will most likely receive your award letter in winter 2022 or spring 2023, depending on the institution and when you filed your FAFSA. You are not required to accept all of the help given in your reward package.
Which type of financial help is best?
Not all financial help is made equal, so be selective about the aid you receive. Maximize help in the following sequence before moving on to the next type:
Gift assistance is money that does not need repayment, such as grants and scholarships.
Earned assistance is money earned while working in a work-study position.
Borrowed federal aid is money borrowed from the Department of Education that you repay with interest. Borrowers of federal student loans have access to income-driven repayment plans, which can cut their monthly payments, as well as forgiveness programs, which can provide loan relief after making qualifying payments for a set period of time.
Borrowed private help is money that you borrow from a bank and repay with interest. The interest rate you pay is usually determined by your credit score and other financial information. Private loans may not provide as many flexible repayment alternatives as government loans, and private lenders do not provide forgiveness programs.
Next Steps: Complete the FAFSA.
If you have not previously done so, complete the FAFSA. Then, verify your FAFSA status to ensure that the Department of Education processed it correctly, examine your Student Aid Report, and address any errors on your application. Before you realize it, your award letters will arrive, and you will be able to select a college that best suits you and your budget.
