10 Different Types of Financial Aid

Different sources of financial aid written in tags over files in a filing cabinet.

While the cost of college education in the U.S. is rising, so is the amount of financial aid available. More than nine million students received a Pell Grant for the school year 2011-2012 while there is currently $135 billion of financial aid available to students and their families.

The College Board’s 2016 Trends in Higher Education also reported that undergraduate students received an average of $14,460 in financial aid during the school year of 2015-2016. More than half of this or $8,390 comes from grants.

Check out the different types of financial aid you need to know to complete a college degree in the U.S.

Federal Financial Aid

Empty forms of Free Application for Federal Student Aid (FAFSA).

Of all the types of financial aid to students, the federal government is the largest provider, and they provide loans, grants, and funds for work-study purposes. To get started, you have to fill out the application, which is free, called the Free Application for Federal Student Aid, or FAFSA. With FAFSA, you fill out one form and you can apply it to several colleges if you like.

Their website gives you all of the necessary deadlines, provides assistance if you need help filling out the application, includes videos and information sheets that answer a lot of your questions, look up a school code, estimate how much financial aid you might get, compare different colleges to determine which one is best for you, and find out all you need to know about financial aid in general.

In a nutshell, this is what you need to know before you go to the FAFSA website:

  • Create your user name and password. Never create the same for someone else, only for yourself.
  • Know your Social Security number, because the form requires that you list it on there.
  • Keep your driver’s license where you can get at the information when you need it unless you do not have a driver’s license.
  • Get a copy of last year’s income taxes, because items from that document need to be included on the FAFSA form.
  • Write down all of your income not declared on last year’s tax returns.
  • Get together a list of all of your (your parents) assets.
  • List all of the schools you are considering attending. You can always change this list later if you need to.

Once you fill out the initial paperwork, you can go back at any time and adjust the information. All of these services are free, so feel free to go back to your application as often as you need to. This information should be as accurate as possible because it is this information that will tell the government how much money you need to attend college. If you want the best outcome and the most assistance, later on, start out by giving truthful answers throughout the entire application, and they can take it from there.

Federal Loans

A man in suit holding a card printed with

There are standard and specialized loans offered by the federal government, which are listed below. Remember, loans have to be paid back, although the specifics of each of these loan types can vary from one loan to another.

  • Subsidized loans. These types of loans are subsidized by the federal government and are based on financial need. The terms are very reasonable, in part because while you’re in school and for six months afterward, the interest on the loan is actually being paid by the U.S. Department of Education.
  • Unsubsidized loans. Any student can get an unsubsidized loan because it is not based on need. Moreover, you must pay the interest on the loan from the moment you receive it.
  • PLUS loans. These are loans to help pay for expenses that are not covered by other types of financial aid. They are available to two groups of people: professional or graduate students, and the parents of dependent undergraduate students. With a PLUS loan, you do not have to show financial need in order to get the money. It is named a PLUS loan because originally it was known as a Parent Loan for Undergraduate Students, although that term is no longer used.
  • Perkins loans. These loans help both graduate and undergraduate students with dire financial need, and they are school-based loans. They are also available at low-interest rates, and the school is the lending institution, which means when you pay back the loan, you’ll be making your payments to the school. Unless you drop out or leave school before you graduate, you don’t have to start paying back a Perkins loan until nine months after you graduate, making them extremely convenient.


The word

The main advantage of a federal or state grant is that the money does not have to be paid back, so it is essentially free money for the student. More often than not, grants are needs-based, merit-based, or even student-specific. A good example of the latter includes grants for students who have disabilities, women, and minorities, but other groups can also be included.

It is recommended that you apply for grants as early as possible because there are always a lot of people trying to get them, but that doesn’t mean getting them is impossible. Grants are broken down into four main categories:

1. Federal Supplemental Educational Opportunity Grant (FSEOG)

These grants are based on financial need and are only awarded to those who intend to work on their undergraduate degree. Financial need is the most important qualification, and the FSEOG can be found and applied for through the participating schools’ financial aid offices.

2. Iraq and Afghanistan Service Grants

Like its name implies, these grants are only for students whose parents were killed while serving in the military in either Iraq or Afghanistan.

3. Pell Grants

Pell grants are for students who do not yet have their bachelor’s degree. A lot of factors are included when qualifying for a Pell grant, including the amount of tuition at the school, your own particular financial need, and several other factors. The good news is, it is easy to find out additional information on Pell Grants because the details are included in numerous websites.

Additional information on Pell Grants can be found here.

4. Teacher Education Assistance for College and Higher Education (TEACH) Grants

These grants are there for people who intend to teach in low-income areas and high-need career fields, and they help you pay for your schooling. They do have one requirement, however, and that is the promise that you’ll teach at a certain location for a certain number of years in order to receive the money.

As you can see, the federal government is generous with its grant money for students, and your first step when you’d like more information is to start with the Internet.

Institutional Financial Aid

A colorful illustration of a hand dropping a dollar coin on an institution building.

This type of aid is provided by the actual institutions themselves. All colleges and universities offer grants, work-study programs, and scholarships, and the best way to learn about the programs is to consult with the student-aid counselor at that particular school.

These counselors are familiar with all of the programs offered to students, and therefore they can help you find and apply for one or more of them. The programs can be need-based, merit-based, free money in the form of grants, work-study programs, loans, scholarships, and more. The point is, these counselors are familiar with every type of program offered, which means they can help you determine which one is right for you.

You may even qualify for more than one type of loan, which is even better, but you can depend on these counselors to be thorough and make recommendations based on which program is more likely to produce the results that you are looking for. Of course, your ultimate goal is being one step closer to having most of your college education paid for in the end.

When it comes to institutional financial aid, most of it is raised through the financial institution itself, and the school acts as the middle link between the school and the student. The money does not come from banks or other financial institutions, but rather from private fundraising through the college itself. If you’ve ever made a donation to your alma mater, chances are good this money was used as some type of scholarship or other financial aid.

The money comes mostly from private citizens and alumna, and even though it is sometimes attached to some type of requirement that the student must adhere to, often it is based on nothing and any student can qualify for it. However, your school’s student financial aid department can give you all of the information you need to apply for this money.


A pen marks the Approved box for the approved application loan form.

Student loans are provided by both private institutions and the federal government, but it is borrowed money, which means you have to pay it back after you graduate, including interest. Many times, loans designed for students are low-interest loans, and the good news is, you can access the funds immediately.

Depending on the specifics of the loan, you may not have to start making payments until up to six months after you graduate, sometimes longer, giving you time to secure a job before you start making payments. Loans can come from all different sources, but if they are designed to pay for college, the lenders often make it easy by designating them low-interest loans or loans with long repayment terms, and even loans with light qualification requirements.

It is easy to keep up with the types of student loans available today, especially if you consult with your high school counselor or the student aid professional at your college.

You also don’t have to apply for these loans only as a freshman, because most of them are available to you throughout your undergraduate (or graduate, if this applies) schooling, which means you can apply for some of them even if you’re close to your graduation day. It behooves students to explore the many different options they have, and it is always smart to research the many types of federal assistance that is available since these types of financial aid are so prevalent.

Private Financial Aid

A small drawstring bag with a printed dollar sign sits on a wooden desk beside colorful wooden bars in ascending order with a small graduation cap at the last bar and a pile of coins.

Private financial aid comes from various private sources, and this can include religious and civic organizations, large corporations, service organizations, professional organizations, and cultural organizations, to name a few. Any student aid department will be able to give you the information to find these types of financial aid programs, and most of the aid is in the form of scholarships and loans.

You can get this information from a high school counselor, financial aid office at a university, or even your public library, as well as numerous websites that are there specifically to share this information with the public.

One of the biggest advantages of a private loan or scholarship is that it can often fill in the gaps that aren’t filled with the rest of the financial aid you’re receiving. Private scholarships are good because there is often no need to qualify for the money, and in addition, the FAFSA application is usually not needed to receive private funds.

Private funds usually have reasonable interest rates and repayment terms, and many of the loans allow you to have a cosigner, which is great for those students – most of them, most likely – with little to no credit. All in all, private funds offer the flexibility that other types of student aid do not, so it is worthwhile for you to check them out thoroughly, which you can do online.

Private Loans

A man in suit concealed in the dark offers a pile of Yen cash.

Unlike private financial aid, which includes both loans and scholarships, all private loans have to be paid back, and you have to apply for them directly through the organization or financial institution which is offering them. Private loans come from private sources only, mostly various types of organizations and commercial entities, and even certain credit card companies offer them. Below are some key perks you can enjoy when you decide to take out a private loan in order to pay for your college education.

  • It can improve your credit. Most college students have low credit scores, but if you pay off this type of loan on time month after month, it can enable your credit score to climb up fairly high after the loan is paid off. There aren’t too many ways a college student can improve his or her credit, but as long as you’re making your payments on time every month and paying back the minimum payment or more, you should see your credit score rise steadily.
  • Repayment can sometimes be wiped out. Although it isn’t advisable, if you do have to default on your loan, there is often a length of time that, once it ends, prevents creditors from coming after you. This “statute of limitations,” as it is sometimes called, varies from state to state and can be five years or up to ten years; however, once it’s up, no one can come after you for the money you owe. Naturally, this will still affect your credit in a negative way, but if push comes to shove, you’ll at least know you have options.
  • You often qualify for high amounts of funds. Unlike many federal loans, private loans often allow you to borrow large sums of money for your college education. In fact, some of these loans will lend you close to $60,000 for undergraduate school and nearly $140,000 for graduate school. You can also borrow up to 100% of the total amount that you need for your schooling, so private loans make it very convenient to pay for college in the end.


A pen on top of an approved sheet of a scholarship application form on wooden background.

Scholarships and grants have one thing in common – neither of them has to be repaid. Everyone has heard of a football scholarship, where a certain college pays an athlete to go to college as long as that athlete stays on the football team. Scholarships are usually offered by private organizations and even the institutions themselves, and they can be based on race, religious affiliation, academic performance, athletic ability, and many other factors.

Many times, the student has to write an essay in order to qualify for the scholarship, but other than that it is relatively easy to qualify for them, and they can be full or partial scholarships, making your college experience a lot less expensive. There are a lot of advantages to getting a scholarship to pay for part of your college education, including:

  • It costs you a lot less!
  • You can concentrate on your studies, instead of how to pay for school.
  • You can be more focused on both academic and extracurricular activities.
  • You don’t have to pay back the money.

It’s not difficult to figure out why getting a scholarship is a lot better overall than paying for school yourself. If you’re unsure where to start to find your own scholarship, it is recommended that you visit the financial aid department of either your high school or the university you wish to attend.

State Financial Aid

The flag of the USA perched on top of one of the stacks of coins sorted in ascending order against black background.

Just like the federal government, state governments have scholarships, grants, loans, and work-study funds available, as well as tuition assistance if you qualify. There are two main ways to get this information: either contact the financial aid agency of your state’s government, or visit a qualified student aid officer at your school.

In fact, there are now websites that contain a list of all state agencies and can help you find the best financial aid program for you, so it is easier than ever to get this information. When researching and applying for state financial aid, there are a few things to keep in mind, including:

  • Each state is different. This means that within your state, you have to do your due diligence and pay attention to the requirements, the deadlines, and any other details that you must be aware of before you apply. After all, sending in an application after the deadline does you no good, so the more information you are familiar with, the better your chances of getting that financial assistance in the end.
  • States usually offer two types of financial aid: needs-based, which means your family’s income will be taken into consideration; and merit-based, which usually consists of some sort of academic or extracurricular excellence. Most are needs-based, but it behooves you to check out all of the types that are available.
  • Pay attention to where the money can be used. Many states offer their assistance only for in-state students, so if you wish to attend an out-of-state college, your state’s financial aid programs may do you no good. Make sure you read up on the material provided so that you know for sure before submitting an application.

Another thing to keep in mind is that, with rare exception, your loans and grants can be used simultaneously, so if you only qualify for a small amount of money on one of these aid types, it is very likely you can use other grants and loans to make up the difference.

Work Study Programs

A woman wearing white polo and jeans sits on a sofa and types on a netbook between iced coffee and a pen on an open notebook on wooden desk.

These programs give you a part-time job in order to make extra money while you’re working towards your degree. The jobs can be on- or off-campus and there is usually a limit as to how many hours per week you can work. The main thing to remember about the work study programs is that not all colleges offer them, so if you are considering this option, it is good to check with the school you wish to attend to make sure they have this program.

Usually, jobs are awarded on a first-come, first-served basis, and just because you choose this option doesn’t mean you are guaranteed a job. If you complete your FAFSA application, you can indicate on there if you’re interested in a work study program, and they can provide the information that you need from there.

Jobs can be obtained one of two ways – either the school matches you with a specific job, or you have to go and interview for the job. In most cases, they try to find you a job where you can learn more about your major, but since that is not always possible, this isn’t a guarantee.

Most of the jobs are minimum-wage jobs that pay by the hour, and regular taxes are taken out of your paycheck just like other workers. Best of all, the money you make from this program doesn’t affect your ability to receive other types of student aid, so you can work and still get the additional funds you need for your education.

More details on the college work study program can be found at websites such as this.

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