Paying for College
Financial Aid 101
Types of Financial Aid
There are many ways to pay for college and many resources to help. College payment assistance typically comes in two forms: money you don’t have to pay back, and money you do have to pay back.
- Money you don’t pay back – Always try this first
Scholarships, grants, and federal work-study programs provide varying degrees of financial assistance that is debt-free. Some are limited and others are competitive. Be sure to apply early and differentiate yourself to increase your chances.
- Money you do pay back
Loans from the government or private lenders (such as banks) are required to be paid back over time. Apply for government loans first, as interest rates, interest schedules, grace periods, and payment schedules are more favorable than private loans.
Scholarships and grants can be a great help in paying for your education, and the first funding source you should consider as you finance your education.
There are two types of scholarships: those awarded by colleges and universities and others provided by organizations in the private sector.
- Institutional scholarships
Are awarded by higher education institutions. The amount awarded is often based on academic merit and need. Contact your school for a list of specific scholarships available.
- Private sector scholarships
Are awarded by private foundations, companies, and service groups, and can number in the thousands. The amount awarded varies widely depending on the provider. Check with your financial aid office to learn your school’s policy.
Scholarship applications are another area where you will need to distinguish yourself from hundreds and potentially tens of thousands of other applicants.
Federal grants are gift aid; like scholarships, they do not need to be repaid. They also are time sensitive and limited to a certain number of applicants. Federal grant awards are based on your FAFSA information, when you apply, your financial need, and the level of available funding at your school. Federal grants available include:
- Federal Pell Grants
Up to $5,920 for 2017-2018 academic year. Based on the cost of attendance (COA), expected family contribution (EFC), and enrollment status.
- Federal Supplemental Educational Opportunity Grants (FSEOG)
Between $100 and $4,000. For students pursuing first bachelors or professional degree
- Teacher Education Assistance for College and Higher Education Grants (TEACH)
Up to $4,000 a year to students who are completing or plan to complete coursework needed to begin a career in teaching
- Iraq and Afghanistan Service Grants
Amount of a maximum Federal Pell Grant for the award year, but cannot exceed the school’s cost of attendance for that award year.
Be sure to submit your FAFSA as early as possible.
- Submit your FAFSA
Indicate on your application that you want work-study assistance.
- Check with your school
Not every college sponsors a work-study program.
Federal Work-Study opportunities offer many benefits beyond reduced college costs, including flexible hours, work experience and contacts in a given profession, and locations on or close to campus.
Under the Federal Direct Loan Program (FDLP) the US Department of Education lends money for college, your school delivers the funds to you to help pay your tuition, fees, and other expenses, and you repay the money later, typically in monthly payments. State loans also operate similarly. There are many reasons to consider federal loans first.
Here’s a short guide to the major types and features of federal loans. To apply for any of these loans you’ll need to complete the Free Application for Federal Student Aid (FAFSA).
- Direct Subsidized (Stafford) Loans
Fixed interest loans for undergraduate students (5.05%) based on financial need. Repayment starts six months after you leave school (graduate or stop out) or drop below half-time enrollment. Interest does not accrue while you’re enrolled at least half-time, during your six month grace period, or during any deferment periods.
- Direct Unsubsidized (Stafford) Loans
Fixed interest loans for undergraduate (5.05%) or graduate (6.60%) students. Repayment starts six months after you leave school (graduate or stop out) or drop below half-time enrollment. Interest begins accruing as soon as loan funds are disbursed.
- PLUS (Parent or Student) Loans
Fixed interest loans (7.60%) based on the creditworthiness of the borrower. Repayment starts, immediately after final funds are disbursed. Interest accrues from the date loan funds are disbursed.
- Consolidation Loans
Available to most borrowers. Interest is based on the underlying loans’ interest rates. Repayment starts immediately after final funds are disbursed.
- Federal Perkins Loan Program
Fixed interest, subsidized loan (5%) for qualifying high financial need students. Funds are limited and borrowed directly from schools. Contact your school for more information.
If you’ve exhausted all other forms of financial aid, including scholarships, grants, work-study, and state and federal loans, you might consider private loans to help pay for college. If you must take out private loans, try to use them to supplement federal financial aid, not replace it.
Reasons to pursue private loans last:
- Private loans are not funded or guaranteed by the federal government.
- They generally come with fewer benefits and stricter terms.
- They generally have higher interest rates and fees.