With the cost of a college degree continuing to rise, getting the most out of financial aid is more important than ever. Understanding each of the different types of financial aid available ensures you can make an informed choice when it comes to accepting an aid package.
There are 4 main sources of student aid to help students attend the college or university of their choice:
- The government of the United States
- The state in which you live
- The college you attend
- Private or non-profit organizations
Student aid from the U.S. government
The U.S. government is by far the largest provider of student aid, offering 3 types of assistance: Grants, Loans and Work-Study.
Grants are considered the “best” student aid and it’s not hard to figure out why: They do not need to be repaid! As a result, the competition for these funds is fierce — so be sure to submit your FAFSA as early as you can. (See Tips & Tricks for FAFSA Success)
Grants are awarded based on merit (good grades), need (family financial limitations) or for specific student characteristics (such as ethnicity, gender, disability or parents’ military service.) The Pell Grant is the best-known federal program, but there are other important grant programs you’ll want to check out such as FSEOG and TEACH.
Loans from the federal government come in two varieties: Subsidized and Unsubsidized.
Subsidized loans, available to students who have a demonstrated financial need, generally have more favorable terms because, currently, the U.S. Department of Education pays the interest on the loan while the student is in school and for the first six months after.
Unsubsidized loans are available to all students regardless of financial circumstances. Students are responsible for all interest on these loans.
Work-Study provides on-campus jobs for undergraduate and graduate students. It’s different than a grant or loan because the money is not provided up front. Instead, it’s delivered directly to the student over time, in the form of a paycheck, to help with the day-to-day expense of going to college.
Student aid from your state
Pretty much every state offers at least one grant or scholarship program, and many offer several options. The National Association of Student Aid Administrators offers an interactive map that connects you directly with what’s available through your state.
Student aid from your student’s college or university
Scholarships, loans and work-study are also made available directly from the school your student attends. This aid can supplement what you receive from the federal government and your state programs. Even though the aid comes from the school, institutions use the data from the FAFSA (and, in some cases the CSS PROFILE) to calculate their awards.
Student aid from a private institution and non-profit organizations
Scholarships and loans are available from a wide network of organizations, corporations, religious institutions and clubs – including such well-known names as the Gates Foundation, Elks National Foundation, National Merit Scholars program and even Burger King and Coca-Cola!
Tip: It can be a rewarding (and fun!) exercise for your student to identify the best private scholarships to pursue. Just be sure the programs are from worthwhile and reputable sources. A great place to start is this informative article from U.S. News & World Report.
With so many options to navigate, it’s no wonder paying for college is the number one source of financial stress for parents with children under 18. One way to help reduce the stress is to protect the hard-earned money you are investing in higher education with a tuition insurance plan from Allianz Global Assistance.