Attending college in the United States is expensive, even more so during the COVID-19 pandemic that has increased college fees from $50 to $475 a semester. However, when seeking financial aid for college there are different types of financial aid for college. These are available so that students can use to help pay for school and pursue their education.
Let’s take a look at the four types of financial aid that can help cover higher education expenses. They are huge help for tuition and fees, books, supplies, transportation, and more.
Grants are a type of financial aid that does not have to be repaid. They are awarded to students based on their financial need, family association with the military, or interest in a particular field of study.
Mostly offered by the federal and state governments, grants not only cover tuition and fees, but also any other education-related expenses, such as transportation, accommodation, books, and supplies.
Some of the grants offered by the federal government include:
- Pell Grants
- Iraq and Afghanistan Service Grants
- Teacher Education Assistance for College and Higher Education (TEACH) Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
Although grants offer free money to students to afford college, failure to maintain eligibility may require a student to repay all or part of a grant. Instances where a student must repay grant money include:
- Early withdrawal from the program
- Change in enrollment status
- Receiving other grants and scholarships that may affect a student’s need for financial aid
- Failure to fulfill the service obligations of a particular grant
Just like grants, scholarships do not have to be repaid. There are hundreds of scholarships available that are offered by schools, private corporations, non-profit organizations, religious groups, and even individuals to help students manage their education expenses.
Scholarships can be broadly categorized into types:
- Merit-Based Scholarships – This type of scholarship is geared towards students with a great academic record or a special talent, interest, or athletic ability.
- Need-Based Scholarships – As the name suggests, these scholarships are awarded based on the financial need of a student.
Unlike state-awarded grants, scholarships may or may not cover the entire cost of tuition. Some scholarships may even be a one-time award to help students reduce their cost of education.
3. Work-Study Programs
Work-study programs allow students to earn money through jobs on the college campus or at other approved locations. Funded by the federal government, these work opportunities are available to both graduate and undergraduate students.
Most students are deployed on campus at academic or non-academic departments. However, some students might be employed by private non-profit organizations with an office located nearby the campus.
The minimum wage offered by work-study programs is $7.25 per hour, but this varies depending on the funding offered by the federal government to the school and the student’s need for financial aid. Also, the work-study earnings are taxable, but they are not included in determining a student’s need for financial aid.
It is important to understand that not all students are eligible to apply to the federal work-study program. To get employed, a student must complete the FAFSA process and demonstrate a need for financial aid. In addition, students who are enrolled at for-profit colleges face certain restrictions on the type of work-study opportunities available to them.
4. Student Loans
Student loans are a type of financial aid for college designed to help students pay for education and other related expenses. These must be repaid, with interest, over a period of time.
Student loans differ from commercial loans offered by banks based on their more lenient repayment schedule and lower interest rates.
Based on the lender, student loans are divided into two types:
Federal Student Loans
These are fixed-interest-rate loans offered by the federal government. These loans are available to all the students who successfully submit FASFA, and are desirable over any other type of financial aid that must be repaid because of their fixed interest rate and flexible repayment schedule.
Federal student loans can be further divided into two types:
- Subsidized Federal Student Loans – Available to undergraduate students only, subsidized federal student loans do not accrue interest while the student is enrolled at the school. In addition, students are offered a grace period of 6 months after their graduation before they start making payments.
- Unsubsidized Federal Student Loans – Unsubsidized loans also offer a grace period of 6 months to students; however, they accrue interest even during the enrollment period. While FAFSA is required to apply for an unsubsidized loan, these are not disbursed based on a student’s financial need.
Private Student Loans
Private student loans are generally the last resort for students in case the amount lent by the federal government won’t cover for all the education expenses. These loans require students to demonstrate a good credit history, and are offered by the college, the state government, or a private institution, such as a bank or a credit union.
Unlike federal student loans, private loans are usually offered at a higher fixed or variable interest rate that is directly dependent on the applicant’s credit score. Besides, most lenders require students to make payments while they are still at school. However, some may put off payments during the enrollment period.
Since private student loans are expensive than other types of financial aid, students must make sure that they have exhausted all other options before they decide to apply for a private loan. While 80% of American college students receive some kind of financial aid. However, it is important to understand that not all types of financial aid for college are created equal.
Free money offered through scholarships and grants is always desirable over borrowed money that must be repaid with interest. Therefore, it is important to start research early, meet deadlines, and apply for as many scholarships and grants as you can to secure funding at more favorable terms.