Step 1: Understanding Financial Aid Basics
Financial aid is a broad term used to encompass the various funding
sources for a student’s education. It’s rare these days that a
student will get a “full ride,” or a financial aid package that
covers all possible expenses. It’s more likely that a student will
secure financial aid that covers only a portion of what they need,
and the rest must be funded through private resources.
Financial aid packages often include a mix of scholarships,
grants and loans. Quite often the package will include a government
education loan, such as a Perkins Loan, Stafford Loan, and/or PLUS
Loan. Chances are you will end up paying for college by combining
many different types of financial aid. See below for an explanation
of scholarships, grants, and loans.
The Basics: Understanding Scholarships, Grants and Loans |
| Scholarships |
Money given by a group, institution or
charity to help cover some of the cost of college.
Scholarships are given to either students with the most
financial need (need-based) or to those with a record of
outstanding achievement (merit-based). Most scholarships are
competitive and require the student to fill out an
application, which includes a description of the student’s
current circumstances, an essay about why they deserve the
money, and some indication of their future plans.
Scholarship money is essentially “free” and doesn’t
need to be repaid. However, many have terms that require
the student to keep up certain grade point averages or
follow a particular course of study. There are also
athletic scholarships, which are dependent on
participation in collegiate sports. Use our
Scholarship Search Engine to find available
scholarships.
Depending on school policy, if students receive
outside scholarships, their financial aid offer might be
adjusted accordingly. Familiarize yourself with your
school’s policy to avoid any surprises.
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| Work/Study |
Financial aid recipients are often offered a position in
a “Work Study” program. This is an arrangement that allows
students to work on campus to help cover some of their
college costs. |
| Grants |
There are two major types of grants – federal and
private.
The Pell Grant is the foundation of federal
student aid, to which aid from other sources (federal
and non-federal) can be added. Pell Grants are awarded
to undergraduate students pursuing their first
bachelor’s degree. They are awarded solely based on
financial need, and the allocations range from
$400-$4050 per school year. Eligibility for Pell Grant
money is based on calculations that take several factors
into consideration. These include family income and
assets (parent and child), the cost of attendance
(tuition and fees), and expected family contribution.
You can apply for Pell Grants by completing the FAFSA or
through your college’s financial aid office that will
assist you in completing the FAFSA and assess your
ability for other sources of financial aid.
Various groups, institutions and charities, give
private grants and there is often some type of
affinity between the student and the organization that
is granting the money. When planning to fund a college
education it makes good sense to explore all of the
possible grants that your church or other community
organizations might offer. There are also grants that
are allocated for specific areas of study, so if you
know what you will be majoring in, you can explore grant
possibilities connected to that field of study.
All grants are competitive and often include a rigorous
application process. Plan ahead, because deadlines could
be earlier than you expect. And the great thing about
grants is that the money does not have to be repaid. Use our
Scholarship Search Engine to find available grants.
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| Loans |
There are a wide variety of loans available to
students. Federal loans can be made to both parents
and students. These loans are referred to as Federal Perkins
Loans, Stafford Loans, and PLUS Loans. And there is also a
Federal Consolidation Loan program that allows students to
consolidate all of their loans into one payment after
graduation although it should be noted that federal loans
can only be consolidated one time.
Private loans are offered from a variety of
banks and financial institutions. This type of loan is
often used to bridge the gap between the money a student
gets from scholarships, grants and federal loans, and
what they actually need to cover expenses. Many banks
make unsecured installment loans to parents, and also
offer money to homeowners through a Home Equity Loan or
Line of Credit. Talk to a financial advisor at your bank
or credit union for more information.
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