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

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.


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.


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.


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.