3 Types of Student Financial Aid to Consider
College can be expensive. The good news is, financial aid can be available to help cover the costs. According to American College Testing (ACT), most financial aid is offered through the federal and state governments, but it’s also available from schools, private organizations, and for-profit loan companies.
Not sure what your options are for financial aid? Don’t worry! There are three main types of financial aid to consider:
Loans make up just over half of all financial aid. The biggest benefit about student loans? Repayment generally doesn’t begin until you’re out of school. Even then, there’s often a six-month grace period to help you get on your feet and find a job. (This can be true for all federal student loans, but might not be true for loans offered through banks or private student-loan companies.)
There are several kinds of federal student loans to choose from, according to The College Board:
- Subsidized loan: This type of loan can be beneficial since the interest accrues while you’re in school and doesn’t get added to the balance of the loan — it’s simply forgiven. This means you most likely won’t have to pay interest on that interest, and may pay less overall.
- Unsubsidized loan: For this type of loan, interest starts accruing as soon as the loan goes into effect, and it gets added to the balance of the loan. You have the option to pay off the interest while still in school, but this can be a stretch depending on your budget. Unsubsidized loans can be worthwhile to consider since the interest rate and loan terms are often more favorable in order to help students.
- Parent PLUS loan: This loan allows parents to borrow money to help with the costs of education. This can be a good option if the student has borrowed the full amount of subsidized and unsubsidized loans. PLUS loans are offered by many lenders.
Unlike loans, grants don’t need to be repaid and are usually need-based. Most grants are offered by the school or another private institution. One important exception to that is the Federal Pell Grant, a federal grant that’s awarded based on the family’s level of income.
Scholarships are also gifts that don’t need to be repaid. They can be need-based or merit-based, and usually have specific criteria. The criteria can include just about anything: income level, hometown, extracurricular interests, family affiliations (like being the child of a veteran), achievements, heritage or race, grade-point average, course of study, or career goal. Some scholarships are offered as one-time gifts and others can be renewed each year. Searching and applying for scholarships can be a bit time-consuming, but well worth the effort.
Where to Look
The Internet is full of the following resources that can help you find and apply for financial aid:
- Federal Student Aid
- FinAid Guide to Financial Aid (with applications)
- Free Scholarship Search
- FAFSA: The Free Application for Federal Student Aid
College can be a great opportunity to deepen your education. Financial aid can be one of many options to help you on your way to obtaining your degree.