When it comes to paying for college, there are so many different options, as you’d probably be able to tell after reading last week’s article. However, one specific method of paying for college, financial aid, is often misunderstood. There are a few different kinds of financial aid offered by the federal government, but most people only think of grants when referring to financial aid. As such, in today’s article, I’ll be detailing a few different forms of federal financial aid.
To begin let's explore the most common and well-known form of federal financial aid, grants. Grants are largely need-based, meaning the amount you get depends on your (and your family’s) financial situation. Those that demonstrate more financial need, like if you have a lower income, qualify for more money in grants. The biggest benefit of a grant is the fact that they do not need to be repaid, so you can consider it “free money”, much like a scholarship.
The two key kinds of federal grants are the Pell Grant and the Supplemental Educational Opportunity Grant, both of which I will talk about in a later article. Both grants are need-based, so you need to show a need for financial assistance to qualify. You show need by filling out the Free Application for Federal Student Aid, or FAFSA form, which asks you questions about your and your family’s financial situation to see how much money you need. To fill this form out, you'll need all of your key financial documents, including federal income tax information, account balances, and details on your assets. This can be a very confusing process, so I’ll be dedicating the entirety of next week’s article to discussing it in detail.
Ideally, you would want to get as much money as you can in grants, because they don’t need to be paid back, and can be spent on any educational expenses, including tuition, housing, and textbooks.
If you don’t qualify for a grant or still have expenses after receiving grants, the next best option is participating in the Federal Work-Study program. Much like financial aid, this program is for those that demonstrate financial need. This program is a partnership between the Federal government and several schools. The government provides these schools with funding, and the school provides students with jobs, using the funding to pay for their wages. Students can then pay for educational expenses using their wages. Essentially, this program allows you to get hassle-free jobs in your field of study.
The work-study program allows students to get part-time jobs on and off-campus, while they’re enrolled in school. If you work on campus, you’ll work for your school, and if you work off-campus, you’ll work for a non-profit organization or government agency. This program aims to provide you with work that is relevant to your field of study, so it’s not random menial work.
The work-study program can help supplement financial aid grants and provide you with work experience, which is valuable when you apply for jobs once you graduate. Make sure your school offers work-study jobs because not all of them do.
The third form of “financial aid”, and I put quotations around financial aid because it very loosely qualifies as such, is federal student loans. These are pretty self-explanatory - you borrow money from the government to pay for your tuition, and then pay it back, little by little, over time.
Ideally, you wouldn’t have to take out any loans, but unfortunately, the educational system is far from ideal. If you need to take out student loans, those provided by the government are the best you can possibly get.
Much like grants and the work-study program, you need to apply for federal student loans through FAFSA. There are two kinds of federal student loans: subsidized student loans, which offer several benefits including delayed interest payments, and unsubsidized student loans, which offer no such benefits. To get subsidized student loans, you need to demonstrate financial need, but most people can get unsubsidized federal student loans.
Both loan variations have a few key factors that allow them to be superior to all other kinds of student loans. The first is the fixed interest rate. This means the percentage of interest you pay throughout the term of your loan, will stay the same. Private student loans can change the interest rate, which can be financially damaging in certain cases. The second benefit is the low-interest rates. Federal student loans offer interest rates that are significantly lower than those of private student loans. Interest can often increase the total amount you pay back significantly, so having lower rates is very beneficial. I’ll explore federal student loans in detail, in the future, so stay tuned for a more detailed breakdown.
So, to recap, grants, work-study programs, and loans are all offered by the federal government, under the umbrella of “financial aid”. Ideally, you’d get money from grants and a work-study program, if needed, and then get loans as a last resort. The federal government is a valuable resource when it comes to paying for college, and you should definitely consider utilizing it whether you’re a prospective student or a current student.
That’s all I have for this week, thanks for reading, and I’ll see you next week!