What is Financial Aid, Anyway?

Unlike publicly funded high school educations, college educations aren’t free. So if you need help to pay for college, your first step is to apply for financial aid. After all, you won’t receive financial aid if you don’t apply for it!

Financial aid helps students pay for college by closing the gap between what college costs and what a family can afford to pay. Various sources, such as federal and state agencies, colleges, high schools, foundations and corporations, and private lenders provide financial assistance.

Financial aid comes in many forms, and usually is not “free money” for you. The most common types of financial aid are as follows:

  • Loans allow you to borrow money at a lower interest rate to pay for your post-secondary education and related expenses. When you take out a student loan, you must pay back the money you borrow, as well as the interest payments you accrue on your loan. Interest is the money you pay to the lender in exchange for borrowing money. It’s calculated as a percentage of the unpaid loan amount borrowed. Some common types of student loans are federal loans given directly to the student, parent loans for undergraduate students, or “PLUS” loans, health professional loans and private loans.

  • Grants and scholarships are monetary awards you may receive to pay for your post-secondary education and related expenses that you don’t have to pay back. Grants for college are typically need based, whereas scholarships may be based on either needs or merits, such as special abilities, hobbies, interests, ethnicities, religions, passions and more.

  • Work-study programs allow you to earn money during a part-time job while you’re pursuing a degree. The “aid” comes in the form of finding you a job on campus. You can use the money you earn to help pay for your education and related expenses. Federal work-study programs encourage community service work, as well as work related to your course of study if at all possible, and the available jobs may be either on or off campus. In order to qualify for the Federal Work Study Program, you must apply for federal assistance through the Free Application for Federal Student Aid (FAFSA) program. Although your school helps you find a work-study job if you qualify for the program, the jobs are usually minimum wage. Also, unlike a part-time job outside of the work-study program, there’s a cap on how many hours you can work and how much you can earn. (Limits vary, depending on the institution.)

If you’re fortunate enough to receive financial aid, the qualifying educational expenses it covers include tuition and fees, room and board, books and supplies and transportation.

The federal government provides more than $150 billion in grants, work-study funds and loans each year. The time you take to seek out and apply for financial aid is worthwhile and could potentially save you thousands of dollars in the long run.