Student financial aid in the United States is funding available to individual students attending a post-secondary educational institution to cover costs associated with attending. These costs include, but are not limited to, tuition, fees, room and board, transportation, and books. Financial aid is available from federal, state, educational institutions, and private agencies (foundations), and can be awarded in the forms of grants, education loans, work-study and scholarships. Please note that in order to apply for any federal financial aid students must first complete the Free Application for Federal Student Aid (FAFSA).
Types Of Financial Aid
Grants are a form of financial aid that normally does not have to be repaid. Sources of educational grants can be the U.S. Department of Education, state agencies, the educational institution, and private agencies. Grant eligibility is determined by financial need, academic merit, and sometimes both. The application process is set by the agency providing the funds, however, for most agencies do rely on data submitted to the U.S. Department of Education via the FAFSA. The results will have influence on determining eligibility and how much an individual is eligible to obtain.
The most sought after grants are listed below:
1. Federal Pell Grant, the largest of the federal grant options and based on an individual’s EFC (estimated family contribution) as determined by the FAFSA.
2. Federal Supplemental Educational Opportunity Grant (FSEOG), federal grant program that is need-based, but directed towards students whose FAFSA results exhibit exceptional financial need, such as being among the lowest Expected Family Contribution (EFC).
3. Institutional Grants, grants provided by educational institutions. Some institutional grants are based on academic achievement (merit awards or merit scholarships), while others are based on financial need, and some are a combination of the two.
4. Private and Employer Grants, grants provided by the private sector, for students who meet specific criteria for eligibility related to the private organization.
5. State Grants, public funds received from state agencies that are completely separate from those listed in the federal sector. These grants vary by state and awarded based on financial need.
An education loan is borrowed by the student (or parent) in order to pay for educational expenses. Unlike scholarships and grants, this money must be repaid with interest. Educational loan options include federal student loans, federal parent loans, private loans, and consolidation loans.
Federal student loans are loans directly to the student; the student is responsible for repayment of the loan. These loans typically have low interest rates and do not require a credit check or any other sort of collateral. Student loans provide a wide variety of deferment plans, as well as extended repayment terms, making it easier for students to select payment methods that reflect their financial situation. There are federal loan programs that consider financial need. For more information on federal student loans please visit: Federal Student Loans.
Federal parent loans are a federally funded loan option if the student is dependent on his or her parents. Parent Loans allow parents to take out loans and the parent is responsible for repaying these loans. The parents use these loans to pay for educational expenses on behalf of the student. For undergraduate students there is the Parent Loan for Undergraduate Students or PLUS Loan available. This loan allows parents to borrow up to the total cost of attendance, considering the difference caused by any other financial aid. Eligibility for the federal parent loan is largely dependent on a credit check done on the parent. Form more information on federal parent loans please visit: Federal Parent Loans.
Private loans are offered by private lenders (financial institutions). Heavily advertised, they should be used only as a last resort, after exhausting federal student loans. They have dramatically higher interest rates, have fewer repayment/deferment options, and are not supervised by any agency.
For information comparing federal loans to priviate loans see: Federal vs. Private Loans.
Consolidation Loans combine several student and/or parent loans into one lump sum amount, which is then used to pay off the balances on the other loans. They are an option for those who find themselves struggling with multiple payments for a variety of loans. Consolidation loans are available for most federal loan types, and some private lenders offer private consolidation loans for private education loans. There is no additional cost to consolidate loans.
The Federal Work-Study Program is a form of financial aid that can be used not only as a means of maintain a stable bank account, but to also earn money toward paying off tuition. Work study jobs allow students to get jobs within their field or given interest, and are more flexible than off-campus part-time jobs because they are designed to accommodate student schedules.
Scholarships, similar to grants, do not need to be repaid. Scholarships come from state, educational institutions, and private agencies. Scholarships can be awarded based on merit, financial need, student characteristics (such as gender, race, religion, family and medical history, and the like), creativity, career field, college, athletic ability, amongst other categories.
There are search engines available to find scholarships such as Peterson’s, Unigo, Fastweb, Cappex, Chegg, The College Board, Niche (formerly known as College Prowler), Scholarships.com, Collegenet.com, and Scholarship Monkey.
Source: Student Financial Aid In The United States