Going to college gets more and more expensive every year. Tuition, fees, books, housing, food, and everything else associated with the college experience keeps rising in cost. And unless your family is wealthy, you’re going to need some financial aid to pay for school. People always ask “does financial aid need to be paid back”, and the answer depends on what type of aid is received.
Not all types of financial aid are created equal. The greatest distinction among types of financial aid is whether they need to be repaid. So before you start taking out student loans, you need to make sure you’ve exhausted all your free money options.
Let’s take a look at each of the common types of financial aid and explore whether or not they need to be paid back.
The best thing about grants is that you don’t have to pay them back. Not a single cent! The federal government, state governments, universities, and other organizations offer grants to college students. These entities look at a family’s ability to afford college and allot money based on need.
FAFSA – Free Application For Federal Student Aid
The quickest gateway for obtaining college grants is by filling out the Free Application for Federal Student Aid (FAFSA). This form is your one-stop-shop for income-based grants. US families forgo billions of dollars per year just by neglecting to fill out the FAFSA form, so don’t leave your free money sitting in the federal government’s coffers.
High school seniors should submit their FAFSA forms as soon as possible after October 1. Grants are awarded on a first-come, first-served basis, and you don’t want your application to come in after the money runs out.
Both public and private universities give low-income students tremendous amounts of money to offset tuition and fees. According to a 2016 report by The College Board, private school undergraduates received about $16,700 in grants, and public school undergraduates received about $5,000. Much of that money comes straight from the universities. Plus, you can sometimes haggle with universities to give you more financial aid than the FAFSA says you need. Special circumstances affecting a family’s income and a student’s academic potential can compel a university to kick in an extra few thousand dollars.
Federal Pell Grants
Many students receive Federal Pell Grants. This grant is awarded by the US government, and the amount you receive depends on four main factors: your financial need, the cost of attending your university, whether you’re a full-time or part-time student, and whether you plan to attend the full academic year. Again, filling out the FAFSA form unlocks access to the Pell Grant and many other need-based grants.
You kept your grades up, you were involved in several student organizations, and you volunteered your time. Now, you get to cash in! Much like grants, scholarships award students free money to put toward educational expenses that do not need to be paid back
It’s amazing how many companies, non-profits, and families set up and fund college scholarships. High school guidance counselors keep a laundry list of federal, state, and local scholarships. Plus, the Internet searches can keep you busy combing through scholarship opportunities. When you’re ready to scour the internet for scholarship money, make sure you look through the listings from The College Board, Fastweb, Niche, and moolahSPOT.
A quick word of caution before you begin Googling for scholarships: never pay a fee to apply for a scholarship. This is a sure-fire way to spot a bogus scholarship opportunity.
Criteria for awarding scholarship money can be based on a wide variety of factors including a student’s academic achievement, participation in extracurricular activities, athletic ability, cultural background, location, and intended undergraduate major. No matter your interests, there are bound to be scholarships out there to match you.
Many scholarship providers consider a student’s financial need in determining whether to award a scholarship or in how much money to award. But not all scholarship providers do this. Though there are more scholarship opportunities available to students with financial needs, scholarships are by no means closed to students whose families can afford to pay for school.
The Federal Work-Study program gives qualifying students the opportunity to earn money through part-time employment. Undergraduate and graduate students may participate in the program. Jobs can be on-campus working for the university or off-campus working for a non-profit or government organization. Sometimes, universities make agreements with private employers to hire work-study students.
Undergraduates usually perform administrative tasks in their work-study jobs. For example, students may work at the university library checking out books, man the reception desk for an academic department, or transcribe recorded interviews conducted by faculty historians.
Work-study jobs must pay at least minimum wage, and they sometimes pay more depending on the skills required for a given job’s responsibilities. Unless a work-study student requests his or her wages be directly applied to the university’s bill, payroll payments are handled like any other job at the school.
To take advantage of the Federal Work-Study program, be sure to check the box on the FAFSA form that shows you’re interested in student employment. If you don’t meet the income qualifications, your university likely has similar jobs that don’t receive federal funding. Check with your admissions officer on how to snag a part-time job working at the school.
Student loans are exactly what they sound like. They’re loans made to students to help pay for educational expenses. Student loans must be repaid. Even bankruptcy can’t absolve you from student loans, so be sure you need one before you take out a student loan. In addition to the expenses like those covered by grants and scholarships, student loans can help students pay for everyday expenses like groceries, rent, utilities, and gasoline they incur while they’re not earning full-time wages. Yes, work-study jobs help, but they’re often not enough to cover all living expenses.
The number one thing you need to find out when you decide to take out student loans is whether a loan is a subsidized or unsubsidized loan. With a federally subsidized student loan, the US government pays a portion of the interest. Subsidized loans are made based on financial need. Unsubsidized loans do not have Uncle Sam’s help with the interest, and they are not made based on need.
If you must take out a student loan, it is much better to get a subsidized loan. When students max out the amount of money they can borrow with subsidized loans, they then borrow using unsubsidized loans.
Your financial aid picture
When you’re piecing together your college financial aid, you want to maximize the free money that can come your way. The most important thing to do is fill out the FAFSA form. This opens you up to a wide world of grants and scholarships to help you pay for school. Plus, it can get your foot in the door for a federal work-study job that can help you pay for life’s expenses while you’re focusing on your education. Lastly, student loans are available to round out your financial aid, but make sure you definitely need loans before agreeing to them.