Finding and getting money for college can be one of the most difficult and confusing parts of the entire college search process. Hopefully the information you find on this site will help make the process simpler for you. Please note that any time the term “college” or “school” is used, it is meant to refer to both colleges and universities. There is also a glossary of financial aid terms to help you sort out the lingo.
Let’s start with the basics.
Financial aid is the general term used to describe any money a student uses to pay for their college expenses, usually from outside sources. There are three basic types of financial aid: gift aid, self-help aid, and savings.
Gift aid includes grants and scholarships; this is free money that does not need to be paid back once the student leaves college. Grants are need-based aid, and the three types of grants are federal, state, and institutional. Scholarships are merit-based aid awarded by private donors and based on a wide variety of criteria.
Self-help aid includes loans and student employment. Loans are money borrowed from a lender with low interest that, with a few exceptions that have forgiveness programs, must be repaid once a student leaves college, either by graduating or otherwise stopping attendance. Loans are awarded to either the student or to the parent. Three types of student loans are the Perkins loan, the Subsidized Stafford loan, and the Unsubsidized Stafford loan. The Perkins loan is awarded only to certain majors of study in high-need career areas. Your financial aid office will determine if your major is eligible. All students will be offered some sort of Stafford loan, based on need. The difference between a subsidized and an unsubsidized Stafford loan is that the government will pay the interest on a subsidized loan as long as the student is enrolled at least part-time in school. Parent Plus loans are awarded directly to parents to pay for their student’s college expenses. These loans usually have a little bit higher interest rates than the student loans. Student employment is just that—jobs for students to work while they are going to college. There are four types of student employment: need-based work study, non need-based work study, on campus hourly employment, and off campus hourly employment.
All of the types of financial aid mentioned so far are awarded by each college’s office of financial aid. Some schools have more money to offer from institutional funding in addition to federal awards. Therefore, you should never rule out a school based on “sticker price” alone because some students can attend private schools for less than what they would pay to attend a public state school as a result of the larger amount of financial aid offered at the private school.
So how do these financial aid offices determine eligibility for all this money? It all starts with the Free Application for Federal Student Aid, or FAFSA. With only one or two exceptions, all colleges determine need-based financial aid based on the information provided on the FAFSA.
Savings is the final type of financial aid. A couple of types of savings are pre-paid tuition plans and 529 Plans. Colleges and financial aid offices have nothing to do with this type of aid other than to accept it as payment from the student or parent. Contact your financial advisor for more information about these aid options. There are also some web links under the scholarships tab on this site with more information.
Most of the information above came from a financial aid presentation given by the Office of Financial Aid at the University of Colorado at Colorado Springs, which can be found in a PowerPoint presentation on their website. You can also find more helpful financial aid information on their financial aid advisor page.