How Does Financial Aid Work?
According to the National Center for Educational Statistics, approximately 21 million students were expected to be in attendance at colleges across the nation during the fall of 2014. It is estimated that around 75 to 85 percent of college students use some form of financial aid to help pay for their years at school, per National Center for Education Statistics.
Student loans are the most popular form of financial aid, with seven in 10 graduating students in 2013 having some amount of loan debt, according to the Project on Student Debt. There are different types of student loans, including:
- Direct Subsidized Loans: Only for undergraduate students demonstrating financial need
- Direct Unsubsidized Loans: For undergraduates, graduates, and professionals with no need-based limitations
- Direct PLUS Loans: Only for grads or professionals, or parents of dependent undergrads, but poor credit history can make you ineligible
- Federal Perkins Loans: Only for students with extreme financial need
As of the end of 2013, the average student loan debt was reported by CNN Money to be around $29,400. Repayment is required for all student loans beginning as early as six months after graduation, unless you qualify for a forgiveness plan or can demonstrate a reason for deferment or forbearance. Interest rates ranging from 3.76 to 6.31 percent are imposed, but the government may pay the interest on certain loans during specific periods of enrollment.
The most widely known scholarship is the merit scholarship, which is given to students who have proven their excellence in certain subjects or extracurricular fields. Many merit-based scholarships don’t require a separate application, but other types often do, and they may require additional items as well, such as a personal essay. Scholarships do not need to be paid back.
The Federal Work-Study Program permits eligible FAFSA applicants to trade some or all of the cost of their tuition for time spent working. In other words, instead of working for a paycheck, the money you make — which is at least minimum wage — goes toward your college tuition bill. Work-study does not require repayment.
Like student loans, grants come in different forms. The most common type is the Pell Grant, which is awarded by the federal government based on financial need. Other grants may also take monetary means into consideration, but not all of them do. Grants are never repaid unless the student fails to complete the courses they were paid to enroll in and attend. The majority of all grants available to you can be obtained by filling out the Free Application for Federal Student Aid, something Forbes Magazine reports 21,945,597 people did in the 2011-2012 application period.
We understand that most people don’t want to pay off student loan debt down the road when they’re just starting out in their career. We also know that not everyone is going to get a scholarship to school.
As a beginner in the world of college financial aid, this may all seem very overwhelming. Let us take the burden off your shoulders when trying to figure out what form of financial aid best suits you. SimpleTuition provides heaps of information and advice to students year after year to help them decide which financial aid options they’re eligible for and what accommodates their financial plans the best.