Types of Financial Aid

Below is an overview of the most typical forms of college financial aid: scholarships, grants, loans, work-study programs, college savings plans, and military college incentive.


Scholarships

Scholarships are financial awards for college students and prospective college students to cover part or all of the student's college-related expenses. In most cases, scholarships do not have to be paid back. Some scholarships are a one-time award of money, while other scholarships are renewable for students continuing to meet the qualifying criteria.

There are a wide variety of scholarships available including, athletic scholarships, merit-based scholarships, need-based scholarships, local scholarships (scholarships for students in a particular geographical region), and scholarships for students possessing a unique qualification (for example, religious affiliation, intended career, place of parent employment). While scholarships tend to be classified under one type of scholarship, many scholarships are actually a combination of types. For example a merit-based scholarship may include a financial need component.

Grants

Grants are a form of financial aid that does not have to be paid back. Grants are available from the federal government, state government, colleges, and private organizations. Most government grants are given to students who have a demonstrated financial need. Many colleges also award grants to students or prospective students who have a financial need or who possess another qualifying criterion. Private grants are available from both non-profit organizations and businesses. Private grants are very similar to scholarships, but the criteria of a grant may be less related to the student's education than scholarships.

Loans

Education loans are available for students and parents. In most cases, loans do need to be repaid. There are government education loans and private loans. Government loans offer low interest rates. Borrowers of these types of loans are not required to be credit worthy. There are both subsidized (the government pays the interest while the student is enrolled in school) or unsubsidized (the student is responsible for all of the interest) government loans.

In general, private loans have variable interest rates, which are higher rates than government loans. Students or their cosigner must be credit worthy to qualify for private loans.

Work-Study Programs

Federal and state work-study programs are available for students with a demonstrated financial need. Work-study students are granted a specific amount of money that the student can earn in the form of wages by working in work-study jobs.

College Savings Plans

The two most common types of college savings plans are Qualified Tuition Plans (commonly known as 529 plans) and Coverdell Education Savings Accounts. Each of these plans offers parents tax advantages while saving for their children's education.

Military College Incentives

Each branch of the military offers financial incentives for their personnel to attend college. The Servicemen's Readjustment Act (commonly referred to as the GI Bill) is available for all enlisted military personnel who choose to participate. There is an active duty version and a reserves version of the GI Bill. In addition to the GI Bill some military branches offer other financial incentives such as student loan repayment and tuition assistance. Military incentives for college vary between branches of service. In addition, some incentives may be available during one period of time, and not available during another time period. Current members of the military should check their contracts and contact military education personnel to understand what options are available to them. Prospective military members should check with their recruiters to see what options are available to them for the funding of their education.