Types of Financial Aid
Types of Financial Aid
Transcript
This lesson will provide you with an introduction to financial aid. We'll start with some very basic definitions and introduce you to things like grants, loans, and scholarships. We'll start from the very beginning. What is financial aid? I like to say that financial aid is four things from four places. The four things include scholarships, grants, loans, and employment. The four places are institutional aid, federal, state, and private aid. The job of a good financial aid administrator is to partner with you, the student, to make sure you are getting the most out of the four things from the four places. There is no single solution. So a financial aid officer will help you come up with the right blend. Both you and the financial aid office need to work together.
A scholarship is an award of money given to the student or the university on behalf of the student to assist with educational costs. Think of it this way. The college or an external organization values something about you and is willing to help you reach your higher education goals. Usually, you do not need to repay the money in a scholarship, but many have specific requirements to maintain them. Scholarships can include academic, talent, athletic, and performance scholarships, while grants, another financial reward that you do not need to repay, are typically need based and made on some kind of review of your financial situation. It also could be a combination of both. For example, a need based grant might be available to you, but eligibility for it includes a specific minimum GPA.
A Pell Grant is money the federal government provides to students. These do not have to be repaid, and eligible students receive a specified amount each year, based on the results of the federal aid application. FSEOG is another federal grant that some colleges can provide to Pell Grant recipients. Not all colleges have FSEOG to award. The school should automatically award it based on their application deadlines and your Pell Grant eligibility. Another type of financial aid are loans. Loans for college educational costs can be federal and non-federal. We will talk a little more in-depth about non-federal grants and loans later.
Federal student loans are provided by the government. They have some limits, but typically, these loans have lower interest rates than commercial loans. If you find yourself in need of a loan for college, we recommend that you look for eligible federal loans first. You'll pay less interest in the long run. For now, I want to focus on federal loans of which there are two main types, Stafford loans and PLUS loans.
Stafford loans, also called subsidized and unsubsidized loans. The amount of these loans is determined by your school each year. The amount you can borrow is based on your year in school. As you get further along towards graduation, federal regulations let you borrow more on an annual basis. PLUS loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school.
Note, undergraduates who are veterans are not likely to be eligible for this loan, as veterans are usually considered independent students. I encourage you to do a cost benefit analysis when considering taking out a loan. This is about what works for you. Each student considering an education loan needs to determine if the long term costs of repaying the loan are worth it, when considering the benefits of the education you will receive. Certainly, taking out education loans are a big responsibility, and if they can be avoided, that is generally a good choice. Most loans do not require that you make payments while you are in school. Some, in fact, are interest free while in school. The good news is that most interest rates are comparable to other commercial interest rates.
Finally, there is employment or work study programs. There is a federal work study program, which allows you to work on campus, typically from 5 to 20 hours a week. Some states have state based programs, and some colleges might have institutional based work study. So check out that possibility. Work study can be a great way to receive additional funds for school related costs through the pay check work study recipients receive when they work. A work study job can often be related to your academic interests, and for veterans, their results of the VA work study program.
A scholarship is an award of money given to the student or the university on behalf of the student to assist with educational costs. Think of it this way. The college or an external organization values something about you and is willing to help you reach your higher education goals. Usually, you do not need to repay the money in a scholarship, but many have specific requirements to maintain them. Scholarships can include academic, talent, athletic, and performance scholarships, while grants, another financial reward that you do not need to repay, are typically need based and made on some kind of review of your financial situation. It also could be a combination of both. For example, a need based grant might be available to you, but eligibility for it includes a specific minimum GPA.
A Pell Grant is money the federal government provides to students. These do not have to be repaid, and eligible students receive a specified amount each year, based on the results of the federal aid application. FSEOG is another federal grant that some colleges can provide to Pell Grant recipients. Not all colleges have FSEOG to award. The school should automatically award it based on their application deadlines and your Pell Grant eligibility. Another type of financial aid are loans. Loans for college educational costs can be federal and non-federal. We will talk a little more in-depth about non-federal grants and loans later.
Federal student loans are provided by the government. They have some limits, but typically, these loans have lower interest rates than commercial loans. If you find yourself in need of a loan for college, we recommend that you look for eligible federal loans first. You'll pay less interest in the long run. For now, I want to focus on federal loans of which there are two main types, Stafford loans and PLUS loans.
Stafford loans, also called subsidized and unsubsidized loans. The amount of these loans is determined by your school each year. The amount you can borrow is based on your year in school. As you get further along towards graduation, federal regulations let you borrow more on an annual basis. PLUS loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school.
Note, undergraduates who are veterans are not likely to be eligible for this loan, as veterans are usually considered independent students. I encourage you to do a cost benefit analysis when considering taking out a loan. This is about what works for you. Each student considering an education loan needs to determine if the long term costs of repaying the loan are worth it, when considering the benefits of the education you will receive. Certainly, taking out education loans are a big responsibility, and if they can be avoided, that is generally a good choice. Most loans do not require that you make payments while you are in school. Some, in fact, are interest free while in school. The good news is that most interest rates are comparable to other commercial interest rates.
Finally, there is employment or work study programs. There is a federal work study program, which allows you to work on campus, typically from 5 to 20 hours a week. Some states have state based programs, and some colleges might have institutional based work study. So check out that possibility. Work study can be a great way to receive additional funds for school related costs through the pay check work study recipients receive when they work. A work study job can often be related to your academic interests, and for veterans, their results of the VA work study program.