If you’re just learning about what types of financial aid are available to your as a college student, it can get confusing. Financial aid is a crucial resource that can help students afford higher education, and understanding how financial aid works is key to making the most of it. This blog is here to help you learn how financial aid works, different types of financial aid that are available, what qualifications you’ll need to be eligible and how to apply for financial aid.

Financial Aid For College Explained

Financial aid for college comes in different forms including grants, scholarships, work-study programs, and loans. According to the National Center for Education Statistics, grants and scholarships are the most common type of financial aid awarded to students. In 2015-2016, 89% of full-time, first-time undergraduates received some type of financial aid. Of those students, 38% were awarded federal grants, averaging $4,221 per student. Another 47% received scholarships and grants from their colleges, averaging $7,770.

Types Of Financial Aid

  • Federal grants like the Pell Grant provide aid that does not need to be repaid. Pell grants are awarded based on financial need and may provide up to $6,495 for the 2022-2023 school year.
  • Academic or merit-based scholarships provide free money for college and are not repaid.
  • Work-study allows students to earn money for college expenses by working part-time, often on campus.
  • Student loans provide financial assistance but must be repaid with interest after graduating or leaving college.

Who Qualifies for Financial Aid

Financial aid is available through a variety of sources, including the federal government, state governments, colleges and universities, and private organizations. There are two main types of financial aid: need-based aid and merit-based aid.

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Need-based aid is given based on a student’s financial need. The main application for need-based aid is the Free Application for Federal Student Aid (FAFSA), which takes into account factors like income, assets, and family size to determine eligibility. To qualify for need-based aid, students must meet certain requirements, including being a U.S. citizen or eligible non-citizen and having a high school diploma or equivalent. Financial need is determined by taking the cost of attendance minus the expected family contribution. Students with an EFC of $0 are considered to have the most financial need.

Merit-based aid is given based on criteria like academic, athletic, or artistic merit. Merit-based aid is awarded regardless of financial circumstances. Common criteria include GPA, test scores, extracurricular activities, and talents. Both need-based and merit-based aid have annual limits based on dependency status.

In general, to qualify for financial aid, students must:

  • Be a U.S. citizen or eligible non-citizen
  • Have a high school diploma or equivalent
  • Be enrolled in an eligible degree or certificate program
  • Make satisfactory academic progress
  • Not be in default on a federal student loan

There are special considerations for dependent vs independent students, graduate students, military members, and more. With thousands of aid programs available, most students can find some type of financial assistance if they meet basic eligibility requirements.

Who Should Apply For Financial Aid?

Any student that would like to be considered for federal, state, and school financial aid programs. This includes scholarships, work-study funds, grants, and loans.

How to Apply For Financial Aid

The main application for federal student aid is the FAFSA. This form is required for all federal grants, loans, and work-study programs. Most states and colleges also use FAFSA data to determine eligibility for their own aid programs. The FAFSA should be completed as soon as possible after it opens on October 1 for the following academic year.

Some colleges also require the CSS Profile form in addition to the FAFSA. The CSS Profile collects more detailed financial information and is primarily used by private universities to determine institutional aid eligibility.

It generally takes a little less than an hour to fill out the FAFSA form. You will need to gather some documents in order to complete your FAFSA form.

Meeting priority deadlines for the FAFSA, CSS Profile, and individual colleges is crucial to maximize aid awards.

Key documents needed to complete financial aid applications include:

  • Tax returns and W-2s from the prior year for student and parents (if applicable)
  • Records of untaxed income like child support and veterans benefits
  • Bank statements and investment records
  • FSA ID to electronically sign the FAFSA. Be sure to keep track of the username and password you set up when you create an account.

Expected Family Contribution

Expected Family Contribution (EFC) is a measure of how much a family can contribute financially toward a student’s college education. It is calculated according to a formula established by the federal government that takes into account income, assets, family size, and other factors.

The EFC formula considers both the income and assets of the student and their parents. Income includes wages, salaries, interest and dividend income. Assets include things like savings accounts, stocks, bonds, mutual funds, and real estate. Certain allowances are made for taxes paid and living expenses.

In general, the higher the income and assets, the higher the EFC will be. However, the EFC is not necessarily equal to what a family will pay for college. It is an index colleges use to calculate financial aid eligibility. Many factors determine final out of pocket cost.

The average EFC is around $10,000 for four-year colleges. However, it varies greatly by income level. For lower income families, the average EFC can be as low as a few hundred dollars.

The goal of the EFC system is to provide a standardized estimate of how much families can reasonably contribute, so that financial aid can be distributed fairly. While not perfect, it aims to make college more accessible and affordable for students from diverse economic backgrounds.

Award Letters

When you are accepted to a college and apply for financial aid, you’ll receive an award letter detailing your financial aid package. This letter lists all the types of aid you qualify for and the amounts. It’s important to carefully compare award letters from the schools you are considering.

Focus on the ratio of grants and scholarships (free money) versus loans. Grants and scholarships you will not have to pay back, but loans you will. Schools with better financial aid packages will meet more need through grants instead of loans. You can appeal your award if you think your family circumstances warrant more aid. Provide them with more documentation like pay stubs, medical bills, or your sibling’s college costs.

Prioritize free aid like grants and scholarships over loans. Federal student loans are capped at certain amounts, so you may need to take out additional private loans. Try to minimize loans as much as possible.

Federal Student Loans

The federal government offers student loans with low interest rates and flexible repayment options. The most common types of federal student loans are:

  • Direct Subsidized Loans: The government pays the interest on these loans while the student is enrolled at least half-time and during grace periods. Eligibility is based on financial need.
  • Direct Unsubsidized Loans: Students are responsible for paying the interest on these loans during all periods. Financial need is not required.
  • Direct PLUS Loans: These loans are available to graduate students and parents of dependent undergraduates. The student or borrower is responsible for interest during all periods.

Interest rates on federal student loans are fixed for the life of the loan. For loans issued between July 2022 and June 2023, interest rates range from 4.99% to 7.54%.

Students must repay federal loans after graduating, leaving school, or dropping below half-time enrollment. Standard repayment terms are 10 years, but extended and income-driven plans are available to borrowers who qualify.

Work Study

The Federal Work-Study (FWS) program provides part-time employment to undergraduate and graduate students with financial need, allowing them to earn money to help pay for education expenses. Students typically work on campus at places like the library, administrative offices, dining halls, or gym. Jobs can also be located off campus at qualifying nonprofit organizations or public agencies.

FWS earnings are not counted as income when calculating the next year’s financial aid eligibility. Students can earn up to the total amount of their work-study award. On average, students work 8-12 hours per week and earn $4,000-$5,000 per year. However, the amount earned depends on the wage rate and hours worked.

Participating in work-study offers several benefits. Studies show it can increase college persistence and degree completion. Work-study students graduate at higher rates, likely because the on-campus jobs integrate them into the university community. Work experience also boosts students’ resumes and job prospects after college.

However, juggling classes and a job can be demanding. Students need to manage their time wisely and communicate with supervisors if their academic workload becomes overwhelming. The income won’t cover all college costs but work-study can provide a valuable opportunity to offset expenses while gaining real-world skills.


Scholarships are a type of financial aid that students do not need to repay. They are awarded based on various criteria, such as academic merit, athletic ability, extracurricular interests, career goals, demographic factors, or submitting an outstanding essay. There are many different types of scholarships available from various sources.

Merit-based scholarships reward students for their academic achievements, such as having a high GPA or test scores. According to this data, the average value of an undergraduate private scholarship in 2024 was $1,982. Many colleges and universities automatically consider applicants for merit scholarships based on their grades and test scores.

Athletic scholarships are awarded to students who excel in sports. They cover tuition, fees, room and board, and textbooks for student-athletes. According to the NCAA, over 180,000 student-athletes receive either a partial or full athletic scholarship each year. These are very competitive, with Division 1 FBS schools offering on average 12 full-ride scholarships per team.

Submitting an outstanding scholarship essay can pay off with generous awards. Essay scholarships allow students to showcase their writing abilities and tell their unique stories. With so much competition, students should start essays early, have teachers/parents proofread them, and highlight their passions and achievements.

How do I Find Outside Scholarships?

Outside scholarships are provided by private organizations, nonprofits, corporations, professional associations, religious groups, and more. Students usually apply directly to these organizations for consideration. The average amount awarded from private scholarships is $1,968.

Great resources for finding outside scholarships include Fastweb, Scholarships.com, BigFuture by The College Board, and your school counselor.

Special Circumstances

One of the most common special circumstances for financial aid is submitting an appeal. Students can appeal their financial aid package if they experience a change in circumstances that impacts their or their family’s finances. Common reasons to submit a financial aid appeal include, medical expenses, death of a parent, or other extenuating circumstances.

The financial aid appeal process allows students to have their aid eligibility re-evaluated based on updated financial information. To start the process, students should contact their school’s financial aid office and request a financial aid appeal form. They will need to explain their circumstances, provide documentation, and give an estimate of how much their income or expenses have changed.

Appeal approval rates vary by school. Schools want to help students, so appeals with clear documentation of need have a good chance of being approved. However, there is no guarantee.

Another option is requesting a professional judgment review. This allows the financial aid office to make adjustments to your aid eligibility based on special circumstances, even if you don’t file a formal appeal. The professional judgment process is similar – you must contact the financial aid office, explain your situation, and provide documentation. Not all schools offer professional judgment, but it can provide another avenue if an appeal is denied.

With both appeals and professional judgment, earlier is better. Submit your request as soon as possible so your aid can be re-evaluated before the next semester. Be persistent and follow up if you don’t hear back right away. Special circumstances can be difficult, but open communication with your financial aid office is key.

Financial Aid Resources

There are many resources available to help students and families navigate the financial aid process.

Some key resources include:

  • FinAid – This comprehensive website covers all aspects of financial aid including loans, scholarships, savings strategies and more. It provides tools and advice for students and parents.
  • Federal Student Aid – from the US Department of Education provides official information on federal financial aid programs like the FAFSA, grants, loans and work-study opportunities.
  • High school guidance counselors and college financial aid offices can provide personalized advice and assistance with the financial aid application process.
  • Non-profit organizations like the National College Access Network and Scholarship America promote college access and provide scholarships. They have local chapters that can provide in-person help.
  • Books like The Ultimate Scholarship Book and Cash for College provide directories of financial aid opportunities. Public libraries carry these and other financial aid resources.
  • Online tools like the Net Price Calculator can provide cost estimates tailored to individual circumstances.

With numerous free websites, nonprofit groups, publications and professional counselors available, students have many options to get information and guidance on the types of financial aid, applying for student loans and the FAFSA application process.

Commonly asked questions

Check out our Student Loans 101 section to get answers to a few commonly asked questions about student loans. But as mentioned before, try to avoid student loans when possible and utilize any financial aid available to you.

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