Financial Aid: How It Works

Well, you’ve found the right place, if you want to know what financial aid means. Going to college involves not just learning but also dealing with money stuff. Understanding how financial aid works is key to making sure the cost of education doesn’t become too heavy. In this guide, we’ll dive into the world of financial aid.

What Is Financial Aid?

Financial aid is money for college that doesn’t come from your family or what you’ve saved up. It can be grants, scholarships, jobs you work during school, or loans from the government or private companies. This money can help pay for lots of college stuff like tuition, housing, books, and getting to campus.

Financial aid can come from different places like the government, schools, community groups, and companies. How much you get depends on the rules of each place and also on government and school rules.

Types of Financial Aid

Financial aid usually comes in one of these forms, whether it’s based on your needs or your achievements:

1. Grants

A grant is a type of financial aid that is awarded to students to help them pay for their education. You don’t have to pay back unless you don’t follow the rules, like dropping out of school. Grants can be from the government, schools, or other groups. They’re usually based on your financial need, but some are given for doing well in school or other reasons.

2. Scholarships

A scholarship is a type of financial aid that is awarded to students to help them pay for their education. Scholarships are typically awarded based on merit, academic achievement, talent, or a combination of these factors.

Scholarships are also like grants; you don’t have to pay them back unless you don’t follow the rules. They can come from the government, schools, or other groups, just like grants.

3. Work-Study/Non-Work Study

Work-Study (FWS) and Non-Work Study (NWS) are two types of financial aid programs that help students fund their education. Here’s a breakdown of each:

Work-Study (FWS):

A federal program that provides part-time jobs for undergraduate and graduate students with financial need.
Students work on-campus or off-campus, typically in community service-related jobs.
Pay is minimum wage or higher, and earnings are taxable.
FWS is awarded as part of a student’s overall financial aid package.
Students must apply for FWS through the Free Application for Federal Student Aid (FAFSA).

Non-Work Study (NWS):

Financial aid that does not require students to work in exchange for funding.
Can include grants, scholarships, and loans.
You can use NWS to help with financial needs, academic merit, or a combination of both.
Students do not need to work to receive NWS funds.
you can receive NWS through federal, state, institutional, or private sources.

4. Federal or private student loans

Federal or private student loans are financial aid that help students fund their education. Here’s a comparison of the two:

Federal Student Loans:

Offered by the U.S. Department of Education
Fixed interest rates (currently 4.53% for undergraduate and 6.08% for graduate students)
Income-driven repayment plans available
Forgiveness programs available (e.g., Public Service Loan Forgiveness)
Deferment and forbearance options available
No need for a credit check (except for PLUS loans)
Subsidized and unsubsidized options available
Origination fees apply (currently 1.057%)

Private Student Loans:

Offered by banks, credit unions, and other lenders
Variable or fixed interest rates (currently ranging from 3.5% to 14.5%)
Repayment terms vary by lender
No forgiveness programs are available
Deferment and forbearance options may be available but vary by lender
Credit check required
A cosigner may be required
Origination fees may apply

What is the Best Financial Aid?

Grants and scholarships are considered the most desirable forms of financial aid because they offer free money to help students pay for their education, with no repayment obligations

Why You May Get Rejected

The Federal Student Aid office says some applications might get rejected because people didn’t meet the basic rules. These rules include showing that you need financial help and being either a U.S. citizen or someone eligible to get aid even if they’re not a citizen.

FAQ

Is financial aid and FAFSA the same thing?

Yes, it is a student aid. If you need money for college from the government, fill out the Free Application for Federal Student Aid (FAFSA®) on fafsa.gov. Your school will look at your FAFSA® to figure out how much aid you can get. This aid might include grants, loans, or a job on campus.