With the cost of education rising every year, understanding financial aid options is more important than ever. Aside from rich relatives, there are essentially three types of financial aid: scholarships, grants and loans. Understanding what financial aid is available, and what’s suitable for your situation, will help you find the best financial aid program for your needs.
If you have excellent grades or excel in sports, you may qualify for a scholarship from your college, the government or a non-profit or private organization. Scholarships are generally merit-based, meaning you usually need above-average skills or achievements to qualify for one. They’re typically very competitive, as hundreds of students could apply for a single scholarship.
Scholarships often come with conditions that the student is willing or eager to accept — like playing football on the college team after receiving a football scholarship. As another example, if you plan to go into a primary care position in health care, you may be eligible for a scholarship from the National Health Service Corps. It pays your tuition and other educational costs and provides you with some living expenses in return for your commitment to work in an underserved community for at least two years after graduation.
If you’re in financial need, you may qualify for a grant. Unlike scholarships, grants are based on need rather than merit. You generally don’t have to pay back a grant, provided you stay in school. Grants are usually limited in how much they pay, so it’s unlikely that you could finance your entire education on grants alone. Some students who qualify for a federal grant also receive federal student loans.
Government Student Loans
State and federal student loans are available through the government and provide some benefits not available from private lenders. Most government loans don’t require a credit check. Students in financial need may qualify for subsidized loans, where no payments are required and no interest is charged while the student is in school. Subsidized loans can also offer:
- Fixed, low interest rates
- income-based repayment plans
- deferment of payments when needed
- cancellation of payments based on some types of public service employment.
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Private loans are generally available from a lender such as banks and credit unions. They usually require a credit check and students with a poor credit rating may need a cosigner. However, private loans do have some benefits. Approval can take only a few days for those with a good credit history. Unlike government loans, private loans are paid to the student, not to the college.
Where to Apply for Financial Aid
Regardless of which type of financial aid you think may be best for you, make sure you know all of your options. The Federal Student Aid website is where you’ll find out if you qualify for federal grants and loans, and where you’ll provide the information required for scholarships. It’s a good idea to visit your college website and your state education website to see what types of financial aid they offer.