If you're trying to finance your college education, you may find yourself asking, "What are the four basic types of financial aid?" To put it simply, the answer is scholarships, loans, grants and work study. It is possible to have anywhere from one type to all four types of aid simultaneously.
What Are the Four Basic Types of Financial Aid
Scholarships are monetary awards that are usually given out to a person with high achievement in a certain discipline. These disciplines can include academics, sports, music and art, but they are not limited to these fields. Some schools use them to enhance their recruitment efforts and draw top students to their schools. Students do not have to repay scholarships, but they may have to meet certain requirements in order to keep them for all four years of study. For example, they may have to keep a minimum grade point average.
Grants are awarded by businesses, individuals and nonprofit organizations. Students apply for grants based on all kinds of criteria. It all depends on what the granter is looking for. For example, a student may receive a grant for living in a certain city or attending a certain religious institution. One big supplier of grants is the federal government. Many government grants are based on financial need. Like scholarships, grants are essentially free money; they do not need to be repaid.
The federal government also offers low-interest student loans, predominately Stafford Loans and PLUS Loans. Stafford Loans are need-based loans. The government may or may not subsidize them. If a loan is subsidized, the borrower doesn't have to pay interest. He or she simply has to repay the amount borrowed. PLUS loans were originally called Parent Loans for Undergraduate Students, but now they are available to graduate students as well. They are not need-based.
Both types of loans may have tax deductible interest. This is a good question for your tax adviser. In either case, the money goes directly to the school. If you have any leftover after paying for tuition, room and board and other fees, you will get a check to use for additional educational expenses.
You can also apply for private loans. These usually do not have as good of an interest rate as government loans, but they are very easy to get and you can sometimes use the money for expenses not directly related to education, such as to pay for an off-campus apartment.
Work study is another type of aid that can be federal or non-federal. With work study, you are given a job and can use your earnings to help pay for your education. If you apply for the Federal Work Study program, you may be given preference in both on-campus and off-campus employment, since you are granted a job that allows you to earn up to the amount of your award. You qualify based on financial need. The goal is to place you in a position related to your major, but this is based on availability. Many Federal Work Study participants receive part-time jobs at government agencies.
Non-federal work study is often limited to on-campus employment. For example, you could get a job in the dining hall or in the bookstore. These positions are not need-based. The best way to apply for them is to get an application on campus.
Applying for Federal Aid
To apply for all types of federal aid, whether you're interested in a grant, a loan or a work study position, you need to fill out the Free Application for Federal Student Aid. You can find it online. Each year that you wish to apply for assistance, you need to submit the application anytime after January 1. The sooner you can do so, the better, as some aid is first come, first served.
If you're still wondering, "What are the four basic types of financial aid?", a good place to turn is your school's financial aid office. It's a resource available to you to answer any questions you may have about money for college.