What is financial aid?
Financial aid is money given by colleges and federal and state governments to help students pay for college or graduate school. This money is in the form of loans, grants, scholarships, and work-study. Loans and work-study must be repaid either through financial obligation (loans) or service to the college (work-study). By contrast, grants and scholarships do not have to be repaid.
There are two types of financial aid: need-based, which is based on your family’s ability to pay, and meritbased, which is based on a student’s academic, athletic, or special talent. Most financial aid is needbased, and the discussion here focuses on need-based aid.
Who offers financial aid?
There are many players in the financial aid arena. Along with you (and your own savings and loans), think of these financial aid providers as pieces of a puzzle that must fit together to create a fully funded college education.
The federal government is the largest dispenser of need-based financial aid for higher education. The federal government funnels money to colleges and banks, and directly to students for loans, grants, scholarships, and work-study programs.
Colleges constitute the second largest provider of financial aid. The money can come from the college’s own reserves (private colleges generally have greater endowment funds than public colleges), or from federal and state government agencies. Colleges may also direct students to a particular bank that coordinates loans with that school. Colleges that accept a student who is eligible for financial aid will create a financial aid package for that student. State governments Most states offer financial education assistance to state residents, to students attending in-state public schools, and to colleges and banks located within their borders.
Most states offer financial education assistance to state residents, to students attending in-state public schools, and to colleges and banks located within their borders.
A vast number of corporations, foundations and associations of all kinds offer merit financial aid. Most organizations seek students with specific qualifications, backgrounds, and future plans—for example, a Nebraska high school graduate who plans to major in pre-med. In recent years, the Internet has become a valuable tool to search for grants and scholarships.
To continue reading about how to effectively apply for financial aid, click here and download our free e-book, Education Planning: Strategies to Help Plan for Your Child’s Future.