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The Ultimate Guide on Financial Aid For College

12.24.2022 • 13 min read

Nick Griffin

Subject Matter Expert

If you need financial aid for college, it’s crucial to understand it. Learn what it is, how it works, the different types, and the steps in order to apply.

In This Article

  1. What Is Financial Aid?

  2. 4 Basic Types of Financial Aid

  3. How To Apply for Financial Aid?

  4. Which Form of Financial Aid Is Best?

  5. What Does Financial Aid Pay For?

“My parents had to take out a 401(k) loan, but in the end, they were homeless while I was in college.” This is only one of 43 Buzzfeed community stories about how their families paid for college. Heartbreaking? Absolutely. But it doesn’t need to be your story.

While millions of Americans have outstanding student loan debt that they struggle to pay off, this is not the only way. Of course, student loans are helpful, but they are only one form of financial aid. Many other forms you don’t need to pay back.

It is possible to learn how to save money in college, but you have to look into a variety of financial aid options first.

What Is Financial Aid?

Financial aid simply means getting money to help pay for higher education. This money comes in several different forms and can pay for most college expenses like:

  • Tuition

  • Fees

  • Housing

  • Food

  • Books

4 Basic Types of Financial Aid

Understanding each type of financial aid will help you figure out how to get money for college.

1. Grants

Grants are free money given to a student based on financial need. This gift money can come from the federal government or the state government.

Most grant money is given out based on the difference between the cost of attendance (COA) and a student’s Expected Family Contribution (EFC).

Federal Pell Grants are the most common. During the academic year, students receive this money each semester in payments called disbursements.

2. Scholarships

Scholarships are also financial aid, but they are based on merit—being especially deserving of something. Scholarships are awarded for things like:

  • Academic achievement in high school

  • Athletic ability

  • Essay writing

  • A chosen career path

Some examples would be scholarships for military spouses and scholarships for single moms.

Scholarships are different from grants. Unlike grants, scholarships can come from various sources at the national, state, or local levels. Similar to grants, you don’t need to pay back this money.

3. Loans

A student loan is money you borrow to pay for college.

In Outlier’s free college success course, Dr. Kelly Richmond Pope gives a full overview of student loans.

You need to pay back both federal and private loans. Each year you apply for this money. Several types of loans are available. The type of loan a student takes out determines if its interest rate is set or variable.

Federal student loans are direct loans that have an interest rate set by the government. They come in two types:

  1. Subsidized

  2. Unsubsidized

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Subsidized Loans

Subsidized loans are offered to undergraduate students.

Subsidized means that the loans do not gain interest until 6 months after a student graduates from college. During this time, the federal government is covering the interest. This allows students to find a good job before they need to start repaying their loan.

Unsubsidized Loans

Unsubsidized loans are offered to graduate students or on top of subsidized loans to undergraduate students.

Unsubsidized loans start accruing interest right away. A wise student would make interest payments while in school.

Federal PLUS Loans are another form of unsubsidized loan.

Students who take out these loans usually need more funds than their subsidized or unsubsidized loans offer. It’s also common for parents to take out PLUS loans to help pay for their child’s education.

4. Programs

The program category of financial aid encompasses a diverse range of financial aid opportunities.

Federal work-study is one type of financial aid program. The government offers it to students who have substantial financial needs based on their EFC. In work-study, the college or a local organization employs a student so they can make money to help pay for school.

Various state and federal programs help pay for college based on the student’s career path. Usually, these programs will pay off student loans under certain stipulations, such as working in a rural community for 3 years.

Other programs that prospective students should look into are employee programs. Many organizations will invest in their employees’ education. These programs help with retention and advancement and could be a perk at your current workplace.

Looking into free money first is a wise move. Don’t be afraid to use student loans to pay for college as well. Most students find that a combination of grants, scholarships, and loans helps them fund their education effectively.

How To Apply for Financial Aid?

Getting financial aid requires patience and persistence. It is best to get ahead of the game and start early.

This step-by-step guide to the financial aid process will help you figure out how to pay for college:

1. Figure out what you want to go to college for

Chances are you have some idea of what career you would like to pursue.

Talk to a few professionals that do those jobs. Talking to a career counselor as well is a smart choice. This helps you get a better sense of what the work entails for the job you’re interested in.

Think about the degree path you’re considering. In Outlier’s free College Success course, you’ll learn about the cost of education compared to your potential earnings and gain critical advice on how best to pay for college.

Weigh the pros and cons of your potential professions and come up with the best fit for you.

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2. Explore schools you are interested in and apply

Once you know which career(s) you would like to pursue, do some research to find out where you might like to go.

Sites like US News & World Report rank the best schools based on their:

  • Career path options

  • Quality of education

  • Student evaluations

Remember to look at schools close to you, including community colleges. Online programs such as Golden Gate University’s Degrees+, powered by Outlier, allow you to earn transferable credits at a fraction of the cost. Imagine enrolling in your bachelor’s degree program with several semesters of credits already completed.

By choosing to then go to an in-state college, you can save thousands of dollars over prestigious out-of-state schools.

3. Fill out the FAFSA

Consider filling out the FAFSA (Free Application for Federal Student Aid) to access thousands of dollars to help pay for college.

Shortly after completing the FAFSA, you will get a student aid report that will list your EFC compared to the cost of your chosen school (COA). These numbers will determine the financial aid package you are eligible for.

On the application, you can list up to 10 potential schools and get aid offers from each of them. These offers include federal and state grants, loans, work-study programs, and even some scholarship opportunities.

The FAFSA should be the first place you go to for financial aid for college. This money is either grants or low-interest loans. You don’t have to accept it as soon as you get your award letter.

4. Fill out the CSS Profile

Many private schools use the College Scholarship Service (CSS) Profile to determine how the school will distribute grants and scholarships.

This profile requires additional information that is not on the FAFSA and is more time-consuming as a result. The CSS Profile, found on the College Board website, may be a requirement for your school. Talk to your college financial aid office before filling it out.

5. Apply for scholarships and keep applying

Various entities—local businesses, nonprofits, state agencies, etc.—offer scholarships to students. Finding them may seem tricky. But it doesn’t have to be.

Chances are your college pays for a website service that finds scholarships for you. You can also use application platforms like Going Merry to get matched with scholarships. It’s free. Talk to the school’s financial aid office to find out how to get access to millions of dollars in scholarships.

Through these free services, you can search for scholarships based on your unique profile. Many of these scholarships require an identical application and/or essay. With these services, you can apply to multiple scholarships with similar criteria at once.

6. Talk to your school’s financial aid office after getting accepted

Your school wants you to be able to pay for college. This is why they have a dedicated office to help you get the money you need. This office will help you navigate financial aid, even if you are not yet enrolled.

Often, students underutilize the financial aid office. The experts working there know exactly what you need to do to access money in different programs. Get the help you need for free from the financial aid office.

7. Calculate the anticipated costs of going to school

Before accepting any grants, scholarships, or loans, it is best to know exactly what it will cost to go to college.

Go to the school’s website to find out the cost of tuition and fees. Look into books you may have to buy, rent, or borrow as well. Think about housing and food (room and board), and look into a few different options.

Do some math and come up with the total amount of money you will need each semester of college. This way you can figure out how much financial aid you will need so you won’t borrow too much.

8. Talk to your boss about your college plans

Make sure your place of employment knows about your plans to go to school. Not only will your company be more likely to alter your schedule for school, but they may also even help you pay for it.

Many companies see college as an investment in their employees and offer college financial aid. If your degree will help you do your job better or push you toward a leadership position, they may be willing to foot some of the bills.

9. Research programs that help pay for college

Depending on which career path you are thinking of, there could be grants and scholarships to help pay for school. The TEACH Grant, for example, will give students up to $4,000 per year for college in exchange for teaching in a low-income school.

Similar programs are in health care and many other specialty areas. Military programs such as ROTC and the GI Bill can even wipe out tuition costs completely.

By using a government-sponsored grant program, you could have some of your college paid for while making a real difference in the lives of others.

10. Create a college budget

College costs more than what gets paid to the university. Learning how to live on a budget is a lifelong skill that can lead to less stress.

Consider all your monthly expenses and put them into a budget by category. This way you can keep track of where your money is going and how much you need to earn.

11. Look for employment opportunities during college

Finding the right fit for a college job can be tricky but hugely beneficial. When trying to figure out how to get a job in college, think first about how much time you have to devote to working.

Having a balance between work, school, and life will help provide you with a sense of autonomy and satisfaction. Plus, the skills that you learn at your job will benefit you when applying for jobs after graduation.

12. Accept your financial aid offers

Once you know how much money you need for college, be sure to accept it. Start by taking any gift money that is offered to you, such as grants and scholarships.

After gift money, take out federal loans to cover the expenses that you cannot cover through your job. Be sure to use federal loans first due to the lower interest rates compared to private loans.

13. Put your studies first

Remember that finding the money to pay for college is extremely important, but taking the time to do well in school is your priority.

Even if you have to take out more in student loans to ease financial stress, it will be worth it. Federal student loans are low interest and do not need to be paid back until after you graduate and start working full-time.

Loans are an investment in your future and should be used when needed.

Which Form of Financial Aid Is Best?

After following the steps above to find money to go to college, you must then decide which to access first. The best way to pay for college is to look for and use all the free money you can before taking out loans.

Below are the best forms of aid:

Gift Aid

This is money that does not need to be paid back, usually in the form of grants and scholarships. This money is accessed through the FAFSA, your school’s financial aid office, and private organizations.

Earned Aid

Money that you earn can come in many forms. Earned aid could be a work-study program through your school. It could also be through a program at your current place of employment that helps pay for college.

Lastly, earned aid is money that you save through your full-time or part-time job. By paying for some school costs as you go, you will pay less in interest on loans later. Think about what you can afford to pay for. Maybe just your food or even your housing?

Federal Subsidized Loans

These loans have the lowest interest rate because the lender is the federal government. Each time you fill out the FAFSA, your school will let you know how much you qualify for in subsidized loans.

You can choose to take the full amount or a partial amount, depending on your financial situation. Anything you take out will not start accruing interest until after you graduate from college.

Another perk of subsidized loans is that you have repayment options. You don’t have to make payments on them until 6 months after graduation, giving you time to find a good job before starting to make payments.

Federal Unsubsidized Loans

Federal unsubsidized loans have a higher interest rate than subsidized loans. This interest will start accruing as soon as you access the funds. That means that by the time you graduate, you will owe more in loans than what you took out.

A student taking unsubsidized loans would be smart to make monthly interest payments while in school. This way the interest is not accumulating more interest, which is called compound interest.

With both federal subsidized and unsubsidized loans, a federal loan forgiveness program applies. This means the government could pay off the loan for you by meeting certain criteria such as working in a low-income community for 3 years after graduation.

Private Loans

Private loans come from a bank or credit union as the loan servicer and typically have higher interest rates than federal loans. Another downside to private loans is that they may have a variable interest rate, meaning the interest rate may go up at any time.

You should only use these loans if there are no federal loans available to you.

What Does Financial Aid Pay For?

Since financial aid comes in many forms, it can pay for many expenses.

Federal loans come with a caveat that they must be used for educational expenses, but this is a vague description. Things like tuition, fees, books, housing, food, and even a personal computer all fall under this category.

While loans should be the last form of financial aid used, don’t fear them. Many successful college students take out loans and pay them back after graduation.

The best thing you can do to make financial aid work for you is to make a college budget and stick to it. Figure out how to get a college job to cover your basic expenses instead of using loans.

This way, you can move into the career you desire with marketable new skills and financial freedom.

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