Financial Aid Packages: Understanding Loans And Awards

Financial aid is any funding that helps students pay for college, such as grants, scholarships, work-study programs, or loans. Students can receive financial aid from the federal government, state government, their school, or a private or nonprofit organization. The two basic types of financial aid are need-based and merit-based. Need-based aid is determined by a family's ability to pay for college, as calculated by the FAFSA. Merit-based aid, on the other hand, is awarded based on a student's talent or academic or athletic ability. While grants and scholarships do not need to be repaid, loans must be repaid with interest.

Federal need-based aid

To be considered for federal need-based aid, students or their families must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA calculates the expected family contribution, taking into account factors such as income and savings and the number of family members enrolled in college. There is no income cutoff to qualify for federal need-based aid, and it is important to submit the FAFSA every year to remain eligible for aid.

Grants are a common form of federal need-based aid and are typically awarded to students with exceptional financial need. Examples include Pell Grants, which are available to undergraduates, and Federal Supplemental Educational Opportunity Grants (FSEOG), which are awarded to undergraduates with significant financial need. Grants do not generally need to be repaid and can be offered by the federal government, state government, schools, or private organisations.

Work-study programs are another component of federal need-based aid, offering part-time employment opportunities for students to help cover their college expenses. These jobs can be found on or off-campus, and students are usually paid at least the federal minimum wage. The availability and amount of work-study awards depend on factors such as the timing of the application, the student's financial need, and the funding level of the school.

Additionally, the federal government offers direct subsidised loans as part of its need-based aid package. During a student's time in school, the government pays the interest on these loans, provided the student is enrolled at least half-time. After graduation or if the student drops below half-time status, they become responsible for the interest. It is important to note that there are annual and undergraduate study limits for direct subsidised loans, and the interest rates may significantly increase the amount owed over time.

Merit-based aid

Financial aid is any form of funding that helps students pay for college, such as a grant, loan, scholarship, or work-study program. There are two types of financial aid: need-based and merit-based. Need-based aid is awarded based on a family's ability to pay for college, while merit-based aid is awarded based on a student's achievements and abilities.

Merit-based financial aid, also called merit scholarships or merit awards, is financial support offered in recognition of a student's achievements. This can include academic, athletic, artistic, or leadership abilities. Unlike need-based financial aid, merit-based aid does not consider the financial need of the student or their family. Most merit-based aid is awarded directly by colleges and universities, but not all institutions offer this type of aid. The amount and availability of merit-based aid can vary significantly between schools.

To be considered for merit-based aid, students may need to complete additional applications or meet specific deadlines and requirements. Some scholarships may require essays, letters of recommendation, or other supporting materials. It is important for students to research the eligibility and application requirements for any merit-based aid they are interested in. Additionally, students should be vigilant in understanding the terms and conditions of their merit-based aid to ensure they meet any necessary requirements to maintain their eligibility.

Grants

Financial aid is any form of funding that helps a student pay for college, such as a grant, loan, scholarship, or work-study program. Grants are a form of financial aid that provides funds to help pay for college, career school, or trade school. They are usually awarded based on financial need and, unlike student loans, generally do not need to be repaid.

There are a variety of grant resources online, and grants can be offered by the federal government, state government, schools, or private or nonprofit organizations. The US Department of Education, for example, offers Pell Grants, which are federally funded and have been around since 1965. For the 2025-2026 award year, the maximum Pell Grant award is fixed at $7,395.

To be considered for grants, it is important to research their eligibility and application requirements. Students should submit a Free Application for Federal Student Aid (FAFSA) form every year that they are in school. The FAFSA form will determine the award year that the student is planning on attending school, and the Department of Education will track the Lifetime Eligibility Used (LEU) by adding the percentages of the Pell Grant scheduled awards received for each award year.

Some other grant programs include the Georgia HOPE Scholarship and Grant Program, which provides grants for tuition, fees, and books for Georgia residents at public and private colleges in Georgia, and the Teacher Education Assistance for College and Higher Education (TEACH) Grant, which is for college students who agree to serve students from low-income school districts.

Scholarships

However, if a college needs to make room for a private scholarship within a student's financial aid eligibility, they may reduce some college-specific grants or scholarships. This is not a common occurrence and is usually a last resort. In this case, the college will contact the student. It is up to the school to decide whether to cut back your financial aid package by reducing the amount of federal aid (grants, loans) or institutional scholarships that you receive. The best-case scenario is for the school to use the scholarship money to replace loans, as this will reduce the amount you need to borrow.

Work-study programs

Financial aid is any form of funding that helps students pay for college, such as grants, loans, scholarships, or work-study programs. Work-study programs are one of three types of federal financial aid funds, along with loans and grants. The Federal Work-Study Program gives qualified undergraduate and graduate students the opportunity to earn money and gain job experience. The US government pays part of the student's wages, and the amount earned depends on the number of hours worked and the hourly pay rate. Students are expected to work between 15 and 20 hours per week.

Students will then receive a regular paycheck to help with their educational and living expenses. This is usually paid biweekly and deposited directly into the student's bank account. Importantly, income earned from a work-study job will not negatively impact a student's financial aid eligibility in the following year. Students can also benefit from an exemption from FICA taxes on their federal work-study earnings.

Overall, work-study programs provide a valuable opportunity for students to gain work experience and earn an income to support their studies, without compromising their financial aid package.

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