Financial aid is a general term that refers to all types of financial assistance available to students financing their college education. Financial aid is available from various sources. There are three main types of financial aid available, including what is considered gift aid (scholarships and grants), work programs, and student loans.

Sources of Aid – Aid is available from the U.S. Department of Education (federal government), the Massachusetts Department of Education, as well as from educational institutions (colleges and universities). In addition, there are scholarships available from private companies, civic organizations, businesses, foundations, and agencies. In some cases, some employers also have tuition assistance and/or benefits available. An employer’s Human Resource Department should be an excellent resource for this information. Lastly, the military may have scholarship monies available as well. Check with each branch of the military to see what is available for education.

Types of Aid – There are three main types of financial aid available which are outlined below:

Gift Aid: This is the best stuff! As the name indicates, this is free money and it comes in the form of grants and scholarships. As the term suggests, gift aid is for the student to use toward educational expenses and it does not need to be repaid. However, a student may need to maintain a certain grade point average (GPA) to continue receiving gift aid.

Gift aid can be further broken down into two categories – Need Based Aid and Merit Based Aid.

Need Based Aid:  Need Based Aid is awarded based on a family’s demonstrated financial need, as determined by information provided during the financial aid application process. Need based aid includes grants, work, and student loan programs. All federal aid sources and the majority of state and institutional aid is need based.

Merit Based Aid:  Merit based aid, or scholarships, are available directly from colleges and typically are awarded to a student based on a special talent, such as athletic or academic achievement, or for a special skill or aptitude. Recipients of merit based aid are determined based on their relative strengths against other applicants and typically are selected through the admissions application process. Be sure to put your best foot forward during the college admissions application process so that you are considered for any available merit based aid during that process.

Need-Based Grants are available from a number of sources and are outlined below:

Federal Grants are based on financial need. A student must complete the FAFSA and demonstrate financial need to be considered for a federal grant. The most common federal grant programs are outlined below.

Federal Pell Grants:  Pell Grants are available to undergraduate students who are enrolled at least half time. These grants are not a guarantee though, as many factors contribute to awarding Pell Grants. For example, Pell Grants typically are awarded to those students demonstrating the highest need as determined by federal guidelines. In addition, the total cost of the college and the student’s enrollment time status has a bearing on Pell Grant award amounts. Colleges will automatically consider a student for a Pell Grant by virtue of a student having filed a FAFSA. Eligible students will be notified via a financial aid award letter.

Federal Supplemental Educational Opportunity Grants (FSEOG):  Federal Supplemental Educational Opportunity Grants are available to undergraduate students exhibiting exceptional financial need. Pell Grant recipients with the lowest Expected Family Contribution (EFC) will be automatically considered for a Federal Supplemental Educational Opportunity Grant (FSEOG) and awarded accordingly. Grants in the FSEOG program range from $100 to $4,000 a year depending on demonstrated financial need, the college’s total annual funding allotment, college awarding policies, and timing of your financial aid application. Colleges will automatically consider a student for an FSEOG by virtue of a student having filed a FAFSA. Eligible students will be notified via a financial aid award letter.

Institutional Grants are awards made by some colleges and universities and are based on specific awarding criteria determined by the college. Many institutional grants are need-based; however, there are institutional grants that are merit-based as well. Check with the colleges and inquire if there are institutional grants that can be applied for separately or if completing the FAFSA is sufficient.

State Grant Programs are available in Massachusetts. By virtue of completing the FAFSA, students will be reviewed for the MA State Grant Program. If found eligible, the student will be notified via a financial aid award letter.

Scholarships are also available from a number of sources. General Scholarships are another form of gift aid. The specific criteria for scholarship eligibility is determined by the college and the aid is awarded accordingly. Scholarships may be based on need, but typically are also based on some additional criteria, such as academic or athletic achievement or a special talent or aptitude. As mentioned above, merit-based aid is available at some colleges. Merit Scholarships create another category of gift aid and are highly sought after. If a college has merit scholarships available, they are typically awarded to students at the time of admission. During the admission review process, the relative strengths of students are compared and merit scholarship recipients are determined accordingly. Check with individual colleges to see if this category of aid is available.  Restricted Scholarships may also be available to those meeting scholarship guidelines, as determined by the college. Restricted scholarships are available from many colleges and typically have a very specific target and set of criteria associated with them, such as ethnic background, geographic locality, program of study, ancestry, family legacy, and/or descendants of members of certain graduating classes. Those are just a few examples of restricted scholarship examples. You should check with the college to see if there are restricted scholarships that can be applied for directly or if students are considered as a result of their financial aid or admissions application. There are local scholarships available as well in some instances.

The Federal Work Study Program (FWS) is a popular federal work program that is available to many students that demonstrate financial need (by completing the FAFSA). If a student is deemed eligible for this program, an FWS award will be included on the financial aid award letter. FWS Program awards allow students to work on campus and earn an actual pay check. Students may also work off campus for a non-profit organization or agency. This is a very popular option and a practical way for students to help pay for incidental college expenses.

Federal Student Loans can be borrowed and must be repaid (along with interest accrued). A federal student loan allows students to borrow money to help pay for college through programs administered by the federal government. Specific federal loan programs are highlighted below:

Federal Perkins Loans are awarded through the college financial aid office and are need-based federal loans. Perkins loans are typically awarded to the highest need students. The Perkins Loan program offers a fixed interest rate, zero fees, a nine month grace period, and a ten year repayment term. This loan is in the student’s name thus the student is fully responsible for repaying the loan. A student will be considered for this low-interest program by completing the FAFSA.

Federal Direct Subsidized Stafford Loan Program is a popular loan program which is widely used by students. This loan program is need-based and students are required to be enrolled in a degree granting program at least half-time. This loan is in the student’s name and social security number thus the student is fully responsible for paying back the loan. A student will be considered for this low-interest program by completing the FAFSA. Interest rates on Federal Stafford Loans are fixed. As this loan is subsidized, no interest will accrue on this loan while the student is enrolled at least half-time or during the six month grace period that this loan offers. Since the U.S. Department of Education is the lender for the Federal Direct Subsidized Stafford Loan, students will repay the loan directly to the U.S. Department of Education. There is a 1% origination fee on this loan which will be deducted from the proceeds of the loan. Even though there is a 1% fee for this loan, the loan terms and repayment conditions make it one of the better student loan options available.

Colleges award financial aid to students following federal, state and institutional guidelines. Colleges are required by the U. S. Department of Education to use the information submitted on the Free Application for Student Aid (FAFSA) to make financial aid eligibility determinations for all federal aid programs.

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