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Know the Difference: Types of Financial Aid

The variety of college funding sources often leads to confusion as students and parents plan for college. This financial aid primer can help you sort out and compare financial aid options.

Types of financial aid.
Type of Aid Where It Comes From For Students With Repayment Things to Think About
Grant Government and agencies, Colleges, Other sources Financial need No Number of years available
Scholarships Colleges; Community, nonprofit and business organizations Financial need, academic merit, specific accomplishments, and other qualifications No Number of years available, requirements for renewal
Work-Study Federal government Financial need No Expected overall earnings, hourly wage, available positions
Savings and Earnings Family and student contribution N/A No Availability of savings, hourly wage, available positions
Student Loans Federal government, private lenders, colleges Financial need, minimum underwriting criteria Yes Ability to repay total amount of debt, interest rates and terms


Grants are usually offered to eligible students with financial need or those with other special circumstances. Grants typically come from federal and state governments and agencies or from colleges; some are guaranteed to students who meet minimum qualifications. Some grants are offered by private entities and other organizations.

Grants do not need to be repaid. Some are offered only for freshman year; others are renewable for four or more years if the student continues to meet the qualifications.


Scholarships are similar to grants in many ways. A student may receive a scholarship for demonstrating financial need, but scholarships are also awarded for academic merit, specific accomplishments and a variety of other qualifications. Colleges are the source of many of the most substantial scholarships, but community organizations, nonprofits and businesses also make awards.

Scholarships also do not need to be repaid. Some are one-time awards; others are renewable if the student continues to meet qualifications. Students who qualify for renewable academic scholarships from colleges should especially be aware of the requirements to continue receiving the award and if they can requalify later if they temporarily fall below minimum guidelines.


Work-study is a federal aid program offered by colleges to eligible students with financial need. Estimated wages for jobs on or near campus are included in the college's financial aid offer, and colleges often provide assistance in locating these positions.

The work-study offer is a projected amount based on the student working a set number of hours, and the student is expected to use earnings to offset college expenses. Students who receive work-study should consider their ability to work the established hours, the pay compared to non-work-study positions and the work-study jobs available to them. Most colleges that offer work-study have job boards listing available positions.

Savings and Earnings

Although not technically offered as part of a financial aid package, students are often expected to provide some funds to pay for the cost of college, either from existing savings or from continued earnings during college. This is reflected in the amount of aid offered by a college, which is based on the Student Aid Index (SAI) number that is generated when a student files for financial aid through the Free Application for Federal Financial Aid or specific financial aid applications required by the college.

Families may not be able to contribute the expected amount, either because the funds are designated for the parents' retirement or siblings' education or otherwise unavailable.

Students who aren't offered enough other aid to cover the cost of attendance may plan to work to earn at least part of the shortfall. Again, students should be aware of the jobs available to them during school terms and breaks and an expected wage. Sometimes, on-campus jobs are limited to those who are eligible for work-study and other students may need to look further afield.

Student Loans

Federal student loans are included in a student's financial aid offer if the student and parents filed the FAFSA. These loans need to be repaid but do not require payment until the student has left school. Students are guaranteed a certain amount of federal student loans, and parents may supplement that amount by taking out federal parent loans for the student's benefit. (Parent loans enter repayment immediately, but borrowers may be able to delay payments if they meet certain criteria.)

Private student loans can be obtained from private lenders if students, or their cosigners if required, meet minimum underwriting criteria. Some colleges also lend student funds through their own programs.

Students who take out student loans should consider their ability to repay the total amount they'll need to borrow for their entire college career. A general rule of thumb is to not borrow more in total than the student can realistically expect to make in his or her first year after leaving college.

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