Key takeaways
- College can cost more than $38,000 per year, which puts it out of reach for many students and families.
- Financial aid, including loans, Work-Study, grants, scholarships, state aid, and more, can help bridge the gap between what you have and what you need.
- Complete the FAFSA and research financial aid awards as soon as possible to maximize your financial aid package.
On average, college costs students $38,270 per year, which includes tuition, books, transportation, and other related expenses. If you’re experiencing sticker shock, you’re not alone. Thankfully, different types of financial aid can help you fund your education, from federal student loans to scholarships. Some students even get a full ride! We take a look at each type of financial aid below so you can make informed decisions about your educational and financial future.
Types of financial aid
Here are some types of financial aid you might be offered when you’re accepted to colleges.
1. Federal loans
Federal student loans are through the U.S. Department of Education. There are three types:
- Direct subsidized loans are for students who have demonstrated financial need. You can receive up to $5,500.
- Direct unsubsidized loans are for all eligible students and you can receive up to $20,500.
- Direct PLUS loans are for parents who wish to borrow money for their dependent undergraduate students. Parents can borrow up to the maximum cost of attendance (COA) after all other forms of financial aid are accounted for.
All federal student loans have to be paid back, with interest. Students start making payments within six months of graduation or leaving school. Parents can start paying back on PLUS loans immediately or choose to defer.
You need to complete the Free Application for Federal Student Aid (FAFSA) to apply for student loans and other forms of aid, including Work-Study, institutional grants, and more.
2. Work-Study
The Federal Work-Study program allows students with demonstrated need to participate in part-time employment on campus or with one of the school’s partners. It’s open to undergraduates, graduates, and professional students. However, not all institutions participate in the program and spots are extremely limited.
Work-Study awards you a maximum number of work hours a week, depending on your financial need and your school’s available funding. You cannot work more than the allotted hours.
These jobs pay at least the federal minimum hourly wage, but wages vary depending on the type of job and skills required. You’ll receive a paycheck that can then be used towards school expenses including food, transportation, books, supplies, and more. You can’t use the money for tuition.
You need to complete the FAFSA to be considered for Work-Study.
3. Grants and Scholarships
Grants and scholarships don’t usually need to be paid back. They can come from the government, schools, and organizations. Grants are often need-based while scholarships are merit-based, but this isn’t always the case. Application processes and award amounts vary.
For example, the Federal Pell Grant is for undergraduate students who have exceptional financial need. It awards up to $7,395 for the 2025-26 award year. The exact amount you’ll receive depends on your school’s COA, your Student Aid Index (SAI), and enrollment status. You need to complete the FAFSA to be considered for the Pell Grant.
While you won’t have to repay grants and scholarships in almost all cases, there are exceptions if you don’t meet the stated obligations. The federal Teacher Education Assistance for College and Higher Education (TEACH) Grant Program requires students to teach for a set number of years after graduation. ROTC Scholarships require graduates to enter the military as officers for a set number of years. Failing to meet these obligations may mean you have to pay back the awarded money.
There are no limits to the number of scholarships you can apply for. In many cases, you can only receive up to your COA, but some organizations award money regardless. There are millions of dollars in scholarships and grants out there, but you can cut down on the legwork by using a database, such as our Scholarship Search Tool.
4. Institutional aid
Institutional aid refers to financial aid directly from the college and university, funded by the school’s endowments or alumni programs. It can be scholarships, grants, merit-based, and/or need-based. Some institutions offer student loans.
Requirements vary by school and program, but you typically have to complete the FAFSA to be considered for any institutional aid, even merit scholarships. Other college financial aid programs ask for additional essays, paperwork, or the CSS Profile.
When you receive acceptance letters, you might receive financial aid offers, too, which detail the amount of federal, state, and institutional aid the school is offering you. It won’t include outside scholarships and grants. You need to alert the college if you’re receiving any additional money through these sources as it could affect your financial aid offer.
5. State aid
Most states have scholarship and grant programs to help lower or cover the cost of college. Some even offer free community college!
In many cases, only state residents are eligible for their state’s financial aid programs and they need to attend a participating school within its borders. Depending on the award, you might receive more money for attending a public college vs a private school.
Application processes, allotted funds, selection, and disbursement vary by state. You’ll typically have to complete the FAFSA, but you may need to submit a separate state-specific application.
6. Employer funding
Several private companies offer financial aid to eligible employees. You have a better chance of qualifying if your selected major is related to your job and career path. Businesses and organizations also offer scholarships to employees’ dependents. Talk to your HR department to learn more about these potential benefits and programs.
7. Private Student loans
A private student loan can help bridge the gap between what you have and what you need – if you’ve exhausted all other options. Private student loans tend to have higher interest rates, less protection, and fewer repayment and deferment options than federal student loans. You also need to start paying them back immediately.
If you need to take out a private student loan, take time to compare rates and terms to identify the ones that make the most financial sense to you. You may need a co-signer if you don’t have credit or income.
Apply early to maximize financial aid
Financial aid funds are limited and on a first-come first-serve basis. While you can receive federal student loans up until the last day of the academic year, delaying too long on the FAFSA puts you out of the running for most forms of financial aid.
Colleges have their own FAFSA deadlines, typically around February before the next academic year. If you submit your application after this due date, you likely won’t be considered for institutional aid.
Scholarships and grants have deadlines, too. For high school seniors, many of these award applications are due during the fall semester, before you even apply to college.
Starting early can maximize your chances of receiving a generous financial aid package. Follow these quick tips:
- Complete the FAFSA as soon as you can after it becomes available on October 1
- Use scholarship databases to find awards and note deadlines. Apply to the awards that are due sooner.
- Research your schools’ financial aid programs, FAFSA due dates, and other requirements, such as the CSS Profile.
You may receive financial aid offers with your acceptance letter. Compare these offers as they come in to find the best deal for your wallet. If you find these letters confusing, you’re not alone – colleges don’t follow a format. Use our Financial Aid Offer Comparison Tool to find the best deal for your wallet.
