With the rising cost of college education, students pay for school using a combination of scholarships, family contributions, grants, and loans.
When you’re applying for financial aid, every dollar helps you get closer to your goals.
Whether you’re attending college for the first time or returning to complete your education, take advantage of the financial aid options that are readily available to you based on your situation.
The U.S. Department of Education awards about $120 billion every year to help millions of students pay for college. This federal student aid is awarded in the form of grants, work-study funds, and low-interest loans.
If your grants have converted to loans, and you don't know what to do, check out the Student Loan Planner. The Student Loan Planner is a CFP that specializes in student loan debt and can help you navigate your loans. Check out the Student Loan Planner here >>
Financial Aid Options
When it comes to federal aid, there are three main types: grants, scholarships, and loans. Grants and scholarships are at the top of the list for the most attractive financial aid options.
Each category has its own terms for repayment. Eligibility for federal and state grants is determined when you fill out the FAFSA.
If you aren’t eligible for grants or scholarships, you might have to turn to federal or private loans for help with college tuition.
There are three types of federal student loans currently offered are Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Plus Loans.
If you’ve gone through all of your federal student loan options, you might need to apply for private loans to close the remaining gap for your education expenses. Private lenders will extend loans based on income and credit information.
However, private loans don’t offer the same benefits as federal student loans, such as forgiveness, fixed rates, and income-driven repayment plans. Explore your options for grants, scholarships, federal loans, and THEN private loans.
Loans consist of money that the student borrows to help pay for college, and must be repaid with interest. Unlike loans, grants do not have to be paid back under most circumstances. Explore all of your “free” options to avoid taking out too many loans and making these student loan mistakes.
If you are fortunate enough to receive a grant, do you have to pay it back? The answer might surprise you!
What Is A Grant?
According to the U.S. Department of Education, grants are sometimes known as “gift aid”, or free money to put towards your college education.
Grants are typically awarded on the basis of need and generally do not have to be repaid as long as you meet all of the obligations. You are eligible for grants based on your family's ability to pay, the cost of your education, and certain merit criteria.
There Are Four Types Of Federal Student Grants:
Federal Pell Grant
Originally named the Basic Educational Opportunity Grant, Pell Grants are distributed to students through their college, and colleges are given enough grant money to properly award all qualifying students.
A Federal Pell Grant is monetary aid from the U.S. federal government to undergraduate students who have not yet earned a bachelor’s degree. For 2017, the maximum Federal Pell Grant award for the 2017-2018 award year is $5,920.
The actual award amount is based on the college’s cost of attendance, student’s enrollment status, the length of the academic year, and most importantly, the student’s financial need.
Students can receive the Federal Pell Grant for up to the equivalent of 12 semesters. As of 2017, low-income undergraduate students working toward a bachelor’s degree can receive up to $5,920 per year to pay for school.
The U.S. Department of Education determines need using a formula established by Congress. When determining need, the following factors are taken into consideration:
Federal Supplemental Educational Opportunity Grants(FSEOG)
These grants are awarded to undergraduate students with exceptional financial need up to the amount of $4,000 per year. The amount of the award is determined by the college’s financial aid office, and depends on the student’s financial need and the availability of funds at the college you attend.
Teacher Education Assistance for College and Higher Education(TEACH) Grants
Teachers pursuing a bachelor’s or graduate degree can receive up to $3,736 per year in grants provided that they agree to teach at a low-income school for four consecutive years.
Otherwise, the grant will covert into a loan, which must be repaid.
Iraq and Afghanistan Service Grants: If your parent or guardian was a military member of the military that passed away during their service in Iraq or Afghanistan, you could receive up to $5,529.28 per year. This grant is only available if you are otherwise ineligible for Pell Grants.
Aside from grants from the federal government, you may also be eligible for state funded grants.
How Are Grants Different From Scholarships?
Although grants and scholarships share similar characteristics, grants are usually based on financial need, whereas scholarships are based on merit.
While there are some federal scholarships based on need, most states, colleges, and other private organizations provide scholarships based on merit.
Grants and scholarships are the most sought after options because they are considered “free” financial aid”, meaning you don’t have to pay it back as long as you meet all of the conditions.
Once you take full advantage of grants and scholarships, you will have take out fewer loans to cover your education.
Like most college students, you will probably not receive enough grants and scholarships to cover all of your costs. To close the gap, students get a job, borrow or accept money from their family, or take out loans.
Loans provide a convenient way to cover any gaps, but you must repay them, so consider grants and scholarships first. Read and understand your award letter so that you properly follow the terms and conditions for all aid.
Like grants, scholarships are a form of “gift “aid that does not have to be repaid as long as you meet all of the obligations associated with the scholarship.
Scholarships can be based on your major, athletic ability, scholastic ability, religious affiliation, or other criteria.
A huge range of organizations, including schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations offer scholarships.
Scholarships can range from small amounts to large awards that cover the cost of your tuition. Unlike grants, many organizations usually award scholarships based on merit, such as good grades or athletic excellence, rather than financial need.
For this reason, scholarships will not hurt your overall financial picture under most circumstances.
While you can receive scholarships from your school, receiving awards from other organizations requires more effort.
To find potential scholarships, see your high school counselor or a TRIO counselor if you are still in high school. You can also visit your state’s grant agency and check out your library’s reference section. Certain business groups, community organizations, and interest-related organizations are great resources as well.
Although most scholarships don’t have to be repaid, some scholarships require you to meet certain conditions, such as maintaining a minimum GPA, otherwise, your risk losing your award.
Unlike grants and scholarships, loans are money that you borrow and pay back with interest. In most cases, you must repay your loans even if you don’t complete your degree, or run into financial difficulty. This is why grants and scholarships are recommended as your first choice over loans.
Federal student loans are awarded based on the information you submitted on your FAFSA. Federal loans have benefits such as access to forbearance, deferment, and income-driven repayment plans. They also tend to have lower interest rates.
Circumstances Where You Have To Pay Back Grants
Pell Grants don’t need to be paid back as long as you follow the government’s requirements. However, you would have to repay a Pell Grant under three circumstances:
1. Withdrawal From The Program Or School
If you receive a grant and drop out before 60 percent of the semester is over, the government will ask you to return 50 percent of the “unearned’ portion of their money. This unearned portion depends on when in the semester you drop out.
For example, if you get a $2,000 Pell Grant, but you drop out halfway through the semester, you did not earn half ($1000) of your grant, and the government will want 50% of the grant (in this case, $500) paid back. However, if you drop out at 60% of the semester, the government believes you have earned your full Pell amount and do not have to pay it back.
2. A Change In Your Enrollment Status
If your enrollment status changes after you receive your Pell funds, you have to pay back the difference. For example, if you go from full-time to part-time, you have to pay back the difference. Otherwise, you will get a “Pell Overpayment” on your record, which disqualifies you from receiving future federal aid.
3. Your Financial Need Is Reduced By Other Aids Or Grants
Although this is a rare occurrence, it’s worth mentioning. If you submit your FAFSA, get a Pell Grant, and then get additional non-federal grants and scholarships that reduce your need for the Pell Grant, the government could ask for some of the money back.
By law, your total financial aid cannot exceed the cost of attendance by more than $300. Your additional grants and scholarship usually affect campus-based aid first, not the Pell Grant. Also, be sure that you are treated fairly by colleges in determining your financial need.
When it comes to financial aid, read the fine print and meet all of the terms and conditions. As long as you don’t change your enrollment status or withdraw, you should be fine.
Although you don’t normally have to repay grants, there are some exceptions. For example, if you withdraw from a program or change your student status from full time to part time, you might have to repay your entire grant or a portion of your grant.
Remember, when it comes to college tuition, select the option that leaves you with low or no debt.
Did you receive grants while you were in college? Did you ever have to pay them back due to special circumstances? Tell us in the comments below!
No! This is a grant, not a loan, so you do NOT need to pay it back.Do Pell grants have to be paid back? ›
A Federal Pell Grant, unlike a loan, does not have to be repaid, except under certain circumstances. Find out why you might have to repay all or part of a federal grant. You may not receive Federal Pell Grant funds from more than one school at a time.Do I have to pay back Texas grant? ›
Conclusion. Grants are an amazing way to fund your college fees because a grant is money that you won't have to pay back. Unlike a federal student loan, a grant is a source of free money—and grants are generally offered on a financial need basis. They can also be awarded by course, school, background, or subject.What is the purpose of a grant? ›
What is a grant? A grant is a way the government funds your ideas and projects to provide public services and stimulate the economy. Grants support critical recovery initiatives, innovative research, and many other programs listed in the Catalog of Federal Domestic Assistance (CFDA).What happens if I don't use all my financial aid grant money? ›
If there is money left over, the school will pay it to you. In some cases, with your permission, the school may give the leftover money to your child. If you take out a loan as a student or parent, your school (or your child's school) will notify you in writing each time they give you any part of your loan money.Does leftover Pell Grant money go? ›
The school will issue you a Pell Grant refund if some of your grant dollars are unused. You may receive a check for the remaining amount, or the school may transfer it via direct deposit into your bank account or student account.Are Pell Grants forgiven? ›
Pell grants are a type of federal financial aid for undergraduate students with “exceptional financial need,” according to the Department of Education. Unlike loans, they typically do not need to be repaid.What are the pros and cons of receiving grants? ›
- Pros of Business Grants.
- Free Money. The number one advantage of business grants is that they are essentially free money. ...
- Accessible Info. ...
- Waterfall Effect. ...
- Gain Credibility. ...
- Cons of Business Grants.
- Time-Consuming. ...
- Difficult to Receive.
Why would I have to repay my Pell Grant? If a student drops out of college during the semester or academic year for which they were given a federal Pell Grant, they may be required to pay back a portion of their award. The same holds true for full-time students who reduce their course load to part-time status.What is the most common grant? ›
This is the most common type of grant. Program/project grants specify that funding may only be used to support the program or project referenced in your proposal.
To be eligible for a Cal Grant, an applicant must:
Be a U.S. Citizen, permanent resident, or eligible non-citizen. Be a California resident attending an eligible school in California on at least a half-time basis. Meet the United States Selective Service requirements if required to do so.
- You can receive generous amounts of money.
- Once you have obtained one grant, you are more likely to receive others.
- Receiving grants is a good way to build your organization's visibility and credibility.
- hiring new employees.
- covering day-to-day costs.
- upgrading facilities.
- product development.
- purchasing inventory.
- expanding retail partnerships.
- investing in marketing.
Foundation grants receive funding through donations, wills & bequests, fundraising, earned income, and memberships. Accordingly, the foundation's board of trustees is the group ultimately responsible for the foundation. This includes decision making such as where the money goes.Why are grants better? ›
No repayment necessary: Grants are non-repayable. Once you're awarded the grant money, it's yours without any strings attached. There's no need to worry about monthly payments or piling on more debt. Repayment is the fundamental difference between a grant and a loan, and also what makes grants more valuable than loans.Can you keep leftover grant money? ›
Grants are distributed similarly to scholarships
Generally, grants for college are associated with free money from the government based on financial need. These awards are paid directly to your account at your school. Any leftover grant money is then given to you for other expenses.
Personal expenses – Funds can be used to purchase groceries, cleaning supplies, clothing and other personal items.Do I have to pay back unused financial aid? ›
Returning a federal loan within 31 to 120 days
Some schools will handle it for you, but they aren't required to do so. If the college won't handle it, contact your loan servicer to find out how to return unused student loans. No interest charges should accrue, and the lender will waive any fees on the returned amount.
You also can't pay for the purchase of a car with financial aid funds. In particular, a qualified education loan is used solely to pay for qualified higher education expenses, which are limited to the cost of attendance as determined by the college or university.Can I buy a laptop with Pell Grant money? ›
Federal Pell Grants can also be used to purchase laptops (in a roundabout way). These grants are paid directly to your school to cover tuition and fees, but if there's money left over you may be issued a refund check. This can then be used to purchase educational supplies such as a laptop.
A student may lose Pell Grant eligibility if he or she withdraws from courses, does not maintain his or her enrollment status or fails to continue making academic progress, which can include GPA requirements set by individual institutions.Why do Pell Grant recipients get 20k? ›
To address the financial harms of the pandemic for low- and middle-income borrowers and avoid defaults as loan repayment restarts next year, the Department of Education will provide up to $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($ ...What is the most money you can get from a Pell Grant? ›
The maximum amount of money you can get from a Pell Grant is: $6,495 (2021-22). The amount granted depends on your Expected Family Contribution (EFC), cost of attendance, your status as a full-time or part-time student, and your plans to attend school for a full academic year or less.How poor is the Pell Grant? ›
The Department of Education will use your family's income and expenses to calculate your Expected Family Contribution (EFC). To be eligible for the Pell Grant for the 2021-2022 academic year, your EFC needs to be at or below $5,846. Because of this, there is no set income cutoff for Pell Grant eligibility.
Grants only offer a percentage of the cost of your project – generally between 10-30%, though some grants can be as high as 50%. You are responsible for sourcing the rest of the funding needed to complete the project. Start-up businesses are often excluded from grant support.What is a downside to grants? ›
One of the biggest disadvantages of grants is that its purpose is very narrow-focused. Most organization only consider giving grants if the non-profit's mission aligns with their beliefs, values and opinions.What are the odds of winning a grant? ›
What are your chances of being awarded a grant? On average, sources state that 1 in 10 applications are approved for funding.How does the Texas grant work? ›
The TEXAS Grant program covers the full cost of tuition and fees through a combination of state, federal, and institutional grants and scholarships. To be eligible for this program, students must receive a TEXAS Grant within their first-year ("initial year") at UNT.Does everyone get the Texas grant? ›
To be eligible for a TEXAS Grant award, a student must:
Have financial need, as determined by the institution. Be enrolled at least 3/4 time. Not have earned a baccalaureate degree. Not have been convicted of a felony or crime involving a controlled substance.
Students receiving a TEXAS Grant cannot exceed the semester maximum. Students may be issued a total of 3 awards (Fall, Spring, and Summer) in an academic year. The award maximum is $5,195 per semester.
TEXAS Grant eligibility requirements: Demonstrate financial need, priority to students with a FAFSA/TASFA Expected Family Contributions (EFC) of 6,454 or less. Register with Selective Service or be exempt. Be a Texas resident for tuition and fee purposes.How much does the Texas grant offer? ›
An eligible student may receive up to $3,497 per year. An eligible undergraduate student with exceptional financial need (defined as a student with an Expected Family Contribution, or EFC, less than or equal to $1,000 for the year) may receive up to $5,246 per year.How does the grant money get paid out to the recipients? ›
The South African Social Security Agency (SASSA) will pay the grant to you through one of the following methods: cash at a specific pay point on a particular day. electronic deposit into your bank or Postbank account (the bank may charge you for the service)Is the Texas grant for 4 years? ›
The amount of time that a student receive the Texas Grant is generally 5 years from the first semester awarded. However, if the student is enrolled in a degree plan that would take more than 4 years, the student can receive the award for up to 6 years.Who is eligible to receive the grant? ›
Be a South African citizen or have permanent residency. Not earn more than R48 000 a year (R4 000 a month) if you're single. If you're married, your combined income shouldn't be above R96 000 a year (R8 000 a month).At what age is college free in Texas? ›
Senior Citizen, 65 or Older, Free Tuition for 6 Credit Hours
The purpose of this program is to encourage senior citizens to continue their education and keep involved with local colleges and universities. In order to be eligible for the exemption, you must: Be a Texas resident, nonresident, or foreign student.
This is a Grant and does not have to be repaid. Awarded mostly to undergraduates who have not earned a degree and who have exceptional financial need. Larger Pell Grants may be available to students who meet other requirements.What is the 150 rule for financial aid? ›
Financial Aid recipients will be terminated upon reaching 150 percent of the number of credits needed to complete their degree, diploma or certificate program. This regulation applies to all students, including those that have not previously received financial aid.What is the max amount of Pell Grant you can receive in a lifetime? ›
The amount of Federal Pell Grant funds you may receive over your lifetime is limited by federal law to be the equivalent of six years of Pell Grant funding. Since the amount of a scheduled Pell Grant award you can receive each award year is equal to 100%, the six-year equivalent is 600%.What is the Pell Grant lifetime limit? ›
You can receive the Pell Grant for no more than 12 terms or the equivalent (roughly six years). This is called the Federal Pell Grant Lifetime Eligibility Used (LEU). You'll receive a notice if you're getting close to your limit. If you have any questions, contact your school's financial aid office.