When we talk about things like the FAFSA and WASFA, it’s easy to get excited about free money. But how does it actually work, and is the money really free? …Sometimes! But many financial aid options also come with strings attached. Here’s a brief intro to the different types of financial aid and what they do.
There are four main types of financial aid:
Grants – The chillest of free money, because you often get them with little to no effort and never have to pay them back. There are grants you can apply to, but there are also grants that the government will probably just offer you if you qualify for free/reduced lunch, like the Pell Grant and the Washington State Need Grant.
Scholarships – Also free money! But usually you have to go through an application process to get one. Some schools will offer you scholarships based on merit, like high test scores, high GPA, athletic skills, community service, etc. Schools will also sometimes offer you scholarships based on need, if there’s a large gap between what the government is offering you versus the cost of attendance.
Loans – Not actually free money 😦 However, there are some loans that are okay. After filing the FAFSA or WASFA, you may be offered two different kinds of loans: subsidized loans and unsubsidized loans. In short, subsidized loans are better because you don’t accrue any interest until six months after you graduate. Still, if you need to take out an subsidized loan, it can be a worthwhile investment into your education and your future.
There’s one more kind of loan: a private loan. These are loans that are given by a company or organization other than the government, like banks, credit unions, and other lenders. These may seem like an okay deal, but many private loans have enormous interest rates that make the loan extremely difficult to pay back. When figuring out how to pay for college, private loans should be your very last option.
Work-Study – As the federal student aid website states, “Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study.”
This means you can get an on-campus job, which helps you make money that you can put towards paying off your loans while you’re in school. But wait, why would you want to pay off loans if they’re not due until after you graduate? Well, once you start accruing interest on a loan, it can be hard to keep up with payments, and may take decades if you’ve borrowed a lot of loans. Paying on your loans while in school, even if just a little, helps lower the principal amount you borrowed so that, once interest begins to accrue, it won’t be as hefty a price.
So that’s a general summary of the main types of financial aid! But these aren’t the only ways to save money while in college. To read about some creative ways to save, check out this post.