The Basics You Need to Know About Student Aid

CreditSoup Staff

Updated On: July 21, 2023  •  7 Minute Read

Credit Basics, Loans, Student/Financial Aid

Applying for college can seem like a long and challenging process, so it's no surprise that students often fail to take advantage of free money available to them. There are essay's to write, forms to fill out, and applications to submit. Unfortunately, those essays and forms can make hundreds of thousands of dollars of difference in the long run.

Filling out that one federal form, the FAFSA (Free Application for Federal Student Aid), could cut the cost of college for many students. But students often don't submit because they are unaware of the form. The money remains unclaimed, as students pay for college out of their own pockets.

Unclaimed Tuition Dollars

In fact, some reports say that as much as $3.6 billion dollars’ worth of tuition funding went unclaimed during the 2022 academic year. That number is just the U.S. federal government funding. Students who graduated from high school in 2022 left about $3.6 billion in Pell Grants unclaimed by not completing the FAFSA, a new report from the National College Attainment Network (NCAN) found.

Many colleges offer additional funding to support students that have been accepted. Much of this money goes unclaimed as well, even though it is equally easy to access. A university's financial aid page is an excellent place to start looking for opportunities for additional tuition funding. Many scholarships and loans require ACT or SAT test scores, so students should make sure to take the tests (and hopefully earn a decent score) before starting the application process.

Loans

To get access to money for college, students can start looking in many places. Many organizations offer scholarships to students. There are so many that it can sometimes be overwhelming, so the easy place to start is U.S. government funding. The U.S. government has multiple types of loans, which need to be re-paid, and grants, which do not need to be repaid. To simplify the process, students can apply for every single type of loan and grant at the same time by submitting a FAFSA. For more information on the application and loans, check can visit the FAFSA site.

The government then determines, based upon financial need, which loans or grants are available to the student. Commonly provided loans and grants are: Stafford Loans and PLUS loans.

1. The Stafford loans come in two types: subsidized and un-subsidized. The subsidized are better terms, meaning that the government pays the student's interest while the student is enrolled in college. Otherwise, interest accrues while the student is in school (an un-subsidized loan). Interest rates vary from loan to loan, but subsidized loans are typically 4.99 percent.
2. The Direct PLUS loans are available to the parents of undergraduate and graduate students, as well as the students themselves. These loans have a fixed rate of 8.05 percent. As government programs, however, all of these loans have caps, or limits on how much can be given to each student.

If the federal loans don't cover the cost the school, it's possible to fill in the gaps with private education loans. These loans are often from banks and credit card companies and are rarely subsidized. Starting with the FAFSA is a good choice because the government might offer better terms, like subsidized loans, than the private lenders. There are many sites where students can search for private loans and receive loan offers from major banks and credit card companies. Specialized loans are available for some career paths, like health professionals.

Subsidized vs Unsubsidized Loans. What's the difference?

As mentioned before, subsidized means that the government pays the student's interest while the student is enrolled in college. Subsidized Loans are available only to undergraduate students who have financial need. Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.

Subsidized or unsubsidized, all student loans need to be repaid. They aren't necessarily free money, like scholarships or grants. Upon graduation, a monthly bill will appear in student's mailboxes. Because loans need to be re-paid, it's important for students to know their loans and recognize the differences.

A low interest rate and subsidies make a big difference. Lower interest rates mean the student will be paying back less money than someone who had a higher interest rate and the same amount of debt. Paying off loans can also require working with the lender, whether it's the government or a private lender.

Sometimes a student can reduce the interest rate after they have made a number of payments. A good history of payments shows that the student is a reliable borrower. Lenders may consider lowering the interest rate at this point.

Pick a feasible repayment option. Students should choose an option based upon how much income they expect to make after graduation. If a student has multiple loans, he should start paying back the most expensive first; these are loans with a high interest rate or principal loan amount. There are a couple of methods that students can use to pay off loans faster and save money.

Grants

Loans are not part of that $3.6 billion in free money. Much of that money is allocated for grants, which do not have to be repaid. By submitting that same FAFSA form, students are evaluated for a federal grant called a Pell Grant. This grant is available to low-income undergraduate students.

The federal government also offers more specialized grants. One example is the Institute for Education Sciences funding, which provides research training. These and other grants are available to search online and apply. Each requires a separate application and may be specific to a cause or industry.

Other specialized grants are offered by private institutions. For example:

• An aerospace trade association may offer grants to students majoring in aerospace engineering.
• Corporations also offer grants to fund students, and often fund students that could eventually contribute to the corporation as an employee or researcher.
• A student's or parent's place of work is a good place to start looking for corporate grants.
• A student's university also can offer grants to fund students. Sometimes these are for specific research or artistic projects.

Students should start looking at corporate grants for corporations in their intended field of study. The university financial aid page is always a good place to start looking for grants because they often list both local and national grants available to students.

Scholarships

Like grants, scholarships also provide students with funds for tuition that do not need to be re-paid. Like private grants, these scholarships are often specialized. Students have to be careful to make sure that they qualify. However, there are even more options than grants because many organizations offer small amounts of money for scholarships. Here are a few places to research for specific scholarships:

• Any extracurricular activities that students are involved in can be a potential loan source.

• Students should check with their religious organizations to start. Some churches offer small scholarships to students, particularly if they are pursuing a career path that will benefit the church, such as majoring in theology or social justice.

• Societies and clubs often offer scholarships to support their members. National Honors Society and Junior Classical League are two examples.

• Scholarships are also common for athletics. Exceptional athletes can often procure a scholarship that covers the full cost of tuition. This is often sponsored by the university itself.

• Some foundations also offer scholarships to undergraduate students, such as the $2500 scholarship offered by the La Grant Foundation.

• Even local business may offer scholarships to students.

Students can begin their search in the local area and by searching online scholarship databases. These scholarships amounts are usually small, but they can add up over time.

Some scholarships require a commitment, but offer a large amount of free money in return. The ROTC, or Reserve Officers' Training Corps, is an option for students that plan to enlist in the military. By committing to military service, a large variety of scholarship opportunities open up. ROTC scholarships are available for many branches of the military in the U.S. and remain a good option to fund college tuition.

There are other scholarships that are offered based upon a student's demographics, to support disadvantaged populations. Many organizations offer scholarships to support people of color, heritage, and gender.

• The National Association for the Advancement of Colored People (NAACP) offers a variety of scholarships.

• Students with a Native American heritage, in particular, have access to apply for special scholarships that cover a large portion of college tuition.

• Female students can also find scholarships set aside for women, especially if the student plans to work in a technological field.

These scholarships are an often-untapped option because many students don't know that they exist. Searching scholarships for a specific demographic often unearths unexpected opportunities for financial support.

In Summary, Financial Help Is Available.

Students are often unaware of the enormous financial resources available to support their college tuition. $3.6 billion is a lot of money to go unclaimed. Thankfully, there are many ways to access these opportunities.

Submitting a FAFSA is an excellent place to start, since it evaluates the availability of government loans and grants on the student's behalf. From there, students can complete their own research into local grants and scholarships offered by public and private institutions.

Scholarships and grants are more specialized than the loans, but the sheer number of them make it likely that a student will find one that suits her unique situation. It's a bit of work to track down all the applications, but it's worth it. There are billions of dollars out there for students to claim in order to finance their college dreams.