The vast majority of college students need some form of financial aid in order to get through an undergraduate degree. The State of California and the Federal Government provide students with numerous financial aid options that can be broken down into three distinct types. These types are grants, loans and scholarships.
Before any type of financial aid except certain scholarships can be awarded, a student must file the Free Application for Federal Student Aid. Most colleges require students to file a FAFSA as part of their admissions process, but it is a good idea to file for a FAFSA as soon as possible and have it completed before starting an admissions process. The FAFSA will be your primary means of qualifying for all government aid, including state-level aid.
Grants:
It is important not to confuse a grant and loan. A loan must be repaid, but a grant is essentially a monetary gift that must be used for an express purpose. In the case of an education grant, the funds must be used for an educational purpose. Depending on the grant this can include tuition, books, materials, other fees and sometimes housing or fuel costs.
There are several government grants that can be awarded to students who qualify based on financial need.
Cal Grants:
This is a grant program funded by the State of California. The exact amounts of the grant change year to year based on the state budget. Qualifying for a grant through this program is a combination of financial need and academic performance. This is where high school GPA matters, and a verification of it must be supplied in order to be reviewed for a Cal Grant.
Pell Grant:
A Pell grant is a federal grant is a program run by the U.S. Department of Education to help needy students afford college. It is awarded to students based on their financial need, their cost of attendance and whether they qualify as a full or part time student. Like most grants the amount changes year to year.
Federal Supplement Educational Opportunity Grant (FSEOG):
This grant is a program where the federal government provides a set amount of money to all participating schools, and the school then has a part in disbursing funds to qualified students. It is primarily need based, but can also be reduced based on the amount of additional aid a student is getting. Unlike Pell grants that can apply to any school, a FSEOG only applies to schools that participate in the program. Amounts of aid vary from $100 to $4000.
Educational loans are usually required by most students. They are considered good debt because they have very low interest rates, excellent payment deferment options and they help to raise a young person’s credit score. Loans however, do have to be repaid, and defaulting on a school loan can have an extremely negative impact on credit score. The rule of thumb is to use loans to pay off whatever cannot be paid in other ways and to only take out what you can afford to repay.
Subsidized federal loans:
These loans are backed by the federal government. They are “subsidized” because the government agrees to pay the interest on the loan while the borrower is enrolled at least part time in school and for a grace period of six months after graduation. The student is still responsible for the principle balance. Students may borrow subsidized loans up to a certain amount based on financial need and the school’s borrowing policies.
Unsubsidized Loans:
These loans are also backed by the government, but since they are not subsidized the student is still responsible for all interest. This works just like any other loan except that it is ensured by the government and has better rates than a regular bank loan. Any amount can be borrowed, but the funds are paid directly to the school, so the school will report how much they need based on cost of attendance.
PLUS Loans:
These are loans for a student’s education that are taken out by the parents. The funds go toward school, but since the loan amount is taken out in the parent’s name, they and not the student, are responsible for repayment.
Scholarships:
Scholarships are elusive beasts for many students. There are no guaranteed scholarships, and every scholarship has some form of requirement. Often the requirement is performance and need based. So students will have to demonstrate their need and prove that they meet the other requirements such as GPA or volunteer experience. Every student’s scholarship situation is different based on where they are enrolling and where they live.
Many local businesses and organizations may offer scholarships. Schools often have academic-based scholarships available to all students, and if an admissions advisor does not provide information about all such scholarships, then the student should request it. Joining organizations such as Phi Beta Kappa can also award scholarships. There are also, of course, sports scholarships for students who qualify. The best advice is to ask an admissions counselor or high school advisor about local scholarships and programs, but do not expect to pay for the majority of school from scholarships. They usually make up for only a small fraction of costs.
