Educational costs can feel like a puzzle. We’ve highlighted some key pieces to help you get started.
Paying for college typically involves a patchwork of different funding sources — savings, loans, scholarships, grants, and help from family members, just to name a few. But not all types of financial aid are created equal; the choices you make about funding your college education can affect your finances for many years to come, so it pays (sometimes literally!) to learn about your options and choose carefully.
Here’s a quick look at some of the most common types of financial aid for college.
Scholarships
Scholarships are a great way to fund your education, because unlike many other kinds of financial aid, they usually don’t have to be paid back. Scholarships come in all shapes and sizes, and from many different sources including schools and colleges, alumni associations, community groups, businesses, cultural organizations, and others.
Not a star athlete or a straight-A student? Don’t worry — many scholarships are based on a variety of factors, such as community involvement, special interests, area of study, or membership in a particular group or community. Other scholarships are based on personal achievement in the face of hardship, or simply on financial need.
Grants
Grants are similar to scholarships in that they don’t have to be paid back. Unlike scholarships, however, grants are typically based on financial need rather than merit, achievement, or other factors. Grants come from a variety of sources, including colleges and universities, foundations, and private organizations. However, many grants are provided by the state or federal government. You will automatically be considered for certain grants when you fill out your FAFSA (the application for most types of federal student aid) while others may require a separate application.
Work-Study
Many students work during college to earn spending money and help cover their expenses. Depending on your and your family’s financial circumstances, you may be eligible to participate in the federal government’s work-study program, which funds certain part-time jobs for college students. These jobs are often conveniently located on campus and are typically limited to a certain number of hours per week, so you can be sure you’ll still have time for class and schoolwork. It’s a great way to gain work experience, develop your professional skills, and make connections while earning money toward your education.
Savings
For many families, savings are the biggest source of funding for college education. Although every student’s circumstances are different, it’s often wise to pay your out-of-pocket tuition and other costs from savings as much as possible, since this will help you minimize the need for student loans that you will eventually have to pay back. There are even specialized savings accounts designed to help families plan for higher education costs, such as 529 plans and Coverdell Education Savings Accounts (ESAs), which offer tax benefits and flexibility.
Student Loans
Student loans can help you cover the what’s left of your college expenses after accounting for savings, family contributions, other types of financial aid, such as scholarships, grants, and work study. In general, it’s a good idea to avoid borrowing more than you need to with your student loans, since this type of funding will need to be paid back — usually with interest. There are many different types of student loans, including government loans, private educational loans, and loans directly from your college or university. Student loans vary dramatically from one to the next, so it’s important to shop around and weigh your options carefully. Pay close attention to the details, such as interest rates, loan length, and repayment options, as well as any fees or penalties that may apply.
The information provided here is general in nature and may not apply to your specific situation.
