How to Pay for College

Learn how to apply for and compare different kinds of financial aid (from the federal government, the states, and colleges themselves), as well as what kinds of things you need to watch out for.

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Financial aid is intended to help students pay for education-related expenses such as tuition, room and board, fees, supplies and equipment. The federal government may be the most well-known provider of funds (through FAFSA), but you’ll discover many sources of financial aid in your search. Whether you’re attending a university, college, private school or vocational school, merit- and need-based aid is widely available.

Financial Aid Basics

Who Should I Ask for Advice?

High School Guidance Counselor

Your first stop for advice on college or university should be your high school counseling office. It’s never too early to start this process.

Your first stop for advice on college or university should be your high school counseling office. It’s never too early to start this process (i.e. Grades 7-8).

High school guidance counselors and university/career counselors are full of information about scholarships, grants and financial aid resources. They can provide you with:

  • Free financial advice and forms for FAFSA
  • Ideas for other sources of financial aid
  • Help with part-time employment and voluntary service with community service organizations
  • Advice on building a plan for affording college (e.g. part-time vs. full-time education; private vs. public school; community college vs. 4-year degree).

And much, much more. Take advantage of their help at every opportunity.

College Financial Aid Office (FAO)

Almost every U.S. college and university has a financial aid office and a section on their website where you can find resources, cost calculators and contact information for financial aid advisors.

Don’t be afraid to contact financial aid offices directly – they will have the most up-to-date information on their institutional financial aid. But also keep in mind that they exist to make money for their school. So be sure to double-check the information you receive and do not disclose your financial information to them until you know it’s accurate.

State Higher Education Agencies

For state-based aid, the first place to start is the website of your State Higher Education Agency (a.k.a. Commission for Postsecondary Education, Student Aid Commission, Department of Higher Education, etc.). This office will have information on state grants, scholarships, loans, work-study and state-administered financial aid programs.

Since each state has specific residency requirements, eligibility rules and application procedures, you should look at websites for both:

  1. The state you live in
  2. The states of colleges you’re applying to

This will give you a good sense of your options.

Does the School’s Accreditation Matter?

The U.S. Department of Education relies on a number of independent accrediting bodies to determine if a college or university is meeting baseline quality criteria. You will not be eligible to receive federal financial aid (and probably state financial aid) if you attend an unaccredited school. The most important accreditation for traditional, brick-and-mortar institutions is regional accreditation from one of six regional accrediting bodies (e.g. Northwest Commission on Colleges and Universities).

Although the U.S. Department of Education recognizes both regional and national accrediting agencies (e.g. Accrediting Commission of Career Schools and Colleges, Distance Education Accrediting Commission, etc.), national accreditation is typically applied to for-profit schools that offer vocational, career or technical programs.

Why We Recommend Regional Accreditation

Regional accreditation is the “gold star” standard. If you do not attend a regionally-accredited college or university, you may find it difficult to:

  • Transfer course credits from a nationally-accredited institution (many regionally-accredited schools will not accept them)
  • Apply to graduate school
  • Be eligible for certain loans, scholarships, grants, etc.

The Key To It All: The FAFSA (And The CSS Profile)

FAFSA

If you’re interested in receiving any kind of federal financial aid or state loans, grants and scholarships, you should begin by filling out the Free Application for Federal Student Aid (FAFSA). FAFSA is responsible for managing student financial assistance programs authorized under Title IV of the Higher Education Act of 1965. The term “federal aid” includes federal grants, loans and work-study funds for colleges, universities and career schools.

It’s worth your time and effort to fill out the FAFSA.

You can fill out FAFSA online (recommended), via PDF or you can request a paper version. Because the government uses tax information to judge your eligibility for the upcoming academic year, the FAFSA must be submitted after October 1st (for example, October 1st 2016 for the 2017-2018 school year). Ideally, on October 2nd. Seriously! State aid may be limited, and if you’re last to the party, there may not be any left. So make it your New Year’s Resolution #1. Some students seek assistance from their high school guidance counselor or a fee-based FAFSA preparer, but there are plenty of free resources online. You must renew your application for financial aid every year.

Don’t believe the myths you might hear about federal financial aid – your family can have college savings, home equity and/or a good income and you might still be eligible for funding. Also, in addition to assessing your eligibility for grants, FAFSA also acts as your application for federal student loans and a lot of state-based aid. So it’s worth your time and effort to fill it out.

Once you submit your information, you will be notified by email or mail if federal funding has been awarded. The U.S. Department of Education will also forward the relevant information to your state student assistance agency. Every state has a deadline for receiving FAFSA submissions (March 1 is usually safe for all states apart from Michigan). Please check with your State Higher Education Agency and visit the government’s FAFSA deadlines page to make sure you submit your FAFSA in time.

CSS/Financial Aid PROFILE®

Short for “College Scholarship Service Profile,” CSS/Financial Aid PROFILE® (a.k.a. CSS/Profile) is a detailed application form for non-federal financial aid from approximately 400 colleges and scholarship programs.

It’s not always necessary to fill out a CSS/Profile, but it could be required for certain applications. Along with the FAFSA, some private colleges will ask you to complete the CSS/Profile in order to assess your eligibility for institutional scholarships, grants and loans. Colleges with early acceptance programs (i.e. before January 1) may also use it to make preliminary financial aid decisions. Check with your individual school to see if a CSS/Profile is necessary.

Financial Aid for Online Degree Programs

Thinking about earning an online qualification? Check first to see if the degree qualifies for federal and state financial aid. There are regionally-accredited schools who offer online programs. A limited number of DEAC-accredited institutions also participate in federal financial aid programs. We have some more specific advice available in our article about What Every Online College Student Needs to Know About Financial Aid.

Federal Financial Aid

Federal Financial Aid Basics

The U.S. Department of Education awards approximately $150 billion per year, primarily in need-based aid. This includes grants, work-study funds, and low-interest loans to 15 million+ students attending college or career school. To be eligible to receive this aid, you must complete a FAFSA.

We cover some of the major federal grants and loans below, but there are more. The best place to start for information is the government’s website: Federal Student Aid. You can also find information about federal veteran and active military aid in our Military Financial Aid section.

Who Qualifies for Federal Financial Aid?

Federal financial aid is available to U.S. citizens and certain non-citizens (e.g. permanent residents). Although the majority of funds are awarded according to need, many students are eligible to receive aid. Don’t count yourself out until you’ve filled in your FAFSA. International students are typically not eligible for federal aid, but they often receive college and university aid.

Federal Student Loans

Direct Subsidized & Unsubsidized Loans (a.k.a. Stafford Loans)

Direct Subsidized and Unsubsidized Loans (a.k.a. Stafford Loans) are available through the U.S. Department of Education through the Federal Direct Loan Program (FDLP). You’ll sometimes see this referred to as the Federal Direct Student Loan Program (FDSLP) or simply “Direct”.

Direct loans have a low, fixed interest rate and are given to undergraduate and graduate students who are enrolled in an accredited institution of higher education for at least 1/2 time. In this case, the U.S. Department of Education acts as the lender (i.e. the loans are made directly from the federal government, not through a bank or other lender).

There are two major types:

  • Direct Subsidized Loan: Offered to undergraduate students with exceptional financial need. With this type of loan, the federal government will pay any interest on the loan while you are completing your studies (this is called “in-school deferment”). No interest accrues while you study and no payments are expected until you graduate. Even then, there is a grace period of six months. Students who go on to work in public service occupations may also be eligible for Federal Loan Cancellation.
  • Direct Unsubsidized Loan: Available to any student regardless of need. Unlike the Direct Subsidized Loan, you are responsible for any interest that accrues while you are studying. If you choose to defer paying this interest until after graduation, the interest you owe will be added to the loan principal.

Provided you’ve filled out your FAFSA, you’ll be told which loan you qualify for – and how much you can borrow – in your award letter from college.

Merit-Based vs. Need-Based

You’ll see the words “merit-based” and “need-based” pop up a lot in financial aid discussions. It’s important to know the difference between the two:

  • Merit-Based: Merit-based aid refers to funds that you receive because of your achievements in an area (e.g. academics, arts, sports, etc.). Typical merit-based aid includes scholarships and fellowships.
  • Need-Based: Need-based aid refers to funds that you receive because of your financial situation. Great grades and talent have nothing to do with need-based aid. Instead, funding bodies will look at your income, assets and the financial status of your family to decide if you require help.

Perkins Loan

Like the Subsidized Stafford Loan, a Perkins Loan is a need-based student loan that is sponsored by the federal government. It is offered to undergraduates, graduates and professional students by participating schools. These schools receive annual appropriations from the U.S. Department of Education to finance their loan programs. Perkins candidates must demonstrate exceptional financial need.

Perkins Loans have a number of attractions:

  • Fixed interest rate of 5% for the duration of the 10-year repayment period
  • 9-month grace period after graduation
  • No interest accrues until you begin to repay the loan

Unlike the Stafford Loan, your school, not the federal government, will act as the lender. Not all schools participate in the Federal Perkins Loan Program, so check with your college’s Financial Aid Office first.

PLUS Loan

A Direct PLUS loan is a federal loan that can be used to pay for college. These loans have a fixed interest rate (generally around 7%) and usually require a good credit history. However, even with an adverse credit history, you may be able to obtain an endorser or explain your circumstances to the U.S. Department of Education.

There are two major types of PLUS loans:

  1. Graduate PLUS Loans: Granted to students. The borrower must be a graduate or professional degree student enrolled at least half-time at an eligible school in a program leading to a degree or certificate. You can place this loan into deferment during your studies, but interest will still accrue.
  2. Parent PLUS Loans: Granted to parents. The borrower must be the parent or step-parent (biological or adoptive) of a dependent undergraduate student enrolled at least half-time at a participating school. Parents can request a deferment while their child is enrolled in school and for six months after graduation.

In both cases, the U.S. Department of Education acts as the lender. The maximum loan amount is the cost of attendance (COA) minus any other student financial aid.

Consolidating Your Federal Loans

Direct Consolidation Loans

A Direct Consolidation Loan helps you to combine multiple federal student loans (e.g. Stafford, PLUS, Perkins, etc.) into one big loan. So instead of dealing with multiple loans each month, you only have to make one monthly payment.

On the up-side, loan consolidation can:

  • Give you up to 30 years to repay your loans
  • Allow you access to alternative repayment plans
  • Permit you to switch your variable interest loans to a fixed interest rate

On the down-side, a consolidated loan may mean you:

  • Make more payments
  • Pay more in interest
  • Lose benefits from your original loan (e.g. loan cancellation, interest rate discounts, etc.)

Once you’ve consolidated your loans, you can’t go back. The original loans no longer exist. What’s more, PLUS loans made to parents cannot be transferred to the student for consolidation.

You can apply for a Direct Consolidation Loan through StudentLoans.gov.

Federal Grants

Federal Supplement Educational Opportunity Grant (FSEOG)

The nice thing about federal grants is that they do not need to be repaid. Like the Pell Grant, the FSEOG is a need-based grant awarded to students who wish to earn a bachelor’s degree or similar. Grants hover between $100-$4,000 per year. The amount will depend on your financial need, how much aid you receive from other sources and the availability of funds at your school.

Unlike the Pell Grant, which provides funds to every eligible student, the FSEOG has a limit. Every participating school receives a certain amount of funds from the U.S. Department of Education per year. Once a school has exhausted its FSEOG funds, no more FSEOGs can be awarded that year. Please check with your college’s Financial Aid Office to see if it participates in the program.

Pell Grant

The Pell Grant is intended to help students of low-income families who wish to earn a bachelor’s or professional degree. This grant is intended for undergraduates, but students enrolled in a post baccalaureate teacher certification program may also be eligible.

The maximum grant amount changes annually, but generally falls in the $5,000-$6,000 range. You cannot receive a grant for more than one school at a time. Money can be used for tuition, fees, room and board and expenses at one of approximately 5,400 participating institutions. Please check with your college’s Financial Aid Office to see if it participates in the program.

TEACH Grant

The Teacher Education Assistance for College and Higher Education (TEACH) Grant is designed to help students who wish to begin a career in teaching. The program provides up to $4,000 a year to qualified candidates.

In order to receive a TEACH grant, you must participate in a TEACH-Grant-eligible program and sign a TEACH Grant Agreement to Serve. In this agreement, you promise to teach:

  • In a high-need field (e.g. mathematics, reading specialist, science, foreign language, etc.)
  • At a school or educational service agency that caters to students from low-income families
  • For 4 full years within 8 years of completing your education (your “service obligation”)

If you don’t fulfil your service obligation, all TEACH Grant funds will be converted to a Direct Unsubsidized Loan and interest will be charged from the date the TEACH Grant was paid to you.

To learn if your school participates in the TEACH Grant, please check with your college’s Financial Aid Office. They will provide you with a list of teaching programs at the school that are TEACH-Grant-eligible.

Work-Study

Federal Work-Study Program (FWS)

The Federal Work-Study Program helps undergraduates, graduates and professional students with a demonstrated financial burden earn money to pay for their education. The program arranges for students to work in part-time jobs and community service related to their course of study. Wages can be used to pay for tuition, fees, room and board, etc.

Work-Study awards are given to both full-time and part-time students. Your job could be on-campus (e.g. working for your school) or off-campus (e.g. working for a public agency). Hours are capped and your salary can’t exceed your total Federal Work-Study award. The total amount of your award will depend on when you apply, your level of financial need and your school’s funding level.

Federal Work-Study is administered by approximately 3,400 participating institutions, so please check with your college’s Financial Aid Office to see if it is involved in the program.

Federal Aid Resources

U.S. Department of Education

FAFSA

State Financial Aid

What is State Financial Aid?

In addition to federal financial aid, you can always seek financial help from your home state. State Higher Education Agencies provide tuition wavers, grants, work-study programs and scholarships. Most of this procedure is easy – after you submit your FAFSA, the U.S. Department of Education will forward relevant information to your state. The agency will then decide if you’re eligible for state aid.

However, it always pays to do your research. We discuss a couple of state-related funding options below, but we highly recommend you look at your state higher education agency website for information on specific scholarships and grants.

Who is Eligible for State Financial Aid?

To be eligible for this aid, most states will require you to live and go to school within state borders. However, there can be exceptions for neighboring states. When in doubt, check with the State Higher Education Agencies of both your resident state and the state in which you wish to go to college.

LEAP Grant

Formerly known as the State Student Incentive Grant (SSIG), the Leveraging Educational Assistance Partnership (LEAP) Program is a federal-state partnership that provides grants to undergraduate and graduate students who have substantial financial need.

Students can apply for LEAP grants in the states in which they are residents. The maximum LEAP award varies from state to state, but hovers around $1,000-$2,500 per year per student.

Section 529 College Savings Plans

Every state offers Section 529 College Savings Plans. These plans fall into two groups:

Some states offer only one of the two options; some states offer both. We cover these plans in more detail in our College Savings Section.

State Government Aid Resources

Institutional Financial Aid

What is Institutional Financial Aid?

To encourage students to apply to their institutions, many colleges and universities provide merit- and need-based aid. This aid could include scholarships funded by endowments, college-administered loans and/or offers of campus jobs.

To establish your eligibility for this aid, schools will typically need to look at your FAFSA; some may also wish to see your CSS/Profile. You can ask the Financial Aid Office for more details on what institutional aid is available.

We also recommend contacting someone in your potential department (e.g. Department of Accounting, School of Nursing, College of Education, etc.). Departments may have subject-specific grants and scholarships available for your major.

College-Controlled Merit Scholarship

Many colleges offer merit-based scholarships to students who have demonstrated excellence in academics, arts or sports. These are usually decided when college admissions boards are reviewing applications and transcripts.

To prepare ahead, you can always ask colleges what scholarships they offer and how many students receive them. You can also ask if specific departments have specific scholarships for your major. For more advice on searching for scholarships, please see our College Scholarships section.

Institutional Loan Program

In addition to distributing federal loans like Perkins, some colleges act as independent lenders, providing loans from their own endowments. Like federal loans, these are usually offered according to financial need and often have a fixed interest rate.

Private 529 Savings Plan

The Private 529 Savings Plan is a national prepaid tuition plan offered by a large group of private and independent colleges. We discuss this option in more depth in our section on College Savings Plans.

Tuition Payment Plan

Tuition payment plans divide tuition bills into short-term installments (e.g. monthly tuition payments automatically debited from your bank account). Although these plans are usually interest-free, some colleges may attach fees or finance charges.

Outside Scholarships & Overaward Situations

Overaward situations occur when your financial aid package exceeds your need. This can often happen if you win a merit-based scholarship from anybody other than the federal government or your college or university. At that point, you must report it to your school’s financial aid office.

Because this “outside scholarship” money is considered an asset, your college will typically reduce your need-based financial aid package as a result. However, they will often reduce your loans and work-study offerings before cutting your grants.

You can read more about these complicated situations in the government resource on Overpayments and Overawards.

College Scholarships

A huge range of university/college scholarships are available for undergraduates and graduates. Scholarships are commonly merit-based, although some givers choose to combine merit with financial need (e.g. Gates Millennium Scholars Program). Unlike student loans, scholarships do not have to be repaid. If you have the chance to apply for one, do not pass it up.

That being said, scholarships will probably only cover a fraction of your education cost. Student loans, savings, federal aid and other sources of funding will need to make up the difference. Above all, watch out for Scholarship Scams.

Types of College Scholarships Available

Scholarships aren’t just for good grades. They are available for sports, academic achievement, artistic talent, special needs, subject areas, underrepresented groups and specific geographic areas. You’ll find them at the national (e.g. National Merit Scholarship, Intel Science Talent Search, etc.), state and local level. They may be sponsored by the government, large corporations (e.g. Coca Cola, Walmart), institutions or private donors.

Tips on Applying for College Scholarships

  • Start your scholarship search as early as possible
  • Consult your high school guidance counselor or college Financial Aid Office for advice
  • Think locally (e.g. parents’ employers, local businesses, PTA, cultural organizations, etc.)
  • Use multiple scholarship search websites
  • Triple check that your scholarship is not a scam
  • Make sure you are qualified to apply
  • Create a calendar of deadlines
  • Apply for as many scholarships as you are able
  • Take time to match the criteria and fill out every form correctly

Tax or No Tax?

Will your scholarship be taxed? This depends on the situation.

  • If scholarship money is being used for tuition, fees, books and equipment, your scholarship is usually not taxed.
  • If scholarship money is being used for room and board or living expenses, it may be taxed.

Community Service Scholarships

Community service scholarships reward students for their volunteer efforts. We discuss a couple of the most well-known ones, but there are plenty more out there.

  • Segal AmeriCorps Education Award: Participants who complete a national term of service with an AmeriCorps program (e.g. VISTA, NCCC, etc.) are eligible for an education award that can be used to pay for costs at post-secondary educational institutions and/or repayment on qualified student loans. The award value changes from year to year.
  • Peace Corps Paul D. Coverdell Fellows: This program offers financial assistance to returned Peace Corps volunteers who wish to pursue graduate work. In addition to pursuing a degree, Fellows must complete a degree-related internship in an underserved American community.
  • CareerOneStop Scholarship Search: Search by award type, residence, study level and affiliation. CareerOneStop is sponsored by the U.S. Department of Labor, Employment and Training Administration.
  • College Board Scholarship Search: College Board’s scholarship engine contains scholarships, other financial aid and internships from more than 2,200 programs, totaling nearly $6 billion.
  • Fastweb Scholarship Matching Service: Fastweb provides a free matching scholarship service to its members (it is free to join). The website also has useful resources on scholarship applications, scams, deadlines and financial aid in general.
  • MeritAid: MeritAid provides a scholarship matching service and a directory of merit and academic scholarships from U.S. colleges. Run by Cappex.com.
  • Scholarship America: Scholarship America is the country’s largest non-profit, private-sector scholarship and educational support organization. It offers scholarships through Dollars for Scholars, Dreamkeepers and related programs.

College Savings Plans

A college savings plan allows your family to start saving money for college as soon as – or even before – you are born. Your parents will typically invest their money into a variety of financial plans that earn interest during the years you are growing up. Once you reach college age, you can start to use savings funds for tuition and expenses. This reduces the number of student loans you may have to take out.

What are Section 529 Plans?

Named after section 529 of the Internal Revenue Code, Section 529 plans are designed to help families save for college. There are two kinds of plans operated by state governments:

  1. Section 529 College Savings Plan
  2. Section 529 Prepaid Tuition Plan

Some states offer only one of the above; some offer both. Most plans require that the account owner (e.g. your parent) or beneficiary (i.e. you, the student) be a resident of the state in which the plan is made. Some states limit plans to undergraduate education.

Anybody – parents, extended relatives, friends, colleagues and total strangers – can contribute to a child’s 529 plan. With that purpose in mind, some grandparents use them as an estate planning tool. Most states put a limit on cumulative contributions.

If you don’t go to college or don’t spend all of the fund’s money on eligible college expenses, your family can have the invested money returned – with income taxes and a 10% penalty owed on earnings. Also, families may find that they reduce a student’s eligibility for need-based financial aid if they pay tuition directly from a 529 account.

We recommend you discuss both 529 options with a qualified financial advisor before investing.

Section 529 College Savings Plan

Tax-exempt Section 529 College Savings Plans are similar to 401k and IRAs for retirement. Plans usually follow an age-based asset allocation strategy. Money in the plan is invested in riskier options while the beneficiary (i.e. you, the potential student) is young (e.g. newborn – 6-years-old). As you grow up, the investments gradually become safer and more conservative.

Section 529 college savings plans have a variety of benefits:

  • Generally exempt from federal, state and local income tax if distributions are used for qualified higher education expenses (e.g. tuition, fees, supplies, equipment and accommodation for students living on campus)
  • Higher contribution limits than prepaid tuition plans
  • Contributions may be deductible on state income tax

Some plans also offer a minimum fixed rate of return and/or protection for the principal against inflation. On the other hand,

  • Unlike prepaid tuition plans, you cannot “lock in” the tuition rate – investments rise and fall with the market
  • There is no guaranteed increase in value
  • Families are limited to investment options provided by the plan

Section 529 Prepaid Tuition Plan

Section 529 Prepaid Tuition Plans are built to “lock in” tuition rates at the time of investment. These investments then increase in value at the same rate as college tuition.

So how does it work? Let’s say your parents purchase shares that are worth 1/3 of tuition costs at your state college. In 15 years time, those shares will still be worth 1/3 of tuition costs, no matter how high tuition rates have risen.

Benefits of prepaid tuition plans include:

  • Generally exempt from federal, state and local income tax if distributions are used for qualified higher education expenses (e.g. tuition, fees, supplies and equipment)
  • Possibility of a full or partial tax deduction on contributions (varies from state to state)
  • Better rate of return than private bank savings or certificates of deposit (CD)
  • No risk on the principal

But there are downsides:

  • ROI and maximum contributions are lower than 529 College Savings Plans
  • Many state prepaid tuition plans do not include savings for room and board

If you wish to go to a private or out-of-state college, the plan will usually pay out the average in-state public college tuition and your family will be responsible for any difference. However, some neighbouring state colleges may be willing to treat you as an “in-state” student.

Private 529 Plan

The Private (a.k.a. Independent) 529 Plan is a private college alternative to the state-run prepaid tuition plan. Instead of prepaying tuition for public state colleges, families can choose to prepay tuition for 270+ private colleges (e.g. MIT) participating in the plan.

The benefits of this plan are:

  • You are not required to attend a state college
  • Families don’t have to choose a particular college when they purchase tuition certificates
  • Certificates guarantee to pay a fixed percentage of tuition of any schools in the consortium

On the other hand:

  • Contributions are capped (5-years-worth of tuition and mandatory fees)
  • Families pay a 10% federal penalty and income tax on any refunded earnings not used for college expenses
  • You cannot use the certificates for room and board, supplies and non-mandatory fees
  • Certificates cannot be redeemed within 3 years of the date of purchase

Search a U.S. map of participating schools.

College Savings Resources

Paying for Graduate School

Putting yourself through graduate school comes with its own set of hurdles. Graduate school is expensive and time-consuming. You will often be working a full-time job, which could impact your eligibility for certain awards. Most graduate schools will expect you to meet the cost of your education through savings, employment income and spousal or parental contributions.

That being said, graduate school is rapidly becoming the norm in many professions and there are now plenty of financial aid packages available – especially if your department is receiving a lot of research funding and grants.

Where Do I Begin?

The best places to start are the website of your college’s Financial Aid Office and the office of the college, department or school (e.g. School of Nursing, Department of Biochemistry, Business College) in which you are interested.

Their financial advisors will have specific information on institutional (i.e. university-based) aid, including specific details on fellowships, research assistantships, university-based loans and scholarship funds. To be eligible for federal and state aid, you should also complete your FAFSA.

Graduate Fellowships, Grants & Scholarships

Fellowships, grants and scholarships are the golden eggs of graduate financial aid. They can be merit-based, need-based or a combination of both. These non-repayable funds may be offered by private funders, non-profit organizations (e.g. National Research Council), the federal government or the institution itself.

  • Graduate Fellowships: Awarded without any expectation of teaching or research in return. Typically merit-based and intended for graduates willing to commit to full-time study.
  • Graduate Grants: Awarded for education expenses and/or graduate research. Can be needs-based or merit-based.
  • Graduate Scholarships: Awarded on the basis of academic or merit-based achievements.

Those interested in teaching may wish to investigate the federal TEACH Grant and the Pell Grant. Although the Pell Grant is primarily aimed towards undergraduates, graduate students involved in a post-baccalaureate teaching program are also eligible.

We discuss scholarships in more detail in our section on College Scholarships.

Graduate Loans

Graduate loans are available from public (i.e. federal and state governments), institutional (e.g. the college or university) and private sources (e.g. corporations and banks). Governments and universities almost always offer better interest rates and repayment terms than private lenders, so we always advise you begin with them first.

Federal graduate loans include:

Institutional loans will be different for each school. We discuss private and peer-to-peer loan options in more depth in our section on Student Loans.

Graduate Teaching & Research Assistantships

To give graduates real-world experience and allow them to make back part of their tuition, many schools employ graduate students as teaching and research assistants. For your efforts, you may receive a salary, health insurance and/or discounts on tuition.

Your university’s Financial Aid Office and your department will have detailed information on how to apply for these opportunities.

Work-Study & Working for the University

In addition to putting your hand up for need-based federal work-study programs, you could also consider applying for jobs within the university you wish to attend. Lots of schools offer discount tuition and part-time degree programs to their employees.

Graduate School Funding Resources

Military Financial Aid

To reward citizens for their service, the federal government offers a range of financial aid benefits to active servicemen, veterans, reservists and military dependents under legislation such as the Post 9/11 GI Bill, the Montgomery GI Bill and the HEROES Act of 2003.

U.S. Department of Veteran Affairs (VA) Education Benefits

The U.S. Department of Veterans Affairs is responsible for administering education and training programs. These programs provide a range of higher education and training benefits to specific service members.

For example:

There are a number of requirements you have to fulfil in order to be eligible for this aid (e.g. honourable discharge, days of aggregate active duty service), so please check with the U.S. Department of Veterans Affairs or your nearest VA regional office for details.

Apply for VA education benefits online.

Federal Education Loans

As an active servicemember, you may be qualified for certain loan benefits, including:

  • Limited Interest Rate During Active Duty: Did you take out student loans (public or private) prior to entering the military or being called to active duty? The Servicemembers Civil Relief Act (SCRA) will fix the interest rate of these loans to 6% during your active duty service.
  • No Interest on Federal Direct Loans: No interest will be charged for a period of up to 60 months while you are on active duty, or performing National Guard duty, during a war or national emergency and are serving in an area of hostilities.
  • Deferment of Payment on Federal Loans: No payment is required while you are on active duty in the military, or performing qualifying National Guard duty, during a war, military operation or national emergency.
  • National Guard/Reserve Active Duty Deferment: If you are called or ordered to active duty while enrolled at least 1/2 time in an eligible school, payment on federal loans will be deferred for 13 months following the end of active duty service or until you return to school.

All of these options require you to show proof of your status. The first thing to do is contact the loan servicer administering your federal loans to see what you may need in terms of documentation.

Iraq and Afghanistan Service Grant

Children of service members who died as the result of military service in Iraq and Afghanistan after 9/11 are eligible for additional aid. If these children are not able to receive a Pell Grant, they may be eligible for the Iraq and Afghanistan Service Grant. Children must be less than 24-years-old at the age of application and enrolled, at least part-time, in a college or career school.

Military Loan Repayment

Depending on their length of service and speciality, some full-time military personnel can qualify to have their federal loans repaid by the Department of Defense. This works out to 1/3 of the loan repaid for each year of full-time duty. Each branch of the service will set its own maximum repayment amount. For more information, consult your military recruiter or visit Today’s Military.

ROTC Scholarships

Reserve Officers’ Training Corps (ROTC) scholarships are merit-based. They include:

Veteran & Active Duty Scholarships

Many organizations offer scholarships to active duty personnel, military veterans and related family members. We’ve listed a few below, but you will also find state or local veterans service organizations who are willing to help.

Military Aid Resources

Other Funding Sources

There are always more sources of education funding out there – they’re just harder to find. We explore a few of the avenues below, but we also recommend you reserve some time to research your options online. There are hundreds of Q&A forums and message boards where other students discuss successful strategies and niche programs. For example, foster care youth websites will be sure to mention the Educational and Training Voucher Program.

Private Student Loans

Peer-to-Peer Student Loans

Peer-to-peer student loans are also known as micro finance, microloans and social lending. In this scenario, you’d receive an unsecured loan from an individual (e.g. friends, family members or unrelated lenders). Sometimes you are able to make a personal case to the lender about why you deserve the loan.

If you’re having trouble gaining a federal student loan and don’t like the terms of a private loan, you may wish to consider this option. But we recommend you always start with the federal government.

Peer-to-peer loans have a few advantages over private loans:

  • Fixed interest rates
  • Lower credit scores may be acceptable for application
  • No need for a cosigner
  • Fewer restrictions on how you spend the money

But they often come with short repayment terms. You can get a sense of how this format works on peer-to-peer lending sites such as:

Private/Alternative Student Loans

In addition to federal aid, you may need to take out a private (a.k.a. alternative) student loan from a private organization or large lending institution (e.g. bank, credit union, real estate agency, etc.). However, be aware that:

  • An established credit record and/or consigner may be required to apply
  • Private loans often have high, variable interest rates (federal interest rates are low and fixed)
  • Interest may not be tax deductible
  • Repayment plans are stricter – many loans require you to pay interest while you are studying
  • Private student loans cannot be consolidated into a Direct Consolidation Loan
  • Lenders rarely offer loan forgiveness programs or deferment options

Student Loan Resources

  • Fastweb Student Lending Center: Fastweb has two student loan matching services, powered by Edvisors and SimpleTuition respectively.
  • Federal Student Aid: Loans Section: Official information on federal student loans from the U.S. Department of Education
  • Overture Student Loan Marketplace: The Marketplace allows you to compare private education loans. With your consent, it analyzes your submitted information and your credit report. It then compares this info with lending criteria to determine whether you qualify for a loan offered through a lender participating on the site.
  • SimpleTuition: SimpleTuition’s loan section provides advice, articles and a loan matching service.
  • StudentLoans.gov: A government site that helps you manage your student loans and repayments.

Employer Tuition Assistance & Benefits

Employers – especially large corporations and organizations – are often willing to help you continue your education if they feel your new skills would grow their business.

Talk to your HR department, check with your supervisor and examine your benefits package. You may find that your company offers:

  • Tuition Assistance: You can receive up to $5,250 in tax-free, employer education assistance benefits for undergraduate or graduate courses. These funds must be used for tuition, fees, materials and equipment.
  • Tuition Reimbursement: Some companies offer tuition reimbursement, tuition reduction and/or loan forgiveness programs to employees who pursue work-related degrees (especially advanced degrees). Before they will reimburse you, companies may require you to achieve certain grades or reach predetermined education goals.

Employers may also offer education scholarships to dependents/children of employees. For more information, see our section on College Scholarships.

Education Tax Benefits

Don’t forget your education when it comes to filing time. The federal government gives students a number of tax breaks, including the:

  • American Opportunity Tax Credit (a.k.a. Hope Scholarship Tax Credit): Taxpayers who pay expenses for postsecondary tuition, fees and supplies may be able to claim a federal income tax credit of up to $2,500 (40%) per student. This credit is limited to the first 4 years of postsecondary education.
  • Lifetime Learning Tax Credit: If you are a graduate student or an adult student returning to school, you can claim a tuition tax credit equal to 20% of the first $10,000 paid in tuition and fees (i.e. up to $2,000). This credit can be received for an unlimited number of years.
  • Student Loan Interest Deduction: For both federal and private education loans, you may be able to deduct up to $2,500 in interest as an “above-the-line” exclusion from your income.
  • Tuition & Fees Deduction: If you earn less than an adjusted gross income of $80,000 (single filer) or $160,000 (married filing jointly), you can deduct up to $4,000 in tuition expenses as an exclusion from income. It cannot be used in the same year as the Lifetime Learning tax credit.

Earning Credits Ahead of Time

Earning course credits ahead of time through AP classes, exams (e.g. CLEP), job training and MOOCs can help you save money on tuition and fees. You start ahead of your peers and don’t have to spend as much time in college.

We explore these options in much greater depth in:

Things to Watch Out For

“Bait & Switch” Grants

Always read the fine print in your financial aid award letter.

Colleges have a nasty habit of enticing freshmen with large financial aid packages and then reducing student support in subsequent years. For example, they might provide you with a need-based grant that covers a good proportion of your tuition in your first year, then slash that money in your sophomore to senior years.

To avoid being taken advantage of:

  • Always read the fine print in your financial aid award letter
  • Ask your college whether grants and scholarships will be adjusted as tuition rates rise
  • Ask if outside money and/or scholarships will reduce the amount your school awards you in grants or loans
  • Talk to upperclass undergraduates and alumni about their experience

Fluctuating Federal Aid Funding

Federal aid is calculated on a large number of factors (e.g. parental income, siblings in college, retirement bonuses, etc.) that can change from year to year.

For example:

  • Your mother may receive a promotion and pay raise.
  • Your older sibling may graduate from college.
  • Your parents may divorce.

These events can have a HUGE impact on how much money the government decides you should receive. Before you begin relying on a fixed sum of federal money for 4 years, examine the elements in your Expected Family Contribution (EFC) calculation in your FAFSA to see how the government is assessing your need-based aid.

Scholarship & Loan Scams

It can be hard to spot a scholarship or student loan scam. Scammers often imitate official agencies and education lenders – by the time you realize they’re not legitimate, your money is gone.

The best way to avoid these scams is to go through reputable scholarship matching services and double-check any offers with your college financial aid administrator or high school guidance counselor. You should also keep a record of all your correspondence and copy of any telephone conversations with scholarship companies in case you wish to report any potential scams.

Be especially suspicious of companies who:

  • Pester you with unsolicited emails and insist you must act quickly
  • Request personal information (e.g. bank account and credit card numbers)
  • Claim to have “endorsements” from the federal government or universities
  • Use official sounding names (scammers will use words like “foundation”, “federal” and “administration” as bait)
  • Trumpet their high success rates (scholarships should be hard to achieve)
  • Tell you they’ll apply on your behalf

Common scams include:

  • Advance-Fee Loan: Promises you a loan with very low-interest if you pay a fee beforehand. Once you pay the fee, the scammer disappears. Real educational loans will be offered by a bank or recognized lender and deduct fees from disbursement checks, not up-front.
  • Free Financial Seminar: Sales pitches for dodgy investment products, student loans and scholarship matching services. Some investment firms may try to make you purchase a product in order to receive federal financial aid – this is illegal.
  • Application Fee Scholarship: Requires an application or “administration” fee (usually under $50) for a low-money scholarship (e.g. $1,000).
  • Scholarship Prize: Asks you to pay a redemption fee or taxes before “releasing” the scholarship prize. Scammers may also send you a check for more than the scholarship and require you to mail them a check to cover the difference.

Useful Financial Aid Sites to Bookmark

NOTE: Although we believe the information above was correct as of date of publication, the content is provided for informational purposes only. We suggest readers verify the current accuracy through the links provided or via official sources.

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