Understanding financial aid for college

The Federal Student Aid Estimator is a valuable tool that can help students predict the amount of federal student aid they may be eligible for. But truly beginning the process of pursuing financial aid involves completing the Free Application for Federal Student Aid (FAFSA®) form . After a school’s financial aid office receives the completed FAFSA form, it will assemble an aid package based on a student’s eligibility.

Depending on the situation, a student may be eligible for any or some of the following.

The wonderful thing about grants is that they do not generally require repayment. For this reason, students should thoroughly research all grant possibilities before investigating other options.

Grants can come from the federal government, state governments, colleges and private institutions. Students should apply for any that they may qualify for, being careful to note application deadlines and terms.

Some well-known federal grant programs include:

Federal Pell Grants are based on financial need. Federal Pell Grants are awarded only to eligible undergraduate students who display exceptional financial need and have not yet earned a bachelor's, graduate or professional degree.

Maximum amounts for a Pell Grant may change yearly. For the 2026-2027 award year, for example, the maximum grant is $7,395. 

The FSEOG program is managed by the financial aid office of participating schools. Students may receive between $100 and $4,000 annually, depending on the availability of FSEOG funds at a given school you are attending, the student’s financial need and the amount of other aid a student is awarded. Because each school receives a certain amount of FSEOG funds for the year, it is important students apply early to avoid missing their school’s deadline.

Like grants, scholarships generally don’t need to be repaid. They may be offered by private companies, civic groups or schools. Scholarships may be merit or need based, but they may also focus on students with a specific career interest.

To find scholarship opportunities, students can:

• Reach out to a school’s financial aid office
• Explore the U.S. Department of Labor’s free scholarship search tool 
• Ask contacts and organizations with which one is affiliated about potential opportunities

Application deadlines vary, so students should research scholarship opportunities early.

According to Stacy Tucker, vice president of financial aid operations at University of Phoenix, any funding source outside of loans will help lower borrowing costs. What’s more, there are opportunities to find unclaimed scholarships.

“There are many scholarships that go unused every year,” she says.

If employer benefits  are available, Tucker adds, a student should speak with their employer’s human resources department as well as their school’s financial aid office to understand how to best maximize those benefits.

Borrowers who acquire a loan must repay it with interest. Loans can come from the federal government, private lenders or a state ’s higher education agencies, and they may be offered as part of a school’s overall financial aid offer.

Federal student loans and federal parent loans often have better interest rates and benefits (e.g., fixed interest rates and income-driven repayment plans) than loans from private lenders, like banks or credit unions. So, look first at federal student loans, which include:

Direct Subsidized Loans  are for undergraduate students who demonstrate financial need. A school determines the amount a student can borrow, and the amount may not exceed one’s financial need.

The U.S. Department of Education pays interest on the loan while the student remains in school, is in a deferment period and for six months after a student drops below half-time enrollment at school.

Direct Unsubsidized Loans  are available for both undergraduate and graduate students, and are not based on financial need.   

The school determines the amount a student may borrow based on their cost of attendance and other financial aid that may be awarded.

For loans first disbursed on or after July 1, 2025, and before July 1, 2026, the  interest rates for Direct Subsidized and Unsubsidized Loans are 6.39% for undergraduate borrowers and 7.94% for graduate/professional borrowers. The 1.057% loan fee is proportionately deducted from each loan disbursement.