Guide to Financial Aid and Scholarships

Financial Aid and Scholarships

In 2020, the Department of Education requested $131 billion in additional student aid funding. That financial aid came in the form of grants, scholarships, and federal student loans.

Almost all students receive some form of financial aid to cover the cost of college. In 2020, 86% of undergraduate students received financial aid. A strong student aid package helps undergrads make a prestigious private school more affordable or cover the cost of public university tuition.

Some forms of financial aid help students more than others. The Federal Pell Grant Program, for example, provides free money for college with no requirement to repay the award. Student loans come in many forms, including subsidized, unsubsidized, and private loans.

Our financial aid guide walks through all the options for paying for college, answering all your questions about different types of student aid and how to maximize financial aid awards.

Find Out How Affordable College Is for You

The calculator below will estimate how much money you can afford to spend annually or monthly on college tuition. Prepare yourself to take the next steps in financing your education.

Average Tuition Costs

Tuition costs have gone up dramatically in the past 40 years. Adjusted for inflation, college students spent around $9,000 in tuition, fees, and room and board in 1980 according to the National Center for Education Statistics. By 2000, that number grew to over $15,500 per year. In 2020, college students paid an average of approximately $33,150 in college costs.

Costs vary widely depending on the type of school. In 2020, public universities charged around $9,580 in in-state student tuition and fees on average, while private universities cost upwards of $37,000 per year. While in-state tuition discounts help some students keep costs down, out-of-state students at public universities pay closer to $27,000 in tuition and fees. In addition, graduate and professional programs typically charge higher rates than undergraduate programs.

As a result of increasing tuition costs, today’s students rely heavily on financial aid, including grants, scholarships, and loans, to pay for college.


On average, undergraduates receive over $9,500 in federal grant money to pay for college. Grants offer a valuable resource for college students, since they offer free money that recipients generally do not need to repay.

Federal Pell Grants support undergraduates with exceptional financial need. Simply by filling out the FAFSA, hundreds of thousands of students receive Federal Pell Grants.

The maximum amount for Federal Pell Grants changes yearly. The amount students receive varies depending on their financial need, enrollment status, and cost of attendance.

In general, recipients do not need to repay grants. Some common exceptions include grant programs with work requirements, like the TEACH Grant. Recipients must agree to work in a high-need field or a low-income school for four years after earning their degree. If grant recipients do not meet the work requirement, the grant converts into a loan. In addition to federal grants, many students research state, school, and corporate grants.


Like grants, scholarships offer free money for college, making them one of the best forms of financial aid.

In 2020, more than 1.7 million private scholarships awarded over $7.4 billion to students.

Many organizations offer scholarships, including professional associations, private foundations, and private donors. Colleges also offer scholarships to support students.

Scholarships come in several forms. For example, need-based scholarships require proof of financial need, while merit-based scholarships award money based on an applicant’s academic record, leadership experience, or community service.

Some scholarships award funds to students in a particular major or planning a career in a certain field. Other scholarships support students based on their gender, race, or veteran status.

In addition to meeting the eligibility requirement, scholarship applicants typically need to submit an application and provide material like transcripts, a scholarship essay, letters of recommendation, or FAFSA forms. Many scholarships also require video or multimedia submissions, and some scholarships require an interview.

Beginning your scholarship search as soon as possible increases your chances of finding and receiving funding. Many current college students also look for scholarships throughout the year.

Learn more about using scholarships to pay for college in our scholarship guide.

Federal Loans

In 2020, student loan debt hit an all-time high, reaching nearly $1.6 trillion. Graduates in the class of 2018 owe an average of $29,200 in student loan debt. An estimated 92% of student loan debt comes from federal loans.

Millions of students rely on federal loans to pay for college. Understanding the different types of federal loans, consolidation options, and loan forgiveness options helps students make informed decisions about student loans.

For example, the federal student aid program caps the amount students can borrow depending on their year in school, dependency status, and degree level. In addition to loans for students, some parents also take out a Direct PLUS Loan to help their child pay for college.

To receive federal loans, students fill out the FAFSA every year. Schools administer the loans through their financial aid offices.

  • Subsidized

    Subsidized federal loans, also called Direct Subsidized Loans, offer low fees and a subsidized interest rate. The U.S. Department of Education covers the interest payments on subsidized loans while borrowers earn their degree, during a six-month grace period after graduation, and during any deferment periods.

    Currently, only undergraduate students who demonstrate financial need qualify for subsidized federal loans. The amount borrowers receive varies depending on their financial need and year in school.

  • Unsubsidized

    Unsubsidized federal loans, also called Direct Unsubsidized Loans, fund undergraduate and graduate students. Recipients do not need to demonstrate financial need to receive an unsubsidized loan.

    Unlike subsidized loans, borrowers pay the interest on their loan as soon as they borrow the money.

    Schools determine how much students can borrow in unsubsidized loans depending on the cost of attendance, the student’s year in school, and their dependent status. The federal government caps the amount students can borrow annually and the total.

Private Loans

Private loans offer another source of financial aid for college students. Many organizations offer private loans, including banks, credit unions, and other financial institutions. Some students who do not qualify for federal loans or exceed the federal student loan borrowing cap also apply for private loans.

Prioritize federal student loans. Federal loans offer several benefits, such as income-based repayment plans and interest deferrals. Before taking out a private loan, carefully review the monthly payment, repayment policies, interest rates, and any cosigner requirements.

For example, the interest rates on private student loans vary widely from 1.20%-14.50%, depending on the borrower’s credit history. Negotiating a lower interest rate or asking about interest-only payments while in school saves borrowers thousands.

Work Study

Work-study programs pay eligible students to work part-time jobs while in school. The federal work-study program provides jobs for undergraduates, graduate students, and professional students who meet financial need requirements.

Students who qualify for work-study jobs find openings through their college. While the federal government funds the program, schools administer the federal work-study program. The program connects students with on-campus and off-campus job opportunities. Work-study students with off-campus jobs typically work for a public agency or a nonprofit organization.

Recipients work a part-time job and receive at least the federal minimum wage for all hours worked. The work-study employer either pays the student directly or applies the money toward expenses like tuition. The federal program caps the amount work-study students can receive each month based on their financial need.

In addition to the federal program, some states offer work-study opportunities. Prospective students learn about their eligibility for the federal work-study program by submitting the FAFSA.


At the graduate level, many students fund their studies with a fellowship. A fellowship typically provides tuition assistance and a stipend for the recipient. Many fellowships include a full or partial tuition waiver and benefits like health insurance.

Students may receive a fellowship from their university or from an external organization. For example, the Fulbright Program offers fellowships for U.S. graduate students to conduct research and study in another country for a year. Graduate programs also offer fellowships to support students pursuing a master’s or doctoral degree. Like a scholarship or grant, recipients do not need to repay the fellowship money.

Fellowships often require recipients to make progress toward the degree, present work funded by the fellowship, or reapply every year to receive funding. Unlike graduate assistantships, which typically include a work component such as teaching or research, fellowships generally provide funding with no work requirements.

Employer Assistance

Some working students use an employer assistance program to pay for college. Employer assistance programs provide partial or full tuition coverage for employees. These educational assistance programs help employees advance their education, often while working. In fact, around half of employers offer tuition assistance programs.

Employer assistance programs come with some restrictions. Some employers require recipients to work at the company for a minimum amount of time after completing their degree. Some programs only cover education related to the industry or field. Employers typically require recipients to attend an accredited school, and in some cases the employer assistance program only covers tuition at a partner institution.

Like other employee benefits, not all employers offer educational assistance programs. Additionally, in some cases students need to pay for tuition costs upfront and maintain a minimum GPA to receive a reimbursement from their employer.

Paying Out of Pocket

  • 529 Plans

    A 529 college savings plan helps students and families save for college in a tax-advantaged account.

    The college savings accounts come in two main types: a traditional 529 plan or a prepaid 529 plan. A traditional account invests money in mutual funds or target date portfolios, while a prepaid tuition plan lets savers pay today’s tuition rates to attend college in the future.

    Check out our comprehensive guide to 529 plans for more.

  • Summer Jobs

    Many college students work in the summer to help cover their expenses. Though unlikely to pay off every college cost, a summer job helps students in more ways than one. For example, undergrads gain work experience in their field with a summer job. Plus, the paycheck from a summer job helps cover room and board, textbooks, and other college costs.

    Many students start by looking for jobs through their school. Colleges and universities often hire students to work on-campus jobs, including in the library, student services, or tutoring programs. Many of these jobs offer year-round opportunities for students to earn a paycheck while in school.

    Many schools also offer career services to help undergrads find summer jobs, paid internships, and part-time jobs during the school year.

Financial Aid for Specific Student Demographics

Some students face unique challenges when paying for college. For example, international students cannot receive loans or grants from federal financial aid programs, but many apply for other scholarships. Similarly, some students qualify for financial aid opportunities based on their military service, race, gender, or disability status.

From choosing an affordable school to identifying financial aid opportunities, the following financial aid guides help students pay for school. Check out our guides for students with disabilities, students of color, and veterans to learn more.

The Fully Accessible Guide to Paying for College for Students with Disabilities
How International Students Can Pay For College

  • What Schools and Programs Can I Use Financial Aid For?

    Students use financial aid to pay for any college or university, including vocational training and trade schools. The federal financial aid program, for instance, funds students pursuing a certificate or degree at any educational level.

    However, some forms of financial aid come with restrictions about which schools recipients attend. For example, federal financial aid applies only to accredited schools. Accredited colleges and universities meet high standards for educating students. Independent accrediting agencies receive approval from the U.S. Department of Education to grant accreditation.

    In addition, many state financial aid and private scholarships require that recipients attend a regionally or programmatically accredited institution. Nursing or education scholarships typically only support students attending a program that leads to a registered nursing license or teaching license.

    The Database of Accredited Postsecondary Institutions and Programs lets prospective students search for accredited schools.

  • What Do I Need to Fill Out the FAFSA?

    Students fill out the FAFSA every year to qualify for federal financial aid. The federal student aid office makes the form available every year on Oct. 1, and students should apply as soon as possible.

    Applicants need several documents to complete the form, including a social security number, federal tax returns, records on untaxed income, and information on all assets.

    Dependent students also provide financial information about their parents. The federal student aid program only considers students independent if they meet certain requirements based on their age, marital status, financial independence, and veteran status. Graduate and professional students also qualify as independent students.

    After submitting the FAFSA form, the federal student aid program determines the student’s expected family contribution. This information goes to the student’s school, which makes a determination about eligibility for federal financial aid programs.

  • Can I Appeal for More Financial Aid?

    Yes, students can appeal the FAFSA to receive more financial aid. The federal student aid program accepts appeals for students with special or unusual circumstances.

    Special circumstances include evidence that the family cannot meet the expected family contribution, changes to the family’s income, or proof that a one-time event significantly increased the filer’s taxable income for the previous year. Other circumstances include changes to the student’s situation that qualify them for independent student status, such as estrangement or abandonment from their parents.

    To appeal their financial aid award, students contact the financial aid office at their school.

  • What Can I Do If I Have Trouble Paying My Student Loans?

    Borrowers who face trouble paying back their student loans benefit from several options, including deferment, forbearance, and consolidation.

    Deferment and forbearance let borrowers pause their student loan payments. Some federal loans offer deferment policies for current students, unemployed borrowers, people on state or federal assistance, or low-income borrowers. Some loans offer interest-free deferment. While forbearance also lets borrowers postpone their loan payments, interest continues to collect.

    Consolidation helps many borrowers lower their monthly payments. Student loan consolidation lets borrowers combine several loans into a single loan payment. This option means a lower interest rate, lower monthly payments, or additional time to pay off the student loan.

    Some borrowers qualify for loan forgiveness and cancellation programs. The Public Service Loan Forgiveness program forgives the balance of student loans for people who work in qualifying public service fields. Teachers also qualify for a federal loan forgiveness program.

    Each of these options help students pay back their student loans — but they often also increase the total amount that borrowers pay and void certain benefits of the loan.

  • What About Application Fees?

    Applying to multiple colleges increases an applicant’s odds of receiving college-based financial aid. But application fees add up. On average, students pay $44 per college application, with some schools charging as much as $90. How can students limit their application fees?

    Most colleges offer fee waivers for qualifying applicants. Many automatically waive the application fee for students who qualified on their SAT or ACT test. Similarly, the Common App waives fees for students who meet income requirements or received a standardized test fee waiver. In some cases, the student’s high school counselor needs to verify their eligibility.

    By applying for a fee waiver, students potentially save hundreds of dollars on college admissions — and maximize their chances of receiving financial aid.

  • What Is a CSS Profile?

    Students fill out the FAFSA to receive federal financial aid. By filling out the CSS Profile, many students apply for non-federal financial aid. Offered by the College Board, the CSS Profile lets students apply for non-federal student financial aid with one form. Nearly 400 colleges and scholarship programs use the CSS Profile to award over $9 billion in grants.

    Applicants need several documents to fill out their CSS Profile, including their most recently completed tax returns, W-2 forms, and any other records of their taxed and untaxed income. Like the FAFSA, applicants also provide financial information about their assets and benefits.

    The CSS Profile costs $25 for an initial application and one college report, plus $16 for additional reports. Low-income students receive a fee waiver for the application and reporting fees.

  • What Factors Can Limit My Student Aid?

    Several factors affect a student’s ability to receive financial aid. For example, international students and undocumented students do not qualify for federal financial aid. Students with a criminal conviction also cannot use federal aid.

    A high family income also limits student aid opportunities. Some dependent students do not qualify for need-based grants and scholarships because of their family income. Low grades present a barrier to receiving merit-based aid. Some grant programs also require a minimum GPA to continue receiving funds.

    Many part-time students receive financial aid, but in many cases their award decreases based on a lower cost of attendance.

    However, students affected by these circumstances often find alternative sources of financial aid. Many international students apply for scholarships and grants, for example, and students from high-income families apply for merit-based awards.

  • How Can I Maximize My Student Aid?

    Apply early and often. Fill out the FAFSA annually to qualify for federal grants, loans, and work-study opportunities. It generally takes less than one hour to complete the form, or even less time for independent or returning students. The CSS Profile also helps students quickly identify non-federal financial aid opportunities.

    In addition, students can apply for an almost unlimited number of scholarships, fellowships, and grants to pay for college. The school’s financial aid office points students toward scholarship opportunities.

    Finally, think strategically about financial aid when applying to college. Focusing on less competitive schools potentially translates into more merit-based aid. By applying for financial aid and tracking scholarship opportunities throughout the year, students increase their chances of maximizing their student aid.

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