The two basic forms of financial help for college students are: 1) Student loans and 2) Grants and scholarships.
Scholarships and grants are essentially the same thing—money given to students to help cover the expenses of attending college. While grants and scholarships may come with conditions, such as, maintaining a minimum average grade, they do not need to be repaid.
On the other hand, student loans, like all loans, need to be repaid and with interest.
According to the U.S. National Center for Education Statistics, the total amount of grants and scholarships given to students each year is nearly identical to the amount of student loans.
More students receive grants than receive loans, but the average loan amount is higher.
| Grants and Scholarships | Loans | |
| Percent of students who receive | 65% | 53% |
| Average amount they receive | $7,400 | $8,200 |
The grants and loans come from a variety of sources including the federal government, state governments, the schools themselves, foundations, and private banks.
The federal government and some states also fund work-study positions for college students. In a work-study program, students will get jobs, usually at the school they attend, and are paid at least the federal minimum wage.
Types of Student Loans
Federal Perkins Loans:
These need-based loans have a low, fixed interest rate of five percent. You borrow the money through your school.- Federal Stafford Loans:
Stafford loans come in two varieties: subsidized or unsubsidized. This distinction can make a big difference to the student. The subsidized loans are based on need and the government pays the interest while the borrower is still in school. The interest paid by the government can add up to several thousand dollars. The unsubsidized Stafford loans are not based on need and the interest accumulates while the borrower is still in school though repayment is delayed until after they leave school. - Federal Plus Loans:
PLUS Loans are made to graduate students or parents of undergraduate students. There is no “subsidized” option for the PLUS loans. They have a higher interest rate than Stafford loans. - Private Loans:
These loans are not guaranteed or subsidized by the government. Like consumer loans, the terms depend on the borrower’s credit rating, market conditions and the lender.
Dependency status has a significant impact on the types and amounts of aid for which students can qualify. Click here to see whether you are “dependent” or “independent.”
