Grants and Loans

Updated: November 14, 2022

College isn't on everyone's radar, but for those looking to attend there are options available to help make it more affordable. Of the options available, we'll discuss grants and loans. Between the two, grants tend to top the list of preferred funding options.

Federal Grants

Federal Grants are a type of financial aid provided by the government. Grants top the list of preferred funding options as they sometimes don't have to be paid back. In order to determine your eligibility, you have to fill out the Free Application for Student Aid (FAFSA) for the academic year you would like to fund.

During the filing process, you have to specify whether you're a dependent or independent student. According to the Student Aid site, you're considered an independent student if you're over the age of 24. If you're younger than 24, then you'll be viewed as a dependent; even if you live on your own (more on this later).

Once the FAFSA is complete, you'll become eligible for one or more of the following grants: the Pell, FSEOG or TEACH.

The Pell

The Pell is a need-based grant that is distributed from the government to your school. Depending on your dependency status, your max award amount will vary. In addition to this, your school will determine which semesters your funds will cover.

Knowing in advance which semesters are covered by your Pell package is important. If you're looking to attend throughout the year, check to see if there are any semesters that won't be covered. Having this information in hand will you plan accordingly.

FSEOG

The Federal Supplemental Education Opportunity Grant (FSEOG) is also part of the federal grant program. Unlike Pell, this grant gets administered through the institution you're attending. It sounds like a positive; however, not all institutions of higher education participate in this program.

TEACH

Lastly is the TEACH grant which is only rewarded to those who plan on entering the teaching field. In order to be eligible, you must be taking and completing the recommended classes that are acknowledged by the grant program. Much like the FSEOG, you have to attend an institution that participates in the program.

Illustrated by vladwel a Vector Stock provider.

Federal and Private Loans

Unlike grants, to an extent, loans are a type of financial aid that gets paid back. In regards to student loans, there are two types: federal and private.

Federal Loans

Federal loans include Direct Subsidized, Direct Unsubsidized along with Direct PLUS. Of the three, the subsidized loan is the only one that doesn't accumulate interest while you're in school. Currently there are caps in place that limit the amount you can borrow.

Dependent students can borrow up to $31,000. Independent students can borrow up to $57,500. If you're taking out loans for graduate school, you can only borrow up $138,500.

Like the above, there are two types Direct PLUS loans: one for parents of undergraduate students and one for graduate students. The Direct PLUS loan doesn't have a fixed amount like the Sub and Unsub loans. Instead, the maximum amount you can borrow is determined by your school.

Private Loans

Private loans are very different when compared to federal loans. As the name implies, these types of loans are distributed by private financial institutions. There are borrowing limits that vary per institution. 

Moreover, each institution has their own set of rules and requirements for eligibility. As a result, if you run into any kind of trouble when it comes time to pay back the money you borrowed, you may or may not get much assistance in terms of a payment plan. Do your homework and research any and all potential loan providers for the option that is best for you.

In Closing

When applying for federal financial aid, do so as early as possible. Do not wait until the last minute, because you may miss out. When it comes to loans, try to stick with the federal sponsored ones as those have support systems in place when it comes time to repay.

For private loans, don't go crazy with the borrowing. Borrow only what you need and what you know you can pay back with little issue.

Resources for Reference

The following is a list resources to help you better understand how the financial aid process works. Further, there are links explaining what differentiates dependent and independent students. That said, it is highly encouraged that you contact your school's financial aid office for how to approach your application if you're younger than 24 and aren't supported by parents and or guardians.

StudentAid.gov

Grants - Explains the different types of grants available

Loans - Explains the types of loans and their requirements

Dependency - Offers information and possible solutions for independent students under 24

Nerd Wallet

What Is a Private Student Loan? by Anna Helhoski - September 24, 2021