Table of Contents:
- What You Need To Know About Paying For College
- Financial Aid Timeline for Parents
- What Are the Different Types of Student Financial Aid?
- Scholarships
- How To Get an Academic Scholarship
- Federal Student Aid
- Federal Student Loans
- Grants
- Work-Study Jobs
- Private Loans
- What Is FAFSA?
- Parent Financial Aid Checklist
- How To Fill Out Your FAFSA
- How To Correct or Edit Your FAFSA
- Accepting Financial Aid
- Repaying Your Student Loans
- Financial Aid FAQ’s
Financial aid is funding that helps families pay for post-secondary education, including college, university, community college, vocational programs, trade schools, and some non-degree programs. It can come in the form of grants, scholarships, work-study programs, or loans.
In this guide, we’ll cover everything you need to know about federal and private financial aid for school. Learn the ins and outs now and get ahead of the application rush!
What You Need To Know About Paying For College
As a parent, planning early is one of the most important steps you can take. Understanding costs, setting realistic expectations, and helping your child borrow responsibly can prevent long-term financial strain for both of you.
The average cost of college for students in the United States is $38,270 per year.1 Over the course of 4 years, students can spend over $500,000 earning a bachelor’s degree.1 Since not everyone has $500,000 laying around, the average student will have to budget, plan, and form a proactive strategy when it comes to paying for school.
The foundation of paying for college starts with forming good financial habits. Budgeting apps can be a helpful place to start learning how to track your expenses, manage your budget, and even set financial goals!
Try Empower to start building strong financial habits and create a student budgeting plan straight from your phone!
Financial Aid Timeline for Parents
- Junior year of high school: Start researching scholarships
- October 1 of senior year: FAFSA opens
- Winter/Spring (After completing FAFSA): Compare financial aid packages
- May 1: Enrollment decision deadline
- Summer before college: Complete loan entrance counseling
What Are the Different Types of Student Financial Aid?
The most common types of student financial aid are:
- Scholarships
- Federal student aid
- Work-study jobs
- Private student loans
Below, we’ll go into detail about each aid type, the qualification requirements, and what to do when it’s time to start the application process.
Scholarships
A scholarship is essentially a monetary gift towards your education. Unlike loans, students don’t have to pay back the money they are awarded from a scholarship. Students may receive scholarships based on education, athleticism, location, race, family economic status, or other merits.
You can find scholarship opportunities for free at:
- Schools
- The reference section at your local library
- Your employer or your parents’ employers
- Local businesses
- Private companies
- Nonprofit organizations
- Community or religious centers
How To Get an Academic Scholarship
Working hard to earn a high GPA in high school (3.5+), providing strong SAT/ACT scores, and being involved in extracurricular activities can help secure scholarships and even qualification for certain types of financial aid.
Some scholarships only require a simple application where students give their information and provide necessary credentials (transcripts, tax documents, etc.) to apply. Other scholarships have questionnaires, essays, or other requirements in order to apply.
Below are a websites students can use to find scholarships.
Students can also find help applying for scholarships on the U.S. Federal Student Aid website.
IMPORTANT NOTE: Beware of scholarship scams! You should never have to pay to apply for a scholarship, and you should always be cautious of “guaranteed” awards.
Federal Student Aid
Students fill out the FAFSA to be considered for federal grants, work-study, and student loans. Qualification for federal student loans is typically need-based, meaning the students who come from families with lower income and fewer assets will be prioritized over students from high-income families.
Federal Student Loans
After filling out the FAFSA, students should look out for offers for federal student loans as part of their school’s financial aid offer. Like any loan, students will eventually have to repay the balance for these loans, plus interest and fees. However, many federal student loans come with a grace period that allows students to postpone repayment until after they are out of school, usually 6 months post-graduation.
Common types of federal student loans are:
- Direct Subsidized Loan — Up to $5,500 for eligible undergraduate students who demonstrate financial need.
- Direct Unsubsidized Loan — Up to $20,500 for eligible undergraduate, graduate, and professional students.
- Direct PLUS Loan — Loans for parents who are borrowing for their dependent undergraduate student or eligible graduate or professional students. Loan amounts can be as much as the total cost of attendance.
- Direct Consolidation Loans — Option for students with eligible federal student loans who want to combine their balances into a single loan.
IMPORTANT NOTE: Loan limits vary by year in school and dependency status.
Grants
Similar to a scholarship, a grant is a type of financial aid given to a student, and generally does not have to be repaid. In order to qualify for a grant, students must meet certain academic, financial, or other need-based requirements.
Some common Federal Grant Programs include:
- Federal Pell Grant — Up to $7,395 awarded to undergraduate students (who have not earned a bachelor’s, graduate, or professional degree) on a financially need-based basis.
- Federal Supplemental Educational Opportunity Grant (FSEOG) — Up to $4,000 awarded to undergraduate students (who haven’t earned a bachelor’s, graduate, or professional degree) on a financially need-based basis.
- Teacher Education Assistance for College and Higher Education (TEACH) Grant — Up to $4,000 awarded to undergraduate, postbaccalaureate, or graduate students on track to earn a degree intended for teaching elementary or secondary school in a high-need field.
Work-Study Jobs
A work-study job provides part-time employment for undergraduate and graduate students that allows them to earn money that goes directly towards their education expenses. Work-study programs are available to full-time or part-time students and may be paid on an hourly or salary basis, depending on whether they’re an undergraduate or graduate student, and the employer.
You can find more information on work-study programs on the U.S. Federal Student Aid website.
Private Loans
Students can also fund their education with private loans. Loan amounts, interest rates, and repayment terms are determined by factors like income, assets, and credit history. To help with the approval process, parents can co-sign private loans if their child doesn’t have enough credit history to get approval on their own.
Students don’t have to fill out the FAFSA in order to qualify for private student loans; they would just apply directly with the lender.
Popular private student loan providers include:
Private loan deferment or forbearance options vary by lender and are typically more limited than federal loan protections, and students may have to start making payments on their loans while they are still in school.
Parent PLUS Loan
Parent PLUS loans are a type of Direct PLUS loan that helps parents pay for education expenses that aren’t covered by other sources of financial aid. These loans are available through participating schools in the Direct Loan Program.
To qualify for a parent PLUS loan, you must meet the following requirements:
- Be the biological or adoptive parent (in some cases a stepparent is also acceptable) of a dependent undergraduate student who is enrolled half-time or more at an eligible financial institution.
- Have a clean credit history (some exclusions apply).
- Meet the general eligibility requirements for federal student aid, including but not limited to citizen, conviction, and disability requirements.
What Is FAFSA?
The Free Application for Federal Student Aid (FAFSA) is the form students must fill out in order to be considered for and receive federal student aid. States and colleges may also use information from your FAFSA to award grants, scholarships, loans, or other financial aid.
Federal funds are limited, so it’s important to complete the FAFSA ASAP if students want to make the most of their potential federal student aid.
| Generally, the FAFSA deadline is 11:59 p.m. Central time (CT) on June 30 of each year. |
You can find more information on FAFSA Application Deadlines on the U.S. Federal Student Aid website.
Parent Financial Aid Checklist
- Create a StudentAid.gov account with your child.
- Gather prior year tax returns.
- Track FAFSA deadlines (federal, state, and school).
- Compare financial aid offers carefully.
- Help your child borrow only what they truly need.
- Review repayment expectations together.
How To Fill Out the FAFSA
The first step in filling out the FAFSA is to make a StudentAid.gov account. This account is what students will use to fill out their FAFSA for their whole college career, so make sure to save the login credentials. Students can also check the status of their FAFSA, make changes, and review their FAFSA with their StudentAid.gov account.
Once they have an account, click “Start New Form” to get started. Some documents to have on hand when filling out the FAFSA include:
- Most recent tax return
- Any records of child support received (if applicable)
- Current balances of cash, savings, and checking accounts of both students and their parent(s)
- Net worth of investments, businesses, and farms (if applicable)
For those planning on filling out a paper FAFSA form, do not mail these documents along with the form! Simply use them as a reference when filling out the FAFSA.
If you need help filling out your FAFSA, StudentAid.gov provides these free tools:
- If you’re on the online version of the FAFSA, select the question mark icon next to a FAFSA question to get more information that may answer a question you may have.
- Check out the FAQ page on StudentAid.gov.
- Use the AI assistant found on the online form.
- Contact the financial aid office of the school you plan to attend directly
| Online FAFSA submissions are typically processed in approximately 1-3 days. Expect about a 7-10 day processing time for paper FAFSA’s submitted via the mail. |
IMPORTANT NOTE: Be sure to check the status of your FAFSA after submitting to make sure there are no actions required. If students are missing information or have filled in incorrect data, their FAFSA form won’t be processed.
How To Correct or Edit the FAFSA
To correct or make changes to the FAFSA form online, students can go to their StudentAid.gov account and make any necessary updates. Dependent student making updates to parent(s) information will have to have their FAFSA re-signed electronically.
When making changes to a paper FAFSA, use the FAFSA Submission Summary that students should have received in the mail, and simply make the updates required, sign the document, and send it to the address listed.
Accepting Financial Aid
After filling out the FAFSA, students may be awarded several loans/forms of financial aid. They don’t have to accept every loan, and they don’t even have to accept the full loan amount (Their school will send info on how to request a lower loan amount in the aid offer).
Your child does not have to accept every loan offered — or even the full loan amount. As a parent, review the aid package carefully together and consider how much borrowing is truly necessary. Remember, they can always increase the amount later if you need!
When accepting financial aid, try to gauge the loan amount to the cost of tuition and living expenses. Borrowing only what you need can save students from not only over-borrowing and paying hundreds of dollars or more in extra interest costs, but also from potentially adding years to their repayment terms as well.
Repaying Student Loans
Eventually, students will need to repay their loans. Depending on the loan structure, they may have to start making payments on their student loans right away, meaning they’ll be responsible for making monthly payments while they’re in school. Other loans have a grace period where students don’t have to make payments while enrolled in school full-time, and for up to 6 months after they graduate (Keep in mind that interest is still usually accruing during this time).
There are some exceptions, such as deferment or forbearance, where students can temporarily pause their student loan payments, or student loan negotiation options for those who can’t afford to repay their loans.
Financial Aid Questions Parents Frequently Ask
When will my student know how much federal financial aid they get?
Once the FAFSA has been processed (1-3 days for online submissions, or 7-10 days for mail-in submissions), students can log into their StudentAid.gov account to view their “Eligibility Overview.” Here they’ll be able to see an estimate of how much funding they’re likely to receive in Federal Pell Grants and Federal Direct Loans, as well as their eligibility status for the Federal Work-Study Program.
What’s the difference between subsidized and unsubsidized federal loans?
Subsidized federal loans are need-based and do not accrue interest while students are enrolled in school at least half-time, during their grace period, or during approved deferment periods. Unsubsidized loans are not need-based, and interest begins accruing as soon as the loan is disbursed, even while students are in school.
What is need-based financial aid?
Need-based financial aid refers to the system of assigning student aid based on the financial situation and income of the student’s family, not on the individual student’s academic (or athletic) merit. This type of financial aid, funded by the federal government, state governments, and individual colleges, is to help with tuition and other education costs for students who cannot afford college on their own.
Eligibility for need-based financial aid will be determined by filling out the FAFSA.
What is student loan delinquency vs. default?
Student loan delinquency happens when a student misses a payment, usually resulting in missed payment fees and damage to their credit score. Students can rectify a delinquent loan by catching up on their payments.
Student loan default occurs when a student has stopped making payments on their loan for more than 270 days past a scheduled due date.2
Can students pause their loan payments temporarily?
Yes. Deferment and forbearance are options for people who are in a short-term financial bind and need to temporarily suspend their student loan payments. With deferment, interest won’t accrue on some types of loans, while interest will accrue on all types of loans during forbearance.
Also, if a student plans to pursue loan forgiveness, any time spent in loan deferment or forbearance won’t count towards their forgiveness requirements, meaning they won’t make any more progress towards their loan forgiveness until they resume their loan repayment.
Can you submit the FAFSA if you don’t have tax information yet?
Yes, students can submit the FAFSA using estimated tax information if the family’s tax return has not been filed yet. However, they’ll need to update their FAFSA later with the correct tax information to avoid delays or changes in their financial aid eligibility.
Do students need to reapply for financial aid every year?
Yes, students must submit a new FAFSA for each academic year they want to receive financial aid. Financial circumstances, enrollment status, and aid availability can change year to year, so reapplying ensures students receive the correct amount of aid.
What happens if the family’s financial situation changes after submitting the FAFSA?
If a student’s family experiences a significant financial change, such as job loss or reduced income, they can contact their school’s financial aid office to request a review through a process called professional judgment. The school may adjust their aid eligibility based on updated financial information.
Can students get financial aid for part-time enrollment or online programs?
Yes, financial aid may be available for part-time students and those enrolled in online programs, but eligibility and award amounts may be reduced. The school must be accredited and participate in federal student aid programs for you to qualify.
How does financial aid affect a student’s credit score?
Grants, scholarships, and work-study programs do not affect a student’s credit score. Student loans can impact credit, but making on-time payments can help build positive credit history, while missed payments may harm scores.
What should a student do if their financial aid offer isn’t enough?
Start by contacting the school’s financial aid office to discuss an appeal, payment plan options, or additional institutional aid. Students can also look for outside scholarships, reduce education-related expenses, or carefully consider supplemental loan options if necessary.
Should parents save for retirement or college first?
In most cases, parents should prioritize saving for retirement before saving for college. There are loans available to help pay for education, but there are no loans for retirement. Ensuring your long-term financial stability also prevents your child from potentially having to support you financially later.
What happens if my child drops below half-time enrollment?
If your child drops below half-time enrollment, their student loans may enter their grace period, which typically lasts six months before repayment begins. They may also lose eligibility for certain financial aid programs. It’s important to contact the school’s financial aid office immediately to understand how enrollment changes could affect aid and repayment timelines.
Can divorced parents both file FAFSA?
No, only one parent completes the FAFSA as the “custodial parent,” which is the parent the student lived with more during the past 12 months. If that parent is remarried, their spouse’s financial information must also be included. The other biological parent does not file a separate FAFSA, though some colleges may request additional information.
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