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A primer on college financial aid

Shelly  Gigante

Posted on October 03, 2022

Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
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Explain why it’s important to submit your FAFSA form early. 

Highlight the types of financial aid that exist, with the pros and cons of each. 

Discuss where to look for the scholarships, grants, and the most favorable loans.

As college costs continue to climb, grants, scholarships, and other forms of financial aid are playing an increasingly vital role in making higher education more affordable.

Average published tuition, fees, and room and board for full-time, in-state students at public four-year colleges and universities stood at $27,330 for 2021-22, while the average private four-year college charged an average of $55,800, according to the College Board.1

Most students, however, don’t pay the full sticker price.

Most students received some form of financial aid, bringing the average net cost (sticker price minus grant aid and tax benefits) of tuition, fees, and room and board down to $14,990 at public four-year institutions for in-state residents and $28,610 for private four-year colleges.

Undergraduate students received an estimated average of $14,800 in financial aid for the 2020-21 school year, the most recent year for which data are available. That includes grants from all sources, federal loans, tax credits, and federal work-study, the College Board reported.2

To maximize the size of their financial aid package, students and parents of college-bound kids must plan early and leave no stone unturned, said Megan Coval, vice president for public policy and federal relations for the National Association of Student Financial Aid Administrators.

First step: FAFSA

That begins with filling out the Free Application for Federal Student Aid, which determines eligibility for federal aid, but is used by many state and private programs, as well.

“We often hear from families that they are sure they won’t qualify for financial aid so why fill out the FAFSA, but it is really important even if you want loans which are not need-based,” said Coval, in an interview.

Also, the FAFSA is undergoing revisions in the next few years. The changes may have significant implications for some families. (Learn more: Big changes for the FAFSA)

Another tip: submit your FAFSA early as many state and institutional grants are awarded on a first come first served basis. When the money for college students runs out, it’s gone.

Types of financial aid

Several types of financial aid exist, including grants, scholarships, work-study programs and loans. Often, the financial aid packages awarded to students include a combination of these.


Grants, which are typically need-based, are the holy grail of financial aid as the dollars awarded need not be repaid. A grant is essentially free money.

State governments, employers, religious groups, individual colleges, nonprofit groups and professional associations offer their own grants and scholarships. Some are earmarked for students from a specific gender, grade level, military families, or ethnic background.

The grants offered by the federal government include:

  • Federal Pell Grants (PELL), which are available to high need undergraduate students who have not yet earned a first bachelor’s degree. Award amounts can change yearly. For 2022-2023, the maximum award is $6,895, but the amount college students receive depends on financial need, cost of attendance, their status as a full- or part-time student and their plans to attend school for a full academic year or less.
  • Federal Supplemental Educational Opportunity Grants (FSEOG), which award between $100 and $4,000 per year to undergraduate students with exceptional financial need, who are also eligible for a Pell grant. The size of the award depends on financial need, when the student applies, the amount of other aid they received, and the availability of funds at their college, according to the Department of Education. The program is administered directly by the financial aid office at each participating school and is often called “campus-based” aid. Students should apply early as each school receives a finite amount of FSEOG funds, the Department of Education suggests. When the money runs out, no new awards can be granted until the following year.
  • Teacher Education Assistance for College and Higher Education Grants (TEACH), which provide up to $4,000 annually to students who are completing course work needed to begin a career in teaching. To qualify for such a grant, students must sign an “agreement to serve,” in which they agree to teach in a high-need field, at a school or educational service agency that serves low-income students, and for at least four academic years within eight years of completing the course of study for which you received the grant. Failure to meet those terms means their grant will be converted to a direct unsubsidized loan and must be repaid with interest.
  • Iraq and Afghanistan Service Grants, which provide awards to students who are not eligible for a Federal Pell Grant on the basis of their Expected Family Contribution, and whose parent or guardian was a member of the U.S. armed forces and died in service performed in Iraq or Afghanistan after the events of 9/11. Among other requirements, the student must have been younger than 24 years old or enrolled in college at least part-time at the time of their parent’s or guardian’s death. The grant awards are equal to the amount of the maximum Federal Pell Grant for the award year, not to exceed the cost of attendance.

College scholarships

Scholarships and graduate fellowships, which may be either need-based or merit-based, are equally coveted.

Like grants, they are a form of “gift aid” and need not be repaid. Money is awarded to students based on academic, athletic, or other achievements to help pay for education expenses.

Award amounts can vary from a few hundred dollars towards fees to a “full ride,” in which the cost of tuition is fully covered.

Several free online databases enable students to search for billions of dollars’ worth of college scholarships that meet their profile, including those offered by and Sallie Mae.

Work-study programs

Students who need a paycheck to make ends meet can also apply for the Federal Work-Study Program, which assigns eligible undergraduate and graduate students a paid part-time job.

Not all schools participate, but those that do typically offer jobs on campus that may be relevant to the student’s course of study. Jobs may range from helping out in the financial aid office to working in the student cafeteria.

Off campus jobs under the federal work-study aid program are usually for a private nonprofit organization or a public agency, and the work performed must be in the public interest, according to the Department of Education.3

Those who qualify will earn at least minimum wage but can make more depending on the type of work they do and the skills required.

If work-study interests you, the federal government urges you to apply for aid early. Schools that participate in the program award funds on a first come, first served basis.

Some college campuses sponsor their own work-study programs, as well.

Student loans

Loans are the largest component of most students’ financial aid packages. This is money you borrow that must be paid back.

Many banks and financial institutions offer private loans to students, but those available through the state and federal government offer the lowest interest rates and most flexible repayment plans.

Stafford Subsidized Loans, for example, offer the lowest rates and are reserved for undergraduate students with the greatest financial need. The federal government pays the interest on subsidized loans while the borrower is in school at least half-time, during the grace period and during periods of deferment.

By comparison, Stafford Unsubsidized Loans are available to both undergraduate and graduate students and are not need-based. Interest accrues while the student is attending school and continues through the life of the loan.

Finally, parents who qualify based on a credit check can also borrow from the federal government using a Direct PLUS Loan to pay for higher education expenses not covered through other forms of financial aid. (The Federal Perkins loan program for undergraduate and graduate students with exceptional financial need ended on Sept. 30, 2017.) (Related: Understanding Parent PLUS debt)

Note that during the COVID-19 pandemic, the White House temporarily paused payments and interest on all federal student loans. Most recently, that student loan relief program was extended through Dec. 31, 2022. (Learn more: Federal student loan relief to end at year’s end. Next steps).

Locating financial aid

To track down all forms of financial aid for which you may qualify, students should contact the financial aid office of the college or colleges to which they plan to apply, their high school guidance counselor and any religious groups, professional organization and clubs (Boy Scouts, Kiwanis) to which they belong.

Public library reference sections, state grant agencies and honor societies can also be a valuable resource.

Parents and students should keep track of financial aid deadlines to ensure they don’t miss out, said Coval.

“Every $200 or $300 helps,” she said. “If you can pull a couple of grants together, it can pay for your books for the entire year.”

Just beware of scams. The U.S. Department of Education reports no student should pay for services that are available for free, including commercial websites that offer help in filing the FAFSA – for a fee. If needed, free help is available through college financial aid offices, and the Federal Student Aid Information Center.

Financial aid can make a big dent in the cost of a college degree, but you have to ask for what you need.

“Sources of aid come from all over the place,” said Coval. “When students are accepted to a college or considering going somewhere, ask questions to find out whether that institution provides any aid beyond federal loans.”

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This article was originally published September 2016. It has been updated.


1 College Board, “Trends in College Pricing and Student Aid 2021”

2 College Board, “Figure CP-9: Average Net Price: Public Four-Year,” Trends in College Pricing and Student Aid 2021.”

3 U.S. Department of Education, “Federal Work-Study jobs help students earn money to pay for college or career school.”

The information provided is not written or intended as specific tax or legal advice. MassMutual and its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.