How to Pay for College: Understanding All Your Financial Aid Options

Freelance Writer

Choosing a college is complicated. You’ve got to figure out what type of school you want, where to live, what to study, and—oh yeah—how to pay for it all.

With all those choices to make and all the action happening as you finish up high school, the last thing most students want to think about is the complicated world of financial aid. But financial aid can be one of the most important pieces of the college puzzle.

The yearly tuition at private colleges can top $50,000, and even state school tuition is rising at a staggering pace. Understandably, the average family doesn’t cover this entire cost on their own: almost 70% of students borrow money to help them get through college, and many others earn scholarships or grants. But how do you navigate the world of grants and loans when there’s so much information out there?

We’ve put together a quick overview of the financial aid options to consider as you make your college choice. Hopefully, this information will make at least one decision a little easier.

This is the FAFSA

Before you can dive into the types of financial aid below, you need to familiarize yourself with the mother of financial aid applications, the FAFSA, aka Free Application for Federal Student Aid. (Trust me, it's gonna come up a lot!)

What is the FAFSA?

The FAFSA is arguably your most important ally in your quest to secure financial aid for college. The government uses the information you provide on this form to assess your eligibility for grants and scholarships, federal loans, and work-study. In addition, colleges and private scholarship organizations can use the FAFSA to determine your eligibility for other aid. In short, it’s the easiest and fastest way to get money for college.

How do I fill out the FAFSA?

Filling out the FAFSA has the reputation of being a drag, but in recent years the government has streamlined the process. To begin, visit the US Department of Education’s FAFSA page. Although online submission is encouraged, there is also a paper form available. (If you’re doing it online, be sure to fill out the form directly through the federal website and not through a third-party site!) Ask your parents to help you with the FAFSA, as you’ll need information about your family’s income, taxes, and assets as well as your own.

When should I do it?

Students who plan to enroll in college for the 2017–2018 academic year can send in their FAFSA as early as October 1, 2016, using tax info from 2015. (It used to be ASAP after January 1 of a given year, but the federal government changed it, effective as of 2016.) However, state financial aid deadlines may differ. And keep in mind that certain types of aid are first come, first served.


Don’t forget: you need to work individually or with your parents to fill out the FAFSA every year you attend college. Also many people assume that if they aren’t in a low-income situation, they won’t qualify for financial aid, but you might be surprised. And even if you don’t currently qualify for aid, if your circumstances change—for example, if a parent loses a job and the amount your family is able to contribute to your education drops drastically—you want to be sure you have all recent FAFSAs on file so you will be eligible for the highest possible amount of aid. 

Free money (WOO!): grants and scholarships

The ideal financial aid scenario, of course, is to find a way to get people to give you money for college that you don’t have to pay back. Each year almost $50 billion in grant and scholarship money is awarded by the US Department of Education, private donors, and schools across the country. Colleges and universities award grants and scholarships are awarded based on need, talent, extracurricular background, or myriad other reasons.


Grants are a type of aid usually awarded by the federal government, often based on student/family financial need, that do not need to be repaid. The Department of Education then sends the money to colleges, which credit students’ accounts.

The most common type of federal grant is the Pell Grant, which is available to all undergraduate students who demonstrate financial need. To qualify, students must complete and submit the FAFSA.

The maximum amount you can receive through the Pell Grant changes yearly. For the 2016–2017 award year (July 2016 to June 2017), the maximum award is $5,815. However, the amount you receive is based on a number of factors, including your financial need, the cost of attendance at your college, and how long and in what status you plan to attend (i.e., part time or full time).

One of the benefits of the Pell Grant is that it’s not affected by other aid, so the amount you receive won’t drop if you get any other scholarships. Additionally, each college or university receives enough money from the federal government to cover all the students who qualify, so there’s no danger of the money running out if you’re not the first to apply.

The federal Supplemental Educational Opportunity Grant (SEOG) is another type of grant awarded to students with an “exceptional” level of need. The program is administered through the financial aid offices of all participating colleges, so you should get in touch with your school to determine whether they participate and see how to apply. Awards can range from $100–$4,000 based on your need, and schools must pay out at least twice per year. Any SEOG funds you are awarded may be credited toward your tuition or paid to you directly, depending on the college.

Just like with the Pell Grant, students should fill out the FAFSA to determine their SEOG eligibility. Unlike the Pell Grant, however, each participating college only has a certain amount of SEOG funding to work with, so this option is essentially first come, first served.

Other federal aid

There are a number of other financial aid options available through the federal government aside from the Pell Grant and SEOG. For example, if you plan to become a teacher in a high-need, low-income area of the country, you may be eligible for the Teacher Education Assistance for College and Higher Education (TEACH) grant.

Additional government money is available for students who have completed community service with organizations like AmeriCorps, those with specific cultural backgrounds, children of service members, and more. A range of scholarships are available for students with specific interests, such as scholarships from the National Institutes of Health for students interested in studying science and medicine. (Check out the Types of Aid page on the US Department of Education’s Federal Student Aid website for more ideas about federal money you might qualify for.)

Scholarships: institutional (aka awarded by your college)

Most colleges and universities offer a range of scholarships for incoming students. Many institutional scholarships are based either on financial need or merit (like grades or honors status), but schools can also offer them as an award for different reasons, such as being an active member of the school community or having a particular major.

The availability of scholarship money also varies from school to school. Although private colleges generally have higher tuition, they also often have more award money available than state schools do. Finally, colleges will vary in how you win scholarships too; some have additional financial aid applications, while some award scholarships based on your general application for admission. In any case, it’s important to ask your college financial aid office for scholarship information before you begin.

Scholarships: external (aka awarded by outside organizations)

Every year thousands of students apply for and receive scholarships from a variety of private funders and agencies. External scholarships can be the most surprising and rewarding sources of money to pay for your education. While many are based on academic merit, you can also earn scholarships for a variety of reasons, including your athletic abilities, cultural or religious background, family military history, hobbies, musical or artistic talents, professional interests or job, and more.

Think creatively and search diligently for scholarships that fit you. Check with cultural or recreational organizations you and your parents are part of, or ask your parents to see whether their employer might have a scholarship program available to you. Both your high school counselor and college financial aid counselors can be invaluable resources in your search for scholarships. Ask them if they can direct you to a listing of scholarships for students with grades and interests similar to yours. Additionally, you can try an online search. Check out the US Department of Labor’s free scholarship search tool, or use trusted sites (like CollegeXpress!).

If an award seems sketchy, avoid it or ask your counselor if it’s a scam. Remember, there’s no such thing as a “guaranteed” scholarship or a scholarship you need to pay to apply for. At the end of the day, if it sounds too good to be true, it probably is.

Related: Find scholarships—both institutional and external—here

Borrowed money: federal and private student loans

Once you’ve exhausted your grant and scholarship opportunities, loans can help cover the difference—just consider your options carefully before you commit.

Federal loans

Federal loans tend to have lower interest rates and more flexible repayment plans than private loans. Before you look into private loans, exhaust all your federal loan options. There are several types of federal loans available, and as with grants, you can apply for all of them using the FAFSA.

The Stafford Loan is the most common type of loan for undergraduates. There are two types: subsidized and unsubsidized. Subsidized loans, which are awarded based on financial need, don’t accrue interest while you’re in school. Unsubsidized loans are not need-based and accrue interest while you’re in college. Many students are offered a combination of the two by the government. Through the Stafford program, students who are financially dependent on their parents—and the vast majority of undergraduate students are—can borrow up to $31,000 over the course of their college education; financially independent students can borrow up to $57,500.

The Perkins Loan is an option for students who have financial need above and beyond what the Stafford Loan covers. Perkins Loans are among the cheapest loans available in terms of interest, charging zero interest while you’re in school and a fixed 5% interest rate afterwards. Undergraduates can borrow up to $27,500. However, each college has only a certain amount of Perkins funding available, and Perkins Loans are currently being phased out. The last loans will be available in September 2017.

Parent PLUS Loans are another federal option. They have a low interest rate, and significant amounts of money are available, so they are a great source of money to cover what you can’t get from the Stafford Loan (especially once Perkins Loans are totally phased out). However, there are a few caveats: unlike other federal loans, they are available only to creditworthy borrowers and require a credit check. Additionally, if the student defaults on loan payment, parents will also be subject to collections. However, if you and your parents have a good credit history, they are still a great alternative to private loans.

Private loans

Private loans can help fill the gaps when grants and federal loans won’t cut it. You’ve probably heard the names of private lenders before—companies like Sallie Mae, Wells Fargo, and Student Loan Network are the most well known.

If you’re considering private loans, contact your college’s financial aid office to get more information. Many schools work with a preferred lender to get special interest rates. In addition, loan limits, fees, and interest rates can be incredibly difficult to understand. College financial aid officers deal with these loans all the time, so they can tell you what the terms mean in plain English.

And if you are able to pay some of your private loans while you’re in college, do it! This can save you lots of money in interest down the road.

Earned money: work-study

Another way to help pay for college is federal work-study. Work-study is only available to those who qualify (determined by the FAFSA), but if you do, it can be a great way to pay for smaller expenses like books and food while at college. Part-time work-study positions are offered through your college and pay at least federal minimum wage. The total award and hours available are based on your level of financial need, your school’s total funding, and when you apply.

Many work-study jobs focus on civic education or your field of interest, so they can provide excellent work experience too. Other more general jobs can include things like working at the sign-in desk in your dorm, assisting RAs with administrative tasks, or helping out in the school’s computer lab or library. Some work-study jobs even allow students to do their homework during down time—and what could be better than getting paid to study?

See the Work-Study Jobs page on the US Department of Education’s Federal Student Aid site for more information.

The search is on!

Now that you have all the info, it’s your turn to uncover which financial aid opportunities are right for you. Investigate and understand your options thoroughly, fill out the FAFSA to qualify for government grants and loans, and then talk to your school counselor about other funding options. With a combination of free, saved, and earned money, you can minimize your college debt and focus on the more important (and fun) choices.

Note: Did you know you could win a $10,000 scholarship for college or grad school just by registering on CollegeXpress? This is one of the quickest, easiest scholarships you’ll ever apply for. Register Now »