Your Guide to Understanding Financial Aid

This financial aid guide from Maryville University is designed to walk you through the process of researching, identifying, and applying for the college financial assistance that is right for you.

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Benjamin Franklin once said that “an investment in knowledge pays the best interest.” College tuition costs are intimidating for many students, but the reward is worth the investment—college graduates may be more likely than non-grads to achieve their career goals and earn higher salaries.

Though college costs can appear to be daunting at first glance, once students see how financial aid can help manage their costs through loans, grants, and external scholarships, the possibility of attaining a college degree becomes a reachable goal.

Today, students have a wide array of options to assist with both the direct and indirect costs of pursuing a college degree. Financial aid is available in many forms, ranging from federal or private grants and loans to scholarships, employer-run tuition assistance programs, and military assistance to active-duty service members and veterans. And applying for and obtaining assistance is actually quite intuitive and easy.

This financial aid guide is designed to walk you through the process of researching, identifying, and applying for the financial assistance that is right for you.

Related: How to Get Financial Aid for College: The Ultimate Guide

All roads begin at FAFSA

Before you get too far along in your quest for a college degree, put together a snapshot of your financial situation and your available financial aid options.

The federal government–run Free Application for Federal Student Aid (FAFSA) is designed to assist with the process. Set up an account on the website and answer the questions, which range from simple demographics (name, address, date of birth, etc.) to your preferred schools, tax status, and financial information.

When you’re done, sign the document electronically and submit your completed FAFSA application package. FAFSA stores the information in its servers so you can use it to apply for grants, loans, and a number of other financial aid options.

The US Department of Education’s blog provides an easy-to-follow, step-by-step tutorial for filling out FAFSA forms online:

  • Create an account/obtain your Federal Student Aid (FSA) ID: FSA IDs are essentially usernames and passwords that remain with you throughout your entire student career.
  • Start filling out the FAFSA: Be sure to choose the correct school year on the first page of the FAFSA form. For example, if you plan to attend college between July 1, 2018 and June 30, 2019, choose the 2018–2019 FAFSA. Also, the beginning of the form includes a “save” key, which lets you return to the form later if necessary.
  • Complete the demographics section: Fill out the sections on personal information. Full legal name, address, Social Security Number, and other identifying information go in this section.
  • List the schools you are applying to: The form lets you choose up to 10 schools. When the form is completed, your information will be sent to the selected institutions.
  • Determine dependency status: Whether a student is considered a legal dependent of a parent or legal guardian determines the course of the rest of the FAFSA form.
  • Complete parent demographics section (if applicable): Students who are legal dependents of a parent or guardian should fill out this section. Names, addresses, and other identifying data of the parent/guardian go here.
  • Prove your financial information: An IRS Data Retrieval Tool (DRT) lets you or your parents/guardians (if applicable) log in to the IRS website and automatically populate FAFSA fields with verified tax return data. Applicants who are unable to use the DRT need to supply paper copies of tax returns to the school to which they are applying.
  • Electronically sign and submit the FAFSA form: FAFSA lets you and your parents or guardians sign the form digitally with FAS IDs. If you forget your numbers, you can use the FSA ID retrieval tool. When everything is signed, the form can be officially submitted.

College financial aid departments use completed FAFSA forms to obtain the necessary financial aid for students who want to enroll in their programs. FAFSA forms must be completed every school year until graduation. 

Related: 8 Things You Need to Do Before Filing the FAFSA

Award letters and federal student aid

When the FAFSA has been filed and processed, each school you’re accepted to will send you an award letter itemizing the aid that’s available to you based on tuition, your Expected Family Contribution (EFC), how far along you are in your program, and whether you are attending school full-time or part-time.

The first type of financial aid most students encounter is federal student aid, which is available in the form of grants and loans. The following are various types of federal aid likely to be found on a financial aid award letter (amounts can change yearly):


  • Federal Pell Grant: Undergraduates without either a bachelor’s or other professional degree may receive a Pell Grant up to $6,195 per semester (for no more than 12 total semesters).
  • Federal Supplemental Educational Opportunity Grant (FSEOG): Some undergraduates with exceptional financial need may have access to up to $4,000, depending on funding availability at a particular school.
  • Teacher Education Assistance for College and Higher Education Grant (TEACH): Undergraduates and graduate students alike may be eligible for up to $4,000 per semester if they are willing to sign an agreement that they will teach full-time in a high-need field after graduation. If students fail to uphold the agreement, the grant is converted to a direct unsubsidized loan.


  • Direct Subsidized Loan: When undergraduates qualify for a Direct Subsidized Loan due to financial need, the US Department of Education (DOE) will pay the interest on the loan as long as the student actively pursues their degree and for a period of deferment after graduation. The amount of the loan depends on the student’s grade level but can reach up to $5,500 per semester.
  • Direct Unsubsidized Loan: Both undergraduate and graduate students qualify for Direct Unsubsidized Loans regardless of financial need. The borrower is responsible for all of the interest on the loans, which can be approved for amounts up to $20,500 depending on grade level and dependency status.
  • Direct PLUS Loans: Parents of undergraduate and graduate students can qualify for Direct PLUS Loans regardless of the student’s financial need. Interest rates are slightly higher than the subsidized and unsubsidized loans, but the maximum amount can cover the total cost of attending school, minus the amount of other financial aid contributions.

Just because you qualify for financial aid doesn’t mean you have to accept whatever is offered. If scholarships or private grants are already in place, you may accept only the federal loans and grants necessary to cover whichever costs have not been covered yet.

Applicants should explore all available options and work up a personal budget to determine what they can contribute to their education expenses.

Related: 3 Things You Can Do If You’re Not Happy With Your Financial Aid Package

Private loans: Supplement other avenues of financial assistance

Federal student aid rarely covers all education expenses. Tuition itself can exceed $30,000 at private colleges and $20,000 at public institutions per school year. Textbooks and supplies also figure into the total expenditure required to get a college degree.

Private student loans essentially work like any other type of bank loan. Unlike federal loans, private loans take the student’s credit score into account. Most require that repayment begin immediately, although some allow repayment of only the accrued interest each month while students are still in school.

For those who don’t qualify for private loans by themselves, co-signers are allowed. Co-signers are usually parents or family members with outstanding credit scores. Students are still expected to pay the loan themselves, but if they fail to do so, the bank will expect repayment from the co-signor. Also, the co-signer’s better credit score means better terms on the loan.

Some private loans can have high interest rates or “introductory offers,” which offer rates that are low at first but that increase dramatically after a given period of time. Students should research the terms of private loans before making a decision.

Related: Types of Student Loans Explained: Federal vs. Private

Gifts applied to your education: Non-federal education grants

Most grants, either federal or non-federal, do not require repayment and are typically need-based awards. Different types of grants can be used for different purposes, ranging from specific types of students (based on gender, minority ethnicity, or income level for example) to educational goals (such as health care or education).

Grants are available from state governments and non-governmental organizations. The latter includes individual colleges and universities, professional associations, corporations, religious organizations, and community clubs and services. lists the types of education grants available to students, including:

  • State grants: For state resident students
  • Non-traditional students: Adults with families returning to school later in life
  • Low-income/disadvantaged students: For students from economically or socially disadvantaged backgrounds or students with disabilities
  • Military and their families: Active-duty or veteran students and the families of current or former military members
  • Subject-specific grants: For students pursuing degrees in specific, high-need career fields
  • Degree-level grants: Undergraduate, graduate, and doctoral student grants
  • Minority-specific grants: For applicants with minority status, such as women students or African American, Hispanic, or Native American ethnicities

Numerous private or public organizations, both for-profit and not-for-profit, offer a range of grants. In fact, a student could conceivably get several grants for the same reason. For instance, a Native American student might qualify for more than one minority grant through different organizations.

Some grants, especially those for specific degree programs, are known as grants-for-service and typically act as a binding contract. A grant-for-service contract means that students receive the grant as long as they agree to work in that field, often for the specific company or organization that paid for the grant.

Related: What’s the Difference Between Scholarships, Grants, and Loans?

Scholarships: Financial support without repayment

While grants are generally need-based financial aid, scholarships typically award money based on student merit. High school football players, for example, may qualify for athletic scholarships at a college or university with a football team.

Every scholarship has its own application process and procedure, so students should be prepared to do a lot of individual research into various programs. Many scholarships have extensive requirements for essays, letters of recommendation, and transcripts.

Most colleges and universities offer their own scholarships, but students can still find scholarships offered by other organizations or businesses that are not limited to a single institution. Examples include:

  • Academic scholarships (merit scholarships): Based on grade point averages and extracurricular activities
  • Average academic performance scholarships: Based less on academic performance and more on community service, leadership, and the strength of the student essay
  • Scholarships for minorities: Based on minority status, either as a collective whole or a specific ethnic group
  • Scholarships for women: Based primarily on gender but also academics, essays, and other considerations
  • Creative scholarships: Usually based on an audition or submission of artwork of various sorts
  • Community service scholarships: Based on a student’s history of community service activity and support
  • Unusual scholarships: Often involve criteria of a unique nature not found in any of the other categories

Scholarships are available for students in many different walks of life. Scholarship search engines designed to assist students in finding the right scholarships are available on the internet.

Read Maryville University’s full guide on understanding financial aid here, and start searching for scholarships on CollegeXpress here.

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