When you decide to pursue a degree, one of the first concerns you might have is “How will I pay for it?” Fortunately, there are many different ways to pay for your college education that don’t rely on having all the money up front. You can obtain funding from the federal government, state agencies, or private lenders to pay for your education.
This guide will show you the different options available to you for student financial aid, and how each one of those options work. Specifically, we’re going to look at grants, scholarships, federal and private loans, and work-study, and what you need to know about each one of those options.
First, let’s clarify what student financial aid is, and how it can help you pay for college.
What is Financial Aid?
Financial aid refers to funding from federal and state governments, educational institutions, employers, private organizations, and other sources that may help students pay for educational expenses. There are several types of financial aid, including:
- Grants
- Scholarships
- Federal and private loans
- Work-study
Financial aid can be used to pay for college tuition and fees, textbooks, coursework supplies, on-campus housing and food, or transportation, depending on the guidelines for each type of financial aid award.
There are two main categories of financial aid: need-based aid, and merit-based aid.
- Need-based aid is awarded by a student’s financial situation, need, and ability to pay. Many grants, work-study programs, and some federal loans are based on financial need.
- Merit-based aid is awarded for a special talent or demonstrated skill, typically in academics, or at some colleges, for athletics or music. Scholarships usually fall under the category of merit-based aid.
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Types of Financial Aid for Students For College
There are four main types of financial aid available to students: grants, scholarships, loans, and work-study.
Grants
Grants are a type of financial aid that do not need to be repaid, so long as you meet the conditions of the grant program. Many grants are a need-based award, though some merit-based grants exist. The federal government and state governments typically have grant programs to help students pay for college. Some universities, colleges, or non-profit organizations may also award grants based on student need.
The most well known type of federal grant is the Pell Grant. Eligibility for this grant and the amount of the award is based on the Student Aid Index (SAI), calculated when you fill out your FAFSA each year. The maximum Pell Grant award for the 2026–27 award year is $7,395. (This is for the award year that runs from July 1, 2026, to June 30, 2027).
Students are generally limited to the equivalent of approximately six years of Pell Grant eligibility, subject to federal lifetime eligibility limits. You must fill out your FAFSA each year, and stay enrolled in an undergraduate program at a domestic school to stay eligible. Pell Grant funds are paid directly to your school to pay for tuition.
Other types of federal grants include Federal Supplemental Educational Opportunity Grants (FSEOG), and Teacher Education Assistance for College and Higher Education (TEACH) Grants.
Scholarships
Scholarships are money awarded to the student that they do not have to pay back. Sometimes known as “cash awards”, scholarships are given to students who meet the criteria set by the sponsoring organization. Typically, scholarships are awarded by colleges, universities, community organizations, or companies.
A common type of scholarship is a merit-based scholarship. These types of scholarships are awarded to students who meet or exceed a target grade point average (GPA), demonstrate exceptional skills in athletics or performance arts, or who have excelled in a specific area of study.
There are also need-based scholarships, which are awarded to students who qualify for eligibility from the awarding organization. Another type of scholarship is a student-specific scholarship, which may be awarded by a private company, to a student family member of an employee – or by a religious or community organization, to an exceptional student who represents a particular group of people.
Scholarships can come from a wide variety of sources, and they are very advantageous for students who receive them, as they are funding that doesn’t need to be repaid. Your school may provide resources to help you identify scholarship opportunities for which you may qualify. Always research the qualifications of each scholarship, so you know if you are eligible to apply.
Loans
Student loans are money that you must pay back with interest. These may be federal loans made through the U.S. Department of Education or private loans from banks, credit unions, or other private lenders. Federal student loans typically have more favorable terms, lower interest rates, and more convenient payment terms. Private loan terms vary by lender and borrower qualifications. Some private loans may require a co-signer, particularly for borrowers with limited credit history.
There are two main types of student loans: subsidized and unsubsidized loans.
Subsidized loans are when the federal government pays the interest while you are attending school, and for a grace period of six months after you leave school. These are available to undergraduate students in a degree or certificate program, or in a career or trade school. These loans are based on financial need.
Unsubsidized loans are when you are responsible for paying the interest on the loans regardless of whether you are in school or not. These loans are available to students in an undergraduate, graduate, or doctorate program. There is no requirement to show financial need for an unsubsidized student loan.
For both subsidized and unsubsidized loans, the school determines how much you can borrow. Borrowing limits are determined by factors such as financial need, cost of attendance, dependency status, and other financial aid received. To determine your eligibility for subsidized and unsubsidized direct loans, you must fill out the FAFSA and submit it by the deadline for each school year.
Federal student loan interest rates are established annually by federal law and vary by loan type.
There are two other types of federal student loans that should also be discussed: Direct PLUS loans, and Direct Consolidation loans.
Direct PLUS loans are available to graduate and doctorate students, as well as parents of dependent undergraduate students to help pay for expenses not covered by other financial aid. These require a credit check, and eligibility is not based on financial need. These may be more difficult to obtain if you have a low credit score.
Direct Consolidation loans allow students to combine all qualifying federal student loans into one loan serviced by a single lender. This is primarily used to simplify already existing student loans.
That brings us to private loans, financed through non-government institutions.
If federal student loans are not available, private loans from a bank or credit union are another option. These loans typically have less favorable terms than federal loans and should be used as a last resort. Many private student loans require a co-signer, particularly for students with limited credit history.
Work-Study
The Federal Work Study Program is another way that students can work part-time and earn money for college expenses. This is a federal program administered through participating colleges and universities. Students must fill out the FAFSA to be eligible for this program. Work study aid is based on financial need, eligibility, and how many open positions there are available.
The availability for jobs is limited, if they are available at your chosen school, so it is important to apply early. Not every school participates in this program each year. Students participating in Federal Work-Study are paid by their employer, which may be the institution, a government agency, or an eligible nonprofit organization. Sometimes jobs can be off-campus, such as a tutoring job. The money can go towards school expenses such as food, transportation, or school supplies, although in some cases, the school will allow you to apply the money directly to tuition or a dorm room on campus.
The total amount a student can receive depends on how early you apply, the level of your financial need, and the funding of the program at that school. Work-study funding may be limited, and students are generally encouraged to apply early.
How to Apply for Financial Aid
Many colleges and universities in the U.S. offer financial aid programs; each school may have their own eligibility requirements. If you are interested in applying for financial aid, the first step is to fill out the Free Application for Federal Student Aid (FAFSA) application, and checking the status through the U.S. Department of Education. While the federal FAFSA deadline is June 30 of the applicable award year, many institutions have earlier deadlines. The FAFSA is used by colleges, universities, and state agencies to determine your eligibility for financial aid. Students may be eligible for financial aid based on financial need, academic achievement, or other applicable eligibility criteria. Need-based grants or scholarships may be awarded based on information based on the FAFSA. Information from your FAFSA is used by the U.S. Department of Education, states, and participating institutions to determine eligibility for various forms of financial aid.
Merit-based aid, such as academic, athletic, or artistic scholarships are awarded by schools and other organizations based on demonstrating exceptional skills and talent. Each school will have different merit-based aid programs, so consult the financial aid department for each college for more information.
After you complete the FAFSA, you will receive a financial aid award letter from the school(s) that accepted your application for aid. You may be offered different financial aid award packages from federal, state, or college programs.
Pursue a Degree or Certificate at Campus: A New Kind of College
At Campus, we know that a high-quality college education is important, and we’re here to help you understand available financial aid options and explore resources for which you may be eligible. Our Financial Aid team can provide information about available financial aid programs and explain the application process for students who may be eligible. Our online degree instructors also teach at leading colleges and universities, including UCLA, Vanderbilt, Stanford, UC Berkeley, NYU, Howard, and more.
If you have questions about financial aid, reach out to our team and we’ll get you the information you need to start your college pursuit.
Disclaimer: This article is provided for informational purposes only. Financial aid programs, eligibility requirements, award amounts, and application procedures are determined by federal and state agencies and may change. Students should consult StudentAid.gov and their institution’s financial aid office for the most current information.