Financial Aid FAQs
Understanding the world of college financial aid can be difficult. To make the process easier, here are answers to some of the most common questions about financial aid.
What’s the difference between a loan, a scholarship and a grant?
A loan is given to a student under the expectation that the student will repay the sum in the future. Loans come with interest rates, which dictate how much the sum grows throughout time. The lower the interest rate, the less the sum grows.
Scholarships generally come in two forms: merit-based and extracurricular. Merit-based scholarships are sums of money awarded to students for their academic achievement, such as high GPA, test scores or for improvement over time. Many colleges require students who receive a merit-based scholarship to maintain a certain GPA.
Extracurricular scholarships are awarded for talent in a certain activity. The most popular are for participation in sports, clubs and national student organizations. These usually require continued participation in the given activity for the student to receive the sum.
Grants are like scholarships since they don’t need to be repaid, but they come in different forms. Many grants are need-based and are awarded based on household income. Academic performance-based grants do exist, as do grants that require future employment in a certain subject field or interest in a particular topic.
Why are loans such a problem for students?
Student loans look appealing at first glance because they promise large sums to pay for college with no immediate downside. But unless you pay close attention to your monthly payments, debt balance and interest rate, it’s very easy to make a mistake.
For example, a student can overborrow and end up with a debt balance that could balloon to an amount that’s almost impossible to pay back. A borrower also could settle for the first student loan they find, ignoring other student loans with lower interest rates.
Even forgetting to change your contact info could lead to late fees. These are a few ways loans can bite back. Keeping track of loan payments and making sure you’re getting the best interest rates are both essential to not falling victim to student loans.
Where can I look for scholarships?
A great place to start is Cappex. We pair you with scholarships that are perfect match for you. For each scholarship, we show you how many people apply, how much work goes into the application, the amount awarded and the application deadline. We have more than $11 billion in scholarships listed in our database.
You also could talk to your high school’s college counselor or those you know who already started attending college. It also wouldn’t hurt to ask the advisors of your extracurricular activities if they know of any scholarships they think are a good fit for you.
What’s a Federal Pell Grant?
The Federal Pell Grant is awarded to undergraduates who have not earned a degree. It doesn’t need to be paid back, plus the maximum amount awarded increases every year, currently as much as $5,920. The amount depends on financial need and your status as a full- or part-time student. You must fill out the Free Application for Federal Student Aid (FAFSA) to apply for Federal Pell Grant.
What’s a Federal Stafford Loan?
Federal Stafford Loans are federal student loans offered to eligible students who submit the FAFSA. Since the U.S. government provides the loans, Federal Stafford Loans carry a lower interest rate than with a private loan.
These loans come in two forms, subsidized and unsubsidized. The former is offered to students based on financial need and the government pays for the interest on the loan while the student is in school. Unsubsidized Federal Stafford Loans are offered to more students, with interest paid for by the borrower while they attend college.
If the borrower does not pay the interest as it accrues, it is added to the amount owed. Both types of Federal Stafford Loans are available for eligible undergraduate students, with graduate students only able to take out unsubsidized loans as of July 2012.