College is expensive; there's no way around that. The good news is, there's a lot of financial aid available to help cover the costs. Much of that aid is offered through the federal and state governments, but it's also available from schools, private organizations, and for-profit loan companies.1
There are three main types of financial aid:
Loans make up just over half of all financial aid.2 The best feature about student loans? Repayment generally doesn't start until the student is out of school. Even then, there's usually a six-month grace period to help the student get on her feet and find a job. (This is true for all federal student loans, but might not be true for loans offered through banks or private student-loan companies.)
Some loans are based on the family's financial need; these tend to offer the best terms.3
There are several kinds of federal student loans:
- Subsidized loans: These are great because the interest that accrues while the student is in school doesn't get added to the balance of the loan; it's simply forgiven. This means the student won't have to pay interest on that interest, and will pay less overall.
- Unsubsidized loans: With this type, interest starts accruing as soon as the loan gets taken out, and it gets added to the balance of the loan. Students have the option to pay off the interest while they're still in school, though that's a stretch for the typical student's budget. Unsubsidized loans are usually still a good deal because of the interest rate and terms that are meant to help students.
- Parent PLUS loans: These loans let parents borrow money to help with the costs of education. They're also a good option if the student has borrowed the full amount of subsidized and unsubsidized loans. PLUS loans are offered by many lenders.
Unlike loans, grants don't need to be repaid. They're usually need-based. Most grants are offered by the school or another private institution. One important exception to that is the Federal Pell Grant, a federal grant that's awarded based on the family's level of income.
Scholarships are also gifts that don't need to be repaid. They can be need-based or merit-based, and usually have specific criteria. The good news is that those criteria can include just about anything: income level, hometown, extracurricular interests, family affiliations and achievements (like being the child of a veteran), heritage or race, grade-point average, course of study, or career goal. Some scholarships are offered as one-time gifts; others can be renewed each year.
Searching and applying for scholarships can be time-consuming, but could be well worth the effort.
The Internet is full of sites that can help you find and apply for financial aid of all sorts:
Learn more about our Financial Tools and Resources