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Home Plan For College Parent and Student Teamwork Types of College Financial Aid

Types of College Financial Aid

There are two main types of financial aid: gift aid and self-help aid.

Gift aid is money that does not need to be earned or repaid, such as grants and scholarships. Eligibility for grants, such as the Federal Pell Grant, is typically based on demonstrated financial need. Eligibility for scholarships is typically based on merit, such as academic, artistic, athletic talent or an activity, such as community service. Some scholarships may have a need-based component. Some people use the terms scholarships and grants interchangeably. A fellowship is like a scholarship, but for graduate and professional study.

Self-help aid includes student employment and education loans. Student employment, such as Federal Work-Study, is financial aid that must be earned through part-time work during the academic year. Some forms of student employment, such as graduate teaching and research assistantships, may provide a full or partial tuition waiver (tuition reduction) in addition to a small living stipend. Loans are debts that must be repaid, usually with interest.

There are two main types of education loans: federal education loans and private student loans. Federal education loans include federal student loans, such as the Federal Stafford loan, Federal Perkins loan and Federal Grad PLUS loan, as well as federal parent loans, such as the Federal Parent PLUS loan. Federal education loans can also include the Federal Direct Consolidation loan, which is used to streamline repayment by combining multiple federal education loans into a single loan. Private student loans, also referred to as alternative student loans and non-federal education loans, include loans made by colleges and universities (institutional loans) and state loan programs, as well as banks and other financial institutions.

Education loans may also be categorized as subsidized or unsubsidized. Subsidized loans include the Federal Perkins loan and the subsidized Federal Stafford loan. The federal government pays the interest on subsidized loans while the borrower is in an in-school deferment and during other periods of authorized deferment. The interest on unsubsidized loans remains the responsibility of the borrower.

Campus-based aid refers to three federal student aid programs where the college’s financial aid administrator exercises discretion in how much aid each student receives. These include the Federal Perkins loan, Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS).

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