What's the difference between financial aid and a grant?

Applying for Federal Loans and Grants

Keeping up with the differences in various grant and loan awards may be complicated, but applying for them is relatively simple. When you put your hat in for federal financial aid, you do so with one form: The Free Application for Federal Student Aid (FAFSA). FAFSA is a U.S. Department of Education form that determines your eligibility for student aid. It includes a lot of personal questions about your family's tax returns and annual income -- and you'll want to dot all of your "i's" and cross your "t's" here, for sure. Your answers to these questions are important, because they determine your Expected Family Contribution (EFC), which is how much you are reasonably expected to contribute to the cost of your education.

The total amount of money you receive in aid -- including grants, loans, or a combination of both -- will depend on both your EFC and the total expenses (tuition and fees) per term at a particular institution. If your EFC is low, your financial need is considered greater. The greater your financial need, the more likely you are to receive one or more federal grants, or a subsidized federal student loan.

Your college's financial aid department will also review your GPA and course registration to see whether the combination of your scholastic record and EFC qualify you for merit-based or degree-specific grants. After completing a FAFSA before your first year of school, you'll need to fill out FAFSA renewal forms annually. However, since your EFC may change from year to year, it's possible to receive certain grants one year and not the next, and the combination of grants and loans you receive can also change on an annual basis.

Now that you know the difference between federal education loans and grants, read on for lots more information about financial aid.

Related HowStuffWorks Articles

More Great Links


  • EducationGrant. "Academic Competitiveness Grant (ACG)." (March 10, 2010)http://www.educationgrant.com/grants/academic-competitiveness-grant-acg/
  • EducationGrant. "FSEOG." (March 10, 2010)http://www.educationgrant.com/grants/fseog/
  • EducationGrant. "National SMART Grant." (March 10, 2010)http://www.educationgrant.com/grants/national-smart-grant/
  • EducationGrant. "Pell Grants." (March 10, 2010)http://www.educationgrant.com/grants/pell-grants/
  • EducationGrant. "Private Student Loans." (March 10, 2010)http://www.educationgrant.com/student-loans/private-student-loans/
  • EducationGrant. "State-Sponsored Grants." (March 10, 2010)http://www.educationgrant.com/grants/state-sponsored-grants/
  • EducationGrant. "TEACH Grant." (March 10, 2010)http://www.educationgrant.com/grants/teach-grant/
  • Guide to Career Education. "Paying for Your Career Education Through Grants." (March 10, 2010)http://www.guidetocareereducation.com/financial-aid/career-education-through-grants
  • Lewin, Tamar. "College May Become Unaffordable for Most in U.S." New York Times. December 4, 2008. (March 10, 2010)http://www.nytimes.com/2008/12/03/education/03college.html
  • Mercer, Charmaine. "Federal Pell Grant Program of the Higher Education Act: Background and Reauthorization." CRS Report for Congress. The Project on Student Debt. May 31, 2005. (March 17, 2010)http://projectonstudentdebt.org/files/pub/Pell%20Grants.pdf
  • Scholarships.com. "Federal Pell Grants." (March 10, 2010)http://www.scholarships.com/financial-aid/federal-aid/federal-pell-grants.aspx
  • U.S. Department of Education. "Application Deadlines." January 30, 2010. (March 10, 2010)http://www.fafsa.ed.gov/before003a.htm
  • U.S. Department of Education. "Campus-Based Aid." November 25, 2009. (March 10, 2010)http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp
  • U.S. Department of Education. "FAFSASM Information." December 10, 2009. (March 10, 2010)http://studentaid.ed.gov/PORTALSWebApp/students/english/fafsa.jsp?tab=funding
  • U.S. Department of Education. "FAQs: Applying for Aid." January 30, 2010. (March 10, 2010)http://www.fafsa.ed.gov/faq002.htm
  • U.S. Department of Education. "Federal Aid First." March 4, 2009. (March 10, 2010)http://federalstudentaid.ed.gov/federalaidfirst/
  • U.S. Department of Education. "Federal Pell Grant." January 11, 2010. (March 10, 2010)http://studentaid.ed.gov/PORTALSWebApp/students/english/PellGrants.jsp?tab=funding
  • U.S. Department of Education. Funding Education Beyond High School: The Guide to Student Aid 2009-10. "What You Should Know Before You Apply." December 2008. (March 10, 2010)http://studentaid.ed.gov/students/publications/student_guide/2009-2010/english/typesofFSA_loans.htm
  • U.S. Department of Education. "PLUS Loans (Parent Loans)." October 27, 2009. (March 10, 2010)http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp?tab=funding
  • U.S. Department of Education. "Stafford Loans (FFELs and Direct Loans)." November 25, 2009. (March 10, 2010)http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp