How Free Financial Aid Works

These students are protesting the proposed 32 percent tuition hike at the California university system in 2009. With increases like these, it's no wonder people are scrambling for free financial aid.
These students are protesting the proposed 32 percent tuition hike at the California university system in 2009. With increases like these, it's no wonder people are scrambling for free financial aid.
David McNew/Getty Images

According to a study by the College Board, investing in a college education is one of the smartest things a person can do for his or her bank account. The study estimated a degree adds, on average, $300,000 to an individual's earnings over the course of a career, after things like inflation and the cost of tuition are taken into account [source: Clark].

Still, while it's nice for college students to think about all the money they'll be making down the road, their tuition bills are waiting for them now -- and those bills can be daunting. In-state tuition at a public college has climbed to an average of $7,020 a year, while tuition for private universities now tops $26,000, and that's without room and board [source: Damast].


The good news for students and parents alike is that, as tuition has risen, so has the amount of available financial aid. In the United States, for instance, the government is set to award $168 billion in aid over the course of 2010 [source: Yip]. Add in other types of aid such as scholarship money and fellowships, and those tuition numbers start to look much more reasonable. After aid money is considered, students at public universities actually pay closer to $1,600 a year in tuition, and tuition at private colleges drops to $11,900 for students at private schools [source: Damast].

Knowing financial aid is out there and knowing how to get a hold of it are two separate things. Every student is different, and accordingly, the aid available to each student differs as well. Depending on a variety of factors, students may qualify for scholarships, grants, loans or work-related aid. Although some financial aid has to be paid back down the road, we'll focus specifically on free or "gift" financial aid that never needs to be repaid.

Free financial aid can come from any number of sources, such as federal and state government, businesses, nonprofit organizations and educational institutions. Before you think "there's no way someone in my situation would qualify for free financial aid," consider all the factors that go into awarding financial aid. School performance, family income levels, subject of study and numerous other considerations determine aid eligibility, meaning every student should at least apply for financial aid and see what happens. To get started, read on to learn about how scholarships work and how you can get one.



Scholarships and Fellowships

Anyone interested in attending college should take a close look at the thousands of scholarships and fellowships available every year. Scholarship money can come from many sources, and once scholarship money is awarded, it never needs to be repaid. Unlike need-based aid, scholarships (and fellowships, which amount to scholarships for graduate students) are typically awarded based on the accomplishments and attributes of a prospective student.

The good news is that a 4.0 grade point average and a perfect score on college entry exams aren't the only things that can earn you scholarship money. For instance, a stellar jump shot or a perfect backhand can help you become one of more than 120,000 student athletes who receive student aid each year from Division 1 and 2 schools in the United States [source: NCAA]. Prospective students may also qualify for scholarships by doing community service, participating in religious and cultural organizations, coming from certain ethnic backgrounds and pursuing certain fields of study.


With so many different types of scholarships out there, you may wonder how to even begin finding the ones that are right for you. High school students can start by visiting their school's guidance counselor or financial aid office. Students can also find information through sites like, which match them up with potential scholarships after they create extensive profiles about their interests and qualifications. Lastly, think about your own situation and see if you qualify for special scholarships. Do the companies your parents work for offer scholarships? Are there any essay contests centered on your favorite authors? A lot of scholarships are out there, and finding the ones that fit your interests is a big part of the process.

Once a student finds a scholarship worth pursuing, he or she should pay close attention to the scholarship requirements. Unlike some other forms of aid, a scholarship can require the student to uphold a set of criteria year after year to maintain it. For instance, you may need to enroll in a certain number of credit hours or maintain a minimum grade point average to maintain the scholarship. Those types of stipulations will be clearly stated by the group awarding the scholarship, and some scholarships have no stipulations at all. Scholarship applications vary widely, too, with some requiring accompanying essays and academic information, and others requiring little more than basic personal information. A great place to start when applying for scholarships is by filling out a Free Application for Federal Student Aid (FAFSA). Many scholarships are based off FAFSA information, and even if the scholarships you're looking at don't need a FAFSA, the next type of free financial aid on our list certainly will.


Need-based Grants

Grants, unlike scholarships, are typically awarded through the federal government, state government or individual colleges and universities. Like scholarships, there are a number of different types of grants, but most can be categorized as either need-based or merit-based. Need-based grants, as the name implies, are awarded to students whose families are unable to afford the entire cost of college tuition. Still, don't think that because you or your parents can afford to contribute toward your college tuition that you shouldn't bother applying for need-based grant money. While you may not qualify for the maximum amounts of grant money available, you may still qualify for partial aid, and since grant money never needs to be repaid, any assistance is welcome.

Application for need-based and merit-based grants alike begins with a FAFSA. When filling out a FAFSA, students are asked to provide extensive information about both themselves and their parents, as well as the school they will be attending. Need-based grant money is then awarded on criteria such as the student's estimated cost of attending college, family income and liabilities (which help determine a family's Expected Family Contribution, or EFC), and other factors. One of the most common need-based grants is the Pell Grant, available to students under 24 years of age seeking an undergraduate degree. While the Pell Grants for the 2009-2010 academic year are worth a maximum of $5,350, the full award is reserved for individuals whose parent or guardian died recently in military service.


In addition to the Pell Grant, students may also qualify for additional grant money depending on their situation. The Federal Supplemental Educational Opportunity Grant (FSEOG), for instance, is awarded to Pell Grant recipients with the lowest EFC and can be worth up to $4,000 a year. A quick note on EFC: A family's ability to contribute toward college tuition will be considered in determining a student's EFC in all but a few unusual cases, even if the parents don't intend to help out. Of course, EFC doesn't factor into every type of grant. Read on to learn more.

Merit-based and Other Grants

Merit-based grants resemble scholarships in that they require potential students to meet certain academic criteria. In fact, merit-based grants and scholarships are often so similar that the terms are used interchangeably, but there are differences. Unlike scholarships, for instance, merit-based grants are typically only rewarded by either federal and state governments or individual educational institutions.

Many such grants only require that students meet a certain set of requirements to qualify for aid. For instance, Georgia offers state residents a merit-based grant, known as the HOPE Grant, that covers students' tuition for public, in-state universities. To receive the grant, students must maintain a 3.0 grade point average (GPA) throughout high school, meaning that there is no set limit to the number of students who can receive the grant as long as they meet the criteria. The federal Academic Competitiveness Grant (ACG) works the same way, rewarding recent high school graduates who have completed a rigorous secondary-school program. Scholarships, on the other hand, are often limited in number and awarded to only the strongest applicants available. As with scholarships and need-based grants, completing a FAFSA is often a key component of the merit-based grant application process. For the previously mentioned HOPE Grant, for instance, both a FAFSA and an additional application are required.


In addition to merit-based grants, some federal grants are available specifically to students pursuing certain disciplines or careers. For instance, the conveniently named Teacher Education Assistance for College and Higher Education (TEACH) Grant is awarded to students who commit to teaching in low-income schools for a minimum of four years after graduation. The National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) is another example of a federal grant meant to encourage study in specific disciplines like engineering, science, technology and mathematics, among others. If you pursue a grant like TEACH or SMART, make sure to follow the grant requirements or risk losing the benefits. For instance, TEACH grant recipients who fail to teach the required four years out of college have their grant money converted into loans that then need to be paid back.

Work-study Programs

You can cut your college costs by grading papers and otherwise helping a professor as a teaching assistant.
You can cut your college costs by grading papers and otherwise helping a professor as a teaching assistant.
Jupiterimages/Getty Images

Depending on your point of view, working for your college tuition may or may not qualify as "free" financial aid, but work-study programs play an undeniably important part of the financial aid system in the United States. In fact, more than 3,400 colleges and universities participate in the Federal Work-Study program [source: U.S. Department of Education]. Add in other types of work-related aid like graduate research assistantships and graduate teaching assistantships, and you can start to see how hitting the books and punching the clock go hand in hand.

The Federal Work-Study program (FWS) is designed to provide jobs to individuals who can't cover their tuition through scholarship money, grant money and savings alone. Like other forms of need-based aid, FWS candidates are determined based on Expected Family Contribution (EFC), with low EFC candidates receiving jobs first. Jobs are guaranteed to pay at least minimum wage, but participants can't work just anywhere. Only jobs related to the student's field of study, nonprofit work and campus-related jobs qualify for the program. In addition, all FWS jobs held at nonprofit organizations have to benefit the general populace, meaning FWS candidates probably won't get away with working for their favorite political group. Besides helping students pay their tuition, FWS helps students develop the tools to succeed in the workplace, building up students' skill sets, as well as their bank accounts. Students who don't immediately qualify for FWS but are interested in both the pay and experience that come from working should consider internships and co-op programs offered through their schools. Make sure also to apply for jobs around campus. You might be surprised how rewarding a job at the campus book store or recreation center can be.


Co-ops, internships and work-study programs aren't the only ways to work your way through school. Research assistantships (RAs) and teaching assistantships (TAs) are offered to students willing to commit several hours a week to research or teaching. In addition to receiving tuition waivers, research and tuition assistants can receive stipends to help cost-of-living expenses. These positions are merit-based, typically hinging on factors like undergraduate grade point average and scores on graduate placement exams. While such positions are typically limited to individuals pursuing master's degrees and Ph.D.s, undergraduate students can also apply for these positions in special cases. Like FWS programs, RA and TA positions aren't just about money; they give participants valuable experience that can help them further their careers in the future.

For more information about how to pay for school, keep reading.


Lots More Information

Related HowStuffWorks Articles

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  • Couch, Christina. "How to lobby for more financial aid." (1/8/2010)
  • Damast, Allison. "College Tuition: Going for Broke." BusinessWeek. Oct. 20, 2009. (1/8/2009)
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  • Federal Student Aid. "Academic Competitiveness Grant." June 30, 2009. (1/8/2010)
  • Federal Student Aid. "Campus-Based Aid." Nov. 25, 2009. (1/8/2010)
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