What is Financial Aid? – GradPlan

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What is Financial Aid?

Learn about the financial aid options available to you

Money for College

Financial aid is money provided to you to help pay for your education after high school. You have to apply for aid through the Free Application for Student Aid (FAFSA), through your state government, or through outside sources, such as your college, businesses, or charitable organizations.

This resource page is designed to provide you with a basic understanding of the different types of financial aid. For questions which are more specific to your needs, make an appointment to see a Financial Aid Advisor on your campus.


Types of Federal Aid

Free Money

Based on Need
No need to Repay

Borrowed Money

Must be Repaid
with Interest $

Work Study
Earned Money

A Job
while in School

What are Grants?

A Grant is FREE money often awarded to you from the federal government through your FAFSA application. In most states, there is also a state-based application available to residents and those who may not be eligible for FAFSA. Make sure to check with your college advisor to see what’s available to you.

Grants can also come from your college, private businesses, and foundations. In order to receive grants from private businesses and foundations, you’ll need to apply directly with that company or organization.

This is the first and best type of aid and they come in many types:

Federal Grant

Example – Pell grant

University Grant

Example – From the College

State Grant

Example – Illinois MAP grant

Foundation Grant

Example – National Science Foundation Grant

What are Scholarships?

A Scholarship is free money awarded to you from colleges, private businesses, or foundations based on financial need or “merit.” Most scholarships have an application process, while other scholarships are gifted by a college or university for academic, athletic or artistic achievement, or for financial need.

Merit-based Scholarships

Based on academic, athletic, or artistic performance

Need-based Scholarships

Considers your household income and expenses

Did you know?

There are also scholarships for underrepresented groups and DREAMers, as well as activity-based awards that honor students for their extracurricular hobbies or experiences, like bowling, photography and cooking. Some Scholarships can even be won by writing an essay, or winning a contest. You can find upcoming scholarships here.

What is a Student Loan?

A Student Loan is an agreement to receive money for college now (usually from the government or a bank), which you will pay back after you graduate or stop going to school. The catch is that you have to pay interest on what you borrow. Interest is money you have to pay in addition to the money you borrowed. The amount of money you end up paying for interest is based on the loan’s interest rate, and how long it takes you to pay off the loan.

Interest rates are charged as a percentage of the total amount you borrow (3%, 5%, 10%, etc.) and they differ from program to program, so read closely before agreeing to the loan!

Here’s an example of how interest works:

Janice borrows $5,000 from the bank for college.


The bank charges Janice 5% interest on the loan and gives her 5 years to pay it back.

+ 5% 

5 years after graduation Janice pays off the loan, but the total she pays is $5,661 due to interest.

 5,000 x 0.5 = $5,661

Did you know?

When you submit your FAFSA, you will automatically be considered for federal student loans, based on need. You do not have to accept these if you don’t want to. Just make sure you have a plan to pay for college without loan money, if that’s what you decide to do.

With all this talk about student loan forgiveness lately, we wish we could tell you that whatever loan you take will be forgiven, but there is no certainty about what will happen there. So protect your credit by paying off any student loans you take.

What is Work Study?

Work-study programs allow you to work while you are enrolled in classes. Work-study jobs are usually on-campus so employers are more understanding of your student schedule. No experience is necessary for most jobs on-campus, and you can sign up for Work Study by checking the YES box on your FAFSA that says, “Are you interested in Federal Work Study?”

Did You Know?

If you are awarded work-study funding, you do not automatically get these funds. You must apply for and obtain a work-study job, and work the hours assigned at that job. Work-study is different from other types of financial aid because you don’t get it all at once, but rather as you earn it.

Also, work-study approval is only good for one academic year, so you will have to reapply every year through your FAFSA if you wish to continue.

Now that you know more about the types of financial aid and how to apply, you can find the applications that best match you and be on your way to funding your education!

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Financial Aid

"Education is the passport to the future, for tomorrow belongs to those who prepare for it today."

Malcolm X, human rights activist