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Guide to Federal Financial Aid

According to the Department of Education, about 60%, or $83 billion, of the financial aid given in the United States comes from the federal government. For students with financial need, the government will likely be their most important source of financial aid. Therefore, it is important to understand the federal aid process and the options the government offers students. Though the vast majority of federal aid is need-based, some federal loans, such as the unsubsidized Stafford loan and PLUS loan, are available to students without financial need as determined by the government.

Links on terms within this section will take you to the glossary entry for that term.

Applying for Federal Aid

Applying for federal aid is a simple process. To be considered for need-based federal financial aid, students need only fill out one form, the Free Application for Federal Student Aid, generally referred to as the FAFSA. This application qualifies students for all need-based federal aid, though much of the aid is administered by participating universities. Students should check with the universities they are attending or considering to find out if the school participates. Many colleges or universities also use the FAFSA to determine eligibility for need-based financial aid.

Find out more about the FAFSA.

Qualifying for Federal Aid

To qualify for federal financial aid, a student must meet certain criteria. First, the student must be a citizen or eligible non-citizen of the United States. Eligible non-citizens include the following:

  • Permanent US residents with Alien Registration Card I-551 or I-151
  • Conditional Permanent Resident with I-151C card
  • Holder of Arrived-Departure Record (I-94) with any of the following designations "Refugee", "Asylum Granted", "Indefinite Parole", "Humanitarian Parole", or "Cuban-Haitian Entrant"

Student Visa (F-1 or F-2), Exchange Visitor Visa (J-1, J-2), and international organization G-series visa holders are not considered Eligible Non-Citizens.

The student must also have federally determined financial need, which is calculated by subtracting his Expected Family Contribution (EFC) from the Cost of Attendance (COA) of his school. This number determines whether he qualifies for aid, which aid programs he qualifies for, and how much aid he is entitled to from the federal government.

Types of Federal Financial Aid

Campus-Based Programs

  • Pell Grant

    The Pell Grant is a need-based federal grant of up to $4,731. A student’s eligibility for the Pell Grant and the size of the grant received are determined by financial need. The student may receive financial aid from other sources, such as more aid from the government, aid from your school, or private aid, along with the Pell Grant. However, he must report outside aid on the FAFSA, as it may affect his financial need status. Pell Grants are given only for undergraduate or teacher education programs. This award is available to both full- and part-time students. The Pell Grant is administered by each school, so students should check with their college or university to find out how they will receive the award.

    Find out more about Pell Grants.

  • Federal Supplemental Educational Opportunity Grant (FSEOG)

    The FSEOG is an award similar to the Pell Grant offered by the government for students with exceptional financial need. As its name suggests, it is meant to supplement other forms of financial aid to allow students with the greatest need to attend school. Depending on the student’s financial need and COA, this grant ranges from $100-$4,000. Like the Pell Grant, the FSEOG is administered by each school, so students should check with their college or university to find out how they will receive the award.

    Find out more about the FSEOG.

  • Federal Work-Study

    The Federal Work-Study program offers undergraduate and graduate students part-time jobs so they can earn money to pay for education expenses. Financial need is used to determine eligibility as well as the number of hours an eligible student may work as part of the program. The student’s wage depends on the type of work and skills required, but the student will earn at least minimum wage. Students are encouraged to do community service or work related to their course of study as a part of the program.

    Find out more about the Federal Work Study program.

  • Federal Perkins Loan

    A Federal Perkins Loan is a low-interest (5 percent) loan for students with financial need. The loan funds are provided by both the federal government and each school and are administered by the school. Undergraduate students can borrow up to $4,000 a year (up to $20,000) and graduate students can borrow up to $6,000 a year (up to $40,000 including undergraduate Perkins Loans).

    Payment of the Perkins Loan does not start until nine months after a student has graduated, left school, or stopped taking the required number of courses (less than half-time). After this grace period ends, the student has 10 years to repay the loan. It is also possible for those who work in certain fields after graduation, such as the armed forces, nursing and education, to have some or all of their Perkins Loans cancelled.

    Find out more about Federal Perkins Loans.

Federal Direct Student Loan Program (FDLP or FDSLP)

The William D. Ford Federal Direct Student Loan Program includes Stafford and PLUS loans that are available directly from the federal government rather than through commercial lenders. Selected colleges and universities participate in this program. A student need only fill out a FAFSA to apply for FDSLP loans.

Federal Family Education Loan Program (FFELP)

The FFELP includes the Federal Stafford, Federal PLUS, and Federal Consolidation Loan programs. It is similar to the FDSLP, except that these loans are funded by private lenders and reinsured by the federal government.

Find out more about the FDSLP and FFELP loan programs.

Types of FDSLP and FFELP Loans

  • Stafford Loan

    The two types of Stafford Loan, the subsidized and unsubsidized loans, are described below:

    • Subsidized Stafford Loan

      After filing the FAFSA, students with financial need may be eligible to receive the subsidized Stafford Loan, which does not charge interest until the student graduates or leaves school.

    • Unsubsidized Stafford Loan

      Unsubsidized loans are available for students who do not file the FAFSA or do not qualify for the subsidized loans. However, although loan payments are not required until after the student graduates or leaves school, interest charges will accrue (accumulate to be paid at a later date) while the student attends school (See Capitalization).

    Other conditions such as health or personal problems and various jobs or professions also allow students to postpone repayment of Stafford Loans.

    Find out more about Stafford Loans.

  • Parent Loan for Undergraduate Students (PLUS)

    PLUS Loans are loans that parents can take out to pay for their dependent child’s education expenses. PLUS loans are not based on need (they do not require submission of the FAFSA) and cannot exceed the COA (Cost of Attendance) minus other financial aid received. To apply for a PLUS loan, a parent must fill out either a Direct PLUS Loan Application (for loans from the federal government) or PLUS Loan application from the private lender, school, or state guaranty agency.

    There is no grace period for PLUS loans, and the loan repayment begins soon after the loan is dispersed.

    Find out more about PLUS loans.

  • Consolidation Loan

    Consolidation Loans allow students or their parents to consolidate their federal loans into one loan. This should simplify the payment process by eliminating the confusion of several repayment schedules and may lower the cost of the loans. However, Consolidation Loans may also increase the cost of your loans by extending the payment time and/or increasing the interest costs. For FFELP loan recipients, you should contact a participating private lender to find out your Consolidation Loan options. For FDSLP loan recipients, you should contact the government’s Loan Origination Center’s Consolidation Department at 800-557-7392.

    Find out more about Consolidation Loans.

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