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
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
Find out more about the FSEOG.
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
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
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 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
Find out more about Consolidation Loans.