The Truth About Financial Aid

Last month we talked about avoiding college debt. Financial aid is a big part of that conversation, but what exactly is financial aid? Many families who have not yet sent a child to college—or who didn’t attend college themselves—are prone to think financial aid is solely made up of scholarships. When colleges advertise, “6.1 million in financial aid!”, they aren’t sharing the whole picture.

Financial aid is made up of three parts: scholarships, loans, and grants. Scholarships and grants don’t need to be paid back. Loans are just what they sound like—loans!


There are two categories for scholarships: institutional (awarded by the college) and “outside”, or scholarships from independent business and organizations. Within these two categories are thousands of scholarship types: academic, ethnic, athletic, and many more. Each scholarship has its own set of rules and qualifications.

Scholarship searching through online search engines is the best way to find independent scholarships and competitions. For institutional scholarships, check college websites and contact the admission office.


Grants can be need-based or based on something as diverse as a student’s major of study or ethnic background. Sometimes grants are listed on scholarship sites. For students attending in-state colleges, there may be state grants available (such as the VTAG grant in Virginia). For students from low-income families, the federal Pell grant is available to help pay for tuition.

Grants do not need to be paid back, but you need to read the fine print to make sure all qualifications are met.


Loans may be private or federal. Federal loans (Stafford loans) are the best kind to take out if you take any out at all. The interest rate is much lower than most private lenders, and you have the option of taking subsidized and/or unsubsidized. The subsidized loans will NOT accrue interest while a student is in college; the unsubsidized will. Many students accept both Stafford loans each year.

Be sure to ask each college about ALL of these options before committing. All of these will contribute to the “bottom dollar”—the annual cost of tuition at that school.

Questions? Email [email protected].