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  • Eugenie Lewis

The Different Types of Financial Aid

We’re in the process of creating a comprehensive guide, our Cash for College Toolkit, which outlines everything you need to know about applying for financial aid in California. Today’s article is a preview of some of the information available in our upcoming guide. Sign up for the newsletter here to stay updated.

Cash for College: The Different Types of Financial Aid

It’s that time of year when students who are planning to attend college in the 2022-2023 school year should start applying for financial aid. The process of applying for financial aid can seem daunting at first–you’ve already spent time and energy preparing for the college application process. Sorting through all the different terms, applications, and important dates can be overwhelming. In today’s article we’re addressing just one topic covered in the toolkit: the different types of financial aid with a focus on undergraduate and community college students.

To obtain Federal and California financial aid, students must complete the Free Application for Federal Student Aid (FAFSA) or the California Dream Act Application (CADAA) by applying between October 1 and March 1. The previous article outlined how to apply for these sources of funding.

Types of Financial Aid

There are four major types of financial aid. They include:

  1. Grants, which are considered “free aid”– meaning you don’t have to pay them back.

  2. Work study, which is considered “self-help aid”. Here students work part-time, typically 20 hours a week, and use their income to help pay for college expenses.

  3. Loans come from public and private sources. Federal student loans have lower-fixed interest rates and many repayment options. Private student loans should be considered a last resort, because of high interest rates and less flexibility with repayment.

  4. Scholarships are also considered “free aid” and come from a variety of sources.

Sources of Financial Aid

The Federal Government, United States Department of Education (ED) offers a variety of grants, loans and work-study programs for students attending four-year colleges or universities, community colleges, and career schools. See the Federal Student financial aid website to determine eligibility for Federal aid. The following are primary sources of Federal aid.

  • Federal Pell Grants are awarded to undergraduate students who display exceptional financial need and have not yet earned a bachelor's, graduate or professional degree. In some cases, students enrolled in post-baccalaureate teacher certification programs may also receive Pell Grants. The maximum Pell Grant award was $6,495 for the 2021-22 school year.

  • Campus Work-Study jobs are funded by the federal government and schools. Students in these positions are typically employed part time and earn at least the federal minimum wage. Wages are exempt from financial aid calculations.

  • Federal Student Loans are made through a loan program administered by the Federal government. Private loans are made by private lenders, such as banks or credit unions, with terms set by the lender. Federal loans offer some benefits, including fixed interest rates, income-based repayment plans, loan cancellation for certain types of employment, deferment options and interest rate reductions based on the repayment method. The following are types of federal loans:

    • Direct Subsidized loans are for undergraduate students with financial need. Between July 1, 2021 and July 1, 2022, the interest rate is 3.73%, with an annual award of up to $5,500.

    • Direct Unsubsidized loans are for undergraduate, graduate and professional degree students. Financial need is not required. Between July 1, 2021 and July 1, 2022, the interest rate is 3.73% for undergraduate students and 5.28% for graduate and professional degree students. The annual award is up to $20,500 (less any subsidized amounts) and depends on grade level and dependency status.

    • Direct Plus loans are for parents who are borrowing money to pay for their dependent undergraduate child’s education and for graduate and professional degree students. Financial need is not required. For loans disbursed on or after July 1, 2021 and before July 1, 2022, the interest rate was 6.28%. The maximum amount is the cost of attendance minus other financial aid the student receives.

The State of California Student Aid Commission offers a variety of grants and scholarships in addition to sources of Federal aid. The following is a summary of types of assistance offered to California students. Eligibility criteria for students to receive Cal Grants is found here.

  • The Cal Grant (A, B & C) provides aid to California undergraduates, vocational training students, and those in teacher certification programs. Grants are for students attending University of California, California State University, California Community College, or qualifying independent and career colleges and technical schools in California.

  • The Middle-Class Scholarship (MCS) provides undergraduate students, including students pursuing a teaching credential with family incomes and assets up to $184,000 per year.

  • The Chafee Grant Program is available to any applicant who is or was in foster care between the ages of 16-18. Applicants may qualify for $5,000 a year for career and technical training. You can find the application here.

School Based Aid or institutional aid is provided by the specific college attended. In California, examples of institutional aid Include:

  • The California Community College Promise Grant, formerly called the Board of Governors or BOG Fee Waiver, is available to students who are California residents attending California Community Colleges. With the Promise Grant, the per-unit enrollment fees, currently $46 per unit, are waived for eligible students​. Assistance for the purchase of books and supplies must be applied for separately. You can apply for the Promise Grant by completing the FAFSA or the California Dream Act Application.

  • The Student Success Completion Grant is awarded to full-time California Community College students who receive Cal Grants. Students are required to enroll in 12 or more units, meet both college and federal satisfactory academic standards (GPA of 2.0), and be exempt from nonresident tuition. Cal Grant recipients can receive an additional $1,298 per year (if enrolled in at least 12 units per term) or up to $4,000 per year (if enrolled in at least 15 units per term). This award cannot be guaranteed, as it is a limited fund.

  • Private schools also offer institutional aid. The amount of these awards depend on college resources, student merit and need.

Scholarships are gifts that don't need to be repaid. There are thousands of them, offered by schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations. Examples of resources where you may find scholarships include: Career One Stop, the Horatio Alger Association, which provides needs-based scholarships on both the state and national level and Niche, which allows students to search by state in order to find local scholarships. There are many more!

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