The cost of college keeps rising, making it harder for students to attend without any financial aid. Fortunately, the government provides a few ways to offset the cost of secondary education. It all starts with the Free Application for Federal Student Aid (FAFSA), which every student attending college must complete.
Completing the FAFSA may make students eligible for a variety of financial aid programs, including grants and federal student loans. Most students don't have to repay grants, but there are a few exceptions.
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What Is a Grant?
To begin with, a grant is money awarded to students to pay for qualified school expenses. Grants are usually based on financial need and don't need to be repaid if the eligibility requirements are met.
If grant money is received, it lowers the out-of-pocket cost for attending a college the same way that any other student aid a student receives does, including student loans. Grants can be awarded by the federal government, state government, or even by the school.
The Types of Grants
There are three types of federal grants that anyone who qualifies based on need may apply:
The Pell Grant is money from the federal government for undergraduate students who demonstrate financial need. The maximum amount the federal government provides for the 2021-2022 school year is $6,345. The amount a recipient receives is based on their Expected Family Contribution (EFC), which is calculated through the FAFSA and is based on the family's income and the cost of attendance at the chosen school. Eligible recipients may receive the grant for up to 12 semesters. Each school receives enough grant money to cover all eligible students.
Federal Supplemental Educational Opportunity Grant
Schools provide the FSEOG Grant, but not all schools offer it. The grant provides up to $4,000 per year for students that demonstrate extreme financial need. Unlike the Pell Grant, each school receives a limited amount of funds from the federal government for this grant. This means that, once the funds are distributed, no more FSEOG grants can be awarded.
Teacher Education Assistance for College and Higher Education Grants
The TEACH Grant allows students to go to school to be a teacher with up to $4,000 in grant funds. Students must be enrolled in a college that participates in the program and agree to teach in an underserved and high need subject area for four years after graduating in order to satisfy the terms of the grant.
How Do Grants Work?
To apply for a grant, all students must complete the FAFSA first. This determines the family's EFC and what financial aid the student is eligible to receive, including grant money. Once the student completes the FAFSA, the student will receive a Student Aid Report that confirms the provided data.
As a part of the FAFSA, students name the schools they're interested in attending. If the student is accepted, each school will reach out to the student with a financial aid offer that includes the amount of grant money they can provide.
If the student is eligible for any grants, the school's financial aid office will tell them how much they're eligible to receive and what they must do to receive it.
Most grant money is paid directly to the school that the student is attending. But, if they prefer, students can also choose to have the grants paid directly to them to pay the school themselves.
How Are Grants Different From Scholarships?
Both grants and scholarships help students pay for college, and they are both a form of gift aid. In most cases, students don't have to pay back a grant or scholarship as long as they meet the requirements. That's where the similarities end.
A scholarship is a form of financial aid that's based on merit, not financial need. Schools (and the government) base student grant eligibility on the student’s finances. They look at how much the student’s family can afford to pay for college according to the FAFSA and determine if the student is eligible for a grant.
A scholarship doesn't consider the student’s family's finances and doesn’t need a completed FAFSA to qualify for it. Instead, a scholarship is money awarded to a student based on their grades, achievements, or affiliations.
Students have more access to scholarships than they do grants because any school, company, nonprofit group, or religious organization can offer them. Students can apply for as many scholarships as they want. It takes more effort to find and apply for scholarships since each scholarship must be applied for individually, but they can make attending higher education much more affordable.
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When Do Grants Need to Be Paid Back?
Each grant has its requirements that need to be met in order to qualify for them. If a student meets those requirements, they won't have to pay the grant back. It’s important to remember that this only applies to the portion of your tuition covered by grant money, however. Any student loans you take out to make up the difference between your total cost, grant money, and scholarship money need to be repaid according to the loan terms.
Students must pay back their Pell Grant if any of the following occur:
The student drops out before 60 percent of the semester is completed. They are then responsible for paying back 50 percent of the grant money. If at least 60 percent of the semester is completed, then the student will not be required to pay back the grant.
The student switches enrollment from full-time to part-time. The student will not be required to repay the grant in full, but they must send back the portion that applies to the full-time status that they no longer have.
The student receives other financial support (scholarships or grants) that reduce their need for the Pell Grant. In this case, the student may need to send back the difference between the new financial support and the previous financial status.
Students must pay back the TEACH Grant if they don't satisfy the service agreement. Each year that the student accepts the TEACH Grant, they sign an Agreement to Serve (ATS). By signing the ATS, students agree that they will teach in a high-need subject area at a low-income school for at least four years. If the student fails to meet the ATS requirements, the grant converts to a Direct Federal Loan and must be repaid according to the standard student loan terms.
What If Too Much Grant Money Was Awarded?
If the student received more grant money than was needed for their college or didn't meet the necessary requirements, their school's financial aid office will typically let them know.
In this case, the student only has a short time (45 days) to repay the overpayment in full, assuming the overpayment exceeds $25. It is a good idea for students to keep careful track of the amount of grants they receive and how the grants are used. If the grant was paid directly to the school, there's a lower chance of the student needing to repay the grant.
If the student does everything that they're supposed to do, but the school awards them too much, then the school is on the hook for repayment, not the student.
Know How to Avoid Repaying Grants
Before students accept a grant, they should make sure they understand the requirements and pay attention to their finances. If they think the grant money exceeds the cost of attending their chosen school, or if they received other awards that offset the grant money, they should talk to their financial aid office right away. This can help to prevent taking too much grant money and subsequently being on the hook for repayment.
It is also important for students to be sure they know how to satisfy the terms of their grants. If there are any questions or any uncertainty about the student’s ability to achieve the grant’s terms, the student should get in touch with the school’s financial aid office.