25 Jul Differences Between Federal and State Financial Aid

Thinking about sending children to college can be a challenging process for many families. Not only do you have to deal with the actual college application process, you also have to learn about financial aid. As the days get closer to college application time for this year’s rising high school seniors, it is important to remember that the financial support you need can come from many sources:

 • Federal financial aid: This comes in the form of outright grants, student loans, and the federal work-study program.

 •  State financial aid: Many states have financial aid programs that are separate from, or in addition to, what the federal government offers.

 •  The college itself: Most colleges have some form of endowment or scholarship program to entice a wide range of students to attend. A top-tier school can often be surprisingly affordable for a student with academic or athletic talents, or other desirable characteristics.

 •  Business and charitable organizations: This type of support usually comes in the form of college scholarships, but some generous businesses have benefit     programs where they contribute towards the cost of a college education for employees.

 •  Family savings and college savings accounts: Some parents, grandparents or other relatives will put aside money for education from the time a child is born. Other families may have tax-advantaged funds available for education purposes.

 •  Additional earned income: Some families and students put a full push on trying to bring in extra money to pay for college. The parents may get a second job, or the student may work part-time around high school classes to earn additional college money.

 •  Private student loans: If other forms of student aid fail to meet the entire cost of college and living expenses, students can turn to private student loan companies to borrow the necessary funds.

Two major forms of financial support are federal financial aid and state financial aid. While federal programs apply equally to applicants in all 50 states, state programs are usually designed to benefit schools and colleges in the individual state. Both federal and state financial aid programs usually have some type of need-based component. On the federal level, grants may be available depending on financial need or a future vocation, such as teaching. Interest rates on federal student loans may be subsidized or unsubsidized based on the family’s financial situation, and the student may qualify for the federal work-study program if a certain level of financial need exists.

States usually do not offer student loans, but they definitely try to promote attendance at public colleges. Most states have their own grant or scholarship programs, or additional tax benefits for qualified education savings plans. California’s Cal Grant program offers qualified residents significant funds that can be applied to tuition, housing or book costs, while New York State covers tuition costs at public four-year colleges or local community colleges for qualified students. Each state is different, so check with your high school counselor or financial aid advisor to determine what is available where you live. This information can make the difference in deciding to attend college in your home state or going out of state for your education.

If you qualify for federal or state financial aid, be sure to note the requirements for continued participation. You may need to maintain a certain level of attendance or academic achievement. These requirements can vary from federal to state, and from state to state, so always know exactly what you have to do to remain aid-eligible.

The first step in qualifying for federal, state, and institutional aid, and even some scholarships, is to complete the FAFSA, but also determine whether other applications are required. The FAFSA will be online beginning October 1. It is always best to complete the FAFSA as soon as possible to meet school financial aid deadlines and qualify for as many programs as possible. Each state also has financial aid deadlines you need to comply with in order to qualify for their programs. Don’t miss out because you file too late!