In the world of college finances, terms get thrown around a lot, and those of us who work with them every day often take for granted everyone will know what they mean. However, as you may well know, parents who are just getting their feet wet in the college jargon could use a little help. Knowing the lingo is one of your first steps in being an informed customer…College Financial Terminology 101!
In a 1-on-1 meeting the other day with one of our families, one of our Capstone advisors was asked about the difference between a grant and a scholarship. This moment was the inspiration for this blog post!
Gift Aid is financial assistance that does not need to be repaid. Gift aid comes in two forms—grants and scholarships.
Grants are typically need-based awards. They are awarded by either the Federal Government (often as Pell Grants), the State Government, the college you are attending, or private/outside organizations.
Need-based means the family’s or student’s financial situation leaves them in a position where they are unable to pay the cost of attendance and need financial assistance with those costs.
Scholarships also do not need to be repaid, but typically they are awarded without regard to need. They are often awarded (at least in part) based on academic excellence or superior qualities like leadership or athleticism. Scholarships are awarded by colleges and private/outside organizations.
Private/outside organizations can award both grants and scholarships. Examples of these types of organizations would be rotary clubs, parent employers, churches, and foundations as well as many others. Scholarships or grants from outside sources need to be sought out by the family or student. Guidance counselors, colleges, and internet searches are all great ways to research available outside scholarships and grants. Some of our favorite online resources include Fast Web! And College Board.
Work-study/Work Award is a federal program where the student works part-time and funds for that work may be applied to their college costs without taxation. Eligibility for the program is determined by financial need. Often the student will work for their college, but employment with other outside organizations is possible. The employer pays half of the costs with the government paying the other half.
All of the forms of financial assistance we have talked about so far do not need to be repaid. But your costs may not be fully covered by these types of aid so loans are also available.
Loans will need to be repaid and are obtained either through the government or through private outside sources like banks. You can refer to our previous blog post about loans for all the details about the types of loans and how they work.
A loan is non-secured because no collateral is available to secure the loan. An education is not like a house or a car which can be taken back if payment is not made on the loan.
We have many more terms to review with you, but we’ll hold them for another blog--“College Financial Terminology 201”. In the meantime, remember that old adage—the only dumb question is the one not asked. So when you have a question about a term or concept you don’t understand—fire it our way! We want you to “know before you go”!