Your ultimate guide to federal student aid

With the cost of college nearing $75,000 at many private universities around the country, now more than ever it’s vital to explore all of your financial aid options. Fortunately, the federal government offers several different grants and student loans, as well as a work-study program to help offset the cost of going to school.

While you need to demonstrate financial need for many of the options listed on this page, there are some types of aid that are open to all students. Because of this, we recommend completing the Free Application for Federal Student Aid (FAFSA) even if you’re not sure whether you’ll qualify.

Types of federal student grants

When looking to pay for school, grants are one of the first options you should turn to since the funds don’t need to be repaid. The federal government offers several options, though eligibility requirements vary by program.

Federal Pell Grant

• Award amount: $623 to $6,195 for the 2019-2020 academic year
• Eligibility requirements:
  • Undergraduate student
  • Demonstrate significant financial need as determined by the FAFSA
  • No previously earned bachelor’s, graduate or professional degree
  • US citizen or eligible noncitizen
  • Meet other federal aid requirements

Of all the federal student grants available, the Federal Pell Grant is the most common. How much you qualify for depends on your financial need and whether you’re enrolled full time or part time — among other factors.

The ins and outs of the Federal Pell Grant

Federal Supplemental Educational Opportunity Grant

• Award amount: $100 to $4,000 per year
• Eligibility requirements:
  • Undergraduate student enrolled in an eligible school
  • Demonstrate exceptional financial need as determined by the FAFSA
  • No previously earned bachelor’s, graduate or professional degree
  • US citizen or eligible noncitizen
  • Meet other federal aid requirements

Like the Pell Grant, the Federal Supplemental Educational Opportunity Grant (FSEOG) is reserved for students who show exceptional financial need. How much you qualify for depends on how soon you submit the FAFSA, how much other aid you receive, your financial need and the availability of funds at your school.

Teacher Education Assistance for College and Higher Education Grant

• Award Amount: Up to $4,000 per year
• Eligibility requirements:
  • Complete the FAFSA — you don’t need to show financial need
  • Enrolled as an undergraduate or graduate student in a TEACH Grant-eligible program at a participating school
  • Meet specific academic achievement criteria, which vary by program
  • Complete counseling that explains the conditions of the TEACH Grant service
  • Sign a TEACH Grant Agreement to Serve
  • US citizen or eligible noncitizen
  • Meet other federal aid requirements

You could qualify for the Teacher Education Assistance for College and Higher Education (TEACH) Grant if you’re planning on becoming a teacher at a low-income school or in a high-needs field — such as math or science. Keep in mind the grant funds you receive will convert to an unsubsidized loan if you don’t fulfill the teaching requirements listed in your TEACH Grant Agreement to Serve. You must provide proof that you’re meeting the teaching requirements each year — until your service agreement expires.

Iraq and Afghanistan Service Grant

• Award amount: $6,195 for the 2019-2020 academic yearmore info button
• Eligibility requirements:
  • Undergraduate student
  • Display financial need as determined by the FAFSA
  • No previously earned bachelor’s, graduate or professional degree
  • Not eligible for the Federal Pell Grant based on need
  • Parent or guardian was a member of the US armed forces and died as a result of military service performed in Iraq or Afghanistan after the events of 9/11
  • You were under 24 years old or enrolled in college at least part time at the time of your parent’s or guardian’s death
  • US citizen or eligible noncitizen
  • Meet other federal aid requirements

The Iraq and Afghanistan Service Grant was created for students who lost a parent in military service performed in Iraq or Afghanistan after 9/11. However, you can only qualify if you’re not eligible for the Federal Pell Grant based on need.

Types of federal student loans

If you’re unable to cover all of your college expenses through grants, you may need to consider loans. We recommend looking into your federal loan options before turning to private lenders since interest rates are typically lower and repayment plans are more flexible.

Direct Subsidized Loans

• Loan amount:
  • First-year limit: $3,500
  • Second-year limit: $4,500
  • Third-year and beyond limit: $5,500
• Interest rate: 2.75%
• Origination fee: 1.059%
• Eligibility requirements:
  • Undergraduate student enrolled at least half time at a participating school in a program that leads to a degree or certificate
  • Show financial need as determined by the FAFSA
  • In good financial standing for any previous federal loans
  • Meet other federal aid requirements

Of all the federal loan options, Direct Subsidized Loans are ideal since interest doesn’t accrue while you’re an active student. However, they’re only available to undergraduate students who demonstrate financial need. Unlike private student loans, your credit score and income aren’t taken into consideration.

Take a deeper dive into Direct Subsidized Loans

Direct Unsubsidized Loans

• Loan amount:
  • First-year limit:
    • Dependent student: $5,500
    • Independent student: $9,500
  • Second-year limit:
    • Dependent student: $6,500
    • Independent student: $10,500
  • Third-year and beyond limit:
    • Dependent student: $7,500
    • Independent student: $12,500
• Interest rate:
  • Undergraduate student: 2.75%
  • Graduate student: 4.3%
• Origination fee: 1.059%
• Eligibility requirements:
  • Enrolled at least half time at a school that participates in the Direct Loan Program
  • In good financial standing for any previous federal loans
  • Meet other federal aid requirements

Direct Unsubsidized Loans are easier to qualify for since you don’t have to show financial need. They’re open to both graduate and undergraduate students, though how much you’re eligible for depends on whether you’re an independent or dependent student and your year in school. Unlike subsidized loans, interest accrues while you’re in school — making your loan more expensive in the long run.

The ins and outs of Direct Unsubsidized Loans

Direct PLUS Loans

• Loan amount: Up to 100% of the school-certified cost of attendance
• Interest rate: 5.3%
• Origination fee: 4.236%
• Eligibility requirements:
  • Parent PLUS Loan
    • Biological, adoptive parent or stepparent of a dependent undergraduate
    • Student must be enrolled at least half-time at an eligible school
    • Meet credit and income requirements
    • In good financial standing for any previous federal loans
    • US citizen or eligible noncitizen
    • Meet other federal aid requirements
  • Graduate PLUS Loan
    • Graduate or professional student enrolled at least half time at an eligible school
    • Enrolled in a program that leads to a graduate or professional degree or certificate
    • Meet credit and income requirements
    • In good financial standing for any previous federal loans
    • US citizen or eligible noncitizen
    • Meet other federal aid requirements

PLUS loans can be a useful resource for filling gaps in funding after you’ve exhausted your free aid and other federal loan options. Parents can take out a Parent PLUS Loan on behalf of their dependent child.

Graduate and professional students can be eligible for the Graduate PLUS Loans . Both types of PLUS loans require you to meet credit requirements — or apply with a creditworthy cosigner.

The ins and outs of Direct Unsubsidized Loans

Federal Work-Study Program

• Award amount: Varies
• Eligibility requirements:
  • Undergraduate or graduate student at an eligible school that participates in the Federal Work-Study Program
  • Demonstrate financial need as determined by the FAFSA
  • US citizen or eligible nonresident
  • Meet other federal aid requirements

The Federal Work-Study Program provides part-time employment on or off campus for undergraduate, graduate and professional students who demonstrate financial need. All work-study jobs will pay at least the federal minimum wage, though it might be higher depending on the type of work you’re doing.

How much you qualify for varies by financial need, when you submit the FAFSA and your school’s funding level. However, the average award amount for the 2019 academic year was $1,808, according to Sallie Mae’s report on How America Pays for College.
Take a deeper dive into the Federal Work-Study Program

Other types of financial aid

If you’ve exhausted all of your federal aid options and still have gaps in funding, consider one of these options:

• Private student loans. While these tend to come with higher maximum loan amounts than federal loans, interest rates are typically higher unless you have good to excellent credit or a creditworthy cosigner. Private student loans also come with less-flexible repayment plans and fewer forbearance and deferment options.
• Grants. Look into grants offered through your school, state government or private organizations. Like with federal grants, you typically need to demonstrate financial need to qualify and don’t have to repay the funds. Start your search with our guide to college grants.
• Scholarships. We recommend applying for as many scholarships as possible since they also don’t have to be repaid. Unlike grants, these typically are based on academic achievement and talent as opposed to financial need. Check out our A-to-Z list of scholarships to get started.
• Employer tuition assistance. More and more employers have started offering some form of tuition assistance, including companies like Walmart, Chipotle and Starbucks. Ask your HR department if there are any options available and how to apply.
• Income share agreements. Offered by some schools and private companies, this alternative to student loans allows you to borrow funds and pay them back with a percentage of your monthly income for a few years after you graduate. Learn more with our guide to income share agreements.

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Bottom line

The US Department of Education offers a slew of financial aid options to help offset the cost of getting your degree. Some are open to all students who meet general federal aid requirements, while others are only available to students who can demonstrate financial need. Regardless, filling out the FAFSA as soon as possible will help ensure you receive the most aid available to you.

Need more funds? Check out our guide to student loans to compare lenders and learn more about how they work.

Frequently asked questions

• When do I need my parents’ involvement to apply for federal financial aid?

When filling out the FAFSA, you’ll be asked a series of questions to determine if you’re an independent or dependent student. If you’re a dependent student, your parents will need to provide information about themselves and their finances and sign the FAFSA. But even if you’re an independent student, some schools still require you to submit information about your parents.

• What’s the total maximum amount of funding I can receive?

Along with the maximum amount awarded for each type of financial aid, most schools limit funding to the cost of attendance (COA). The COA is the maximum amount of all forms of aid that can be used toward your education based on tuition and fees at your school. If you receive aid over the cost of attendance, it can be treated as income and is taxable.

• What is the deadline for filling out the FAFSA?

The application opens on October 1st, though deadlines vary each year. The federal deadline for the 2020-2021 academic year is June 30, 2021. However, your school might have its own deadline for the FAFSA that’s earlier. We recommend filling out the application as soon as you can after October 1st, since many types of federal aid are offered on a first-come, first-served basis. Learn more with our guide to FAFSA deadlines.

• How will I receive financial aid I qualify for?

Aid is generally sent directly to your school. The way excess funds are paid out to you from the school depends on your financial aid office. You may receive it by check, prepaid debit card or direct deposit.

Or, if you go to a qualifying school, you may be able to register for a myFSApay account.