What are the Four Basic Types of Financial Aid

The demands of the work place have changed dramatically over the last 50 years making college or specialized training a vital element in a resume. Both recent high school graduates as well as nontraditional students face the challenge of paying for higher education. The prospective student should ask this question: What are the four basic types of financial aid?

The four categories of financial aid are scholarships, grants, loans, and student employment. These types of aid can be broken down further into two more categories, financial assistance that has to be paid back and financial assistance that does not have to be paid back.

Scholarships and grants are the most desirable of the four basic types of financial aid. These are sometimes referred to as free money or gifts. Scholarships are merit based, awarded based on the student’s academic, artistic, or athletic performance. An example of this type of aid would be a National Merit scholarship, which is a tribute to a high school student’s academic excellence. Musically talented future undergraduates can apply for the BMI Foundation John Lennon scholarship. This scholarship is available to talented students ages 15-24. Student athletes can apply for scholarships at the colleges of their choice. The availability of these scholarships varies greatly from one sport to another. Grants, the other type of gift aid, are provided at the federal level and the state level. Pell grants are distributed by the federal government to undergraduates based on financial need. Other grants are available at the state level.

Once again, what are the four types of financial aid? Scholarships and grants, which have been previously discussed, loans and student employment will be discussed here. Educational loans have lower interest rates than many other types of loans. This type of financial aid must be repaid with interest. Lenders are usually state or federal governments, banks or credit unions, employers and family members. Student employment, or federal work-study programs, allows students to work on campus to earn money to help cover their living expenses. The earned income does not have to be repaid.