One of the most common types of financing options is student loans. These accrue interest over time and usually require payments to be made on them starting about six months after a student leaves school. There are two main types of student loans: government and private loans. Federal loans are preferable primarily because they have an interest rate with a fixed cap set by Congress. They come as either as unsubsidized loans, which accrue interest while the student is still in school, and subsidized loans, where the government pays the interest until after a student graduates or leaves college. One popular federal loan is the Stafford loan. Private loans have, for the most part, higher interest rates than federal loans. These rates can also fluctuate over time.
Grants are another way to finance college tuition expenses. These monetary awards do not require students to pay them back. One of the most popular grants is the federal Pell Grant. This is awarded to students who demonstrate financial need by completing the FAFSA (see the next section). The Pell Grant offers students differing amounts depending on their need, though there is a maximum offered, around $5400 for 2011. This amount differs annually. The case is the same for most other grants as well.
One of the most important tools for college financing is the Free Application for Federal Student Aid (FAFSA). This is an online application that is filled out annually using parents' and students' tax records from the prior year. After a FAFSA application is reviewed, a student may be given a certain amount in awards. These come in the form of both loans and grants, depending upon income and need. The Federal Pell Grant, unsubsidized and subsidized federal loans are the most common awards. Other types of grants may also applied for, though they typically require stricter guidelines to receive them, such as a certain GPA. The FAFSA needs to be filled out each year, and the awards offered last from fall of the year the application is completed through the end of the following summer semester.
Scholarships are another important means of college financing for many students. Almost every institution offers a number of scholarships, each one with a different criteria for those who are eligible to receive them. Often they require a certain GPA. Scholarships may also require an essay, community service project, majoring in a specific field of study or artistic piece to receive them. Scholarship money is not a loan and therefore does not need to be paid back. There are also many private scholarships not associated with colleges and universities.