At private universities, institutional grants typically form a large portion of a student's financial aid package. This is money a student is given by the university to offset the cost of attendance, and it does not need to be paid back. The amount of an institutional grant is determined by your financial need. Institutional grants are usually used after all your loans, federal grants, scholarships and savings have been applied and there is still a balance on your tuition bill. At a private, well-endowed university, a student whose family is unable to contribute any money toward college expenses may be awarded $20,000 or more in institutional grants per year.
The federal government offers several higher education grants. Among these, the most popular is the Pell Grant. Pell Grant money is given by the federal government but usually apportioned by your school's financial aid office. In the 2008-2009 school year, the maximum Pell grant award was $4,731. Another popular federal grant is the Federal Supplemental Educational Opportunity Grant (FSEOG). This award (up to $4,000 per year) is given to students with exceptional financial need and who already qualify for Pell Grants. Federal grants, like institutional grants, do not need to be repaid.
There are loads of need-based grants that are typically given out on the basis of where you live, your race or ethnicity and what you plan to study. These grants, unlike institutional and federal grants, will not be given to you as part of the financial aid application process; you'll have to seek them out. Consult the Resources section for websites with directories of scholarships and grants.
Almost all students applying for financial aid are required to fill out the Free Application for Federal Student Aid (FAFSA). This form, administered by the federal government, is used to calculate your eligibility for federal aid (including Pell Grants FSEOGs and also federal loans). But the form is used by your university not only to calculate your federal aid eligibility but also to determine what institutional grants and scholarships you're eligible for. Because of its importance, take extra care to file it by the deadline. See Resources for a link to the FAFSA's website.
Scholarships and grants often seem alike---both provide money for school that doesn't need to be repaid---but the criteria for receiving them are often very different. In general, scholarships are awarded on the basis of academic, athletic, extracurricular or community service achievement. Grants are typically given out to students based on their financial need. With private scholarships and grants, the definitions can become confusing. Some private scholarships are only given out to students with financial need and some grants require a certain level of academic merit; at this point, the difference between the two is largely semantic.
Most institutional and federal grants are given out on the basis of financial need and don't require students to maintain a certain GPA or do anything to reciprocate for them. In some cases, your university may ask you to attend a donor's event or write a letter to thank the people who contributed the money that went toward your grant.