Federal Student Aid is a program within the United States Department of Education that exists to provide financial aid options to college-bound students. Federal Student Aid educates families about college financing options in addition to providing need-based grant and loan programs under Title IV of the Higher Education Act of 1965. Programs under Federal Student Aid include grants, work-study and loan programs.
To be eligible for assistance through Federal Student Aid, students must complete a Free Application for Federal Student Aid (FAFSA). The FAFSA collects information regarding the student's income and tax status as a dependent or independent. Based on this information, the office of Federal Student Aid will determine whether students are eligible for financial assistance.
The Federal Student Aid office manages a variety of grant and loan programs to help students fund their college degrees. Federal Pell Grants, for example, are available to students who are low- or middle-income. The Federal Pell Grant awards vary between students, and some students will receive a higher grant amount than others depending on their economic status and university of choice.
Academic Competitiveness Grants (ACG) are available for students who have completed an advanced course of study in high school. Profession-based grants are available to students who plan to pursue careers in science, math or teaching.
Subsidized and unsubsidized loans are also available through the Federal Student Aid office. Subsidized Stafford loans, for example, allow undergraduate students to borrow funds at a low interest rate at around 4.5 percent for the 2010-2011 academic school year. Unsubsidized and graduate rates are at 6.8 percent.
Unlike many private student loans, the interest rates for unsubsidized and subsidized Stafford loans are fixed, meaning that the rates for each individual loan will not change over time. However, the interest rate may vary for each school year. For example, the subsidized interest rate for the 2009-2010 school year was 5.6 percent for undergraduates. Undergraduates who borrow for the 2010-2011 school year will borrow at an interest rate of 4.5 percent.
The amount that the student is eligible to borrow will vary based on factors including year in college, income and school of choice.
Students who complete a FAFSA may be eligible for a work-study financial aid offer that guarantees part-time work while enrolled in school. Colleges and universities provide employment opportunities for students who are work-study eligible. Usually, schools have a set of funds that are specifically designated for work-study students. Students receive work-study payments as they would a regular paycheck.