viii. Types of Financial Aid: How to Pay for College

The true cost of college may be more than you expected, but you can make an effort to make the cost less than many might think. While the price tag for a school might say $40,000, the net cost of college may be significantly less. The net price for a college is the true cost a family will pay when grants, scholarships, and education tax benefits are factored in.

Understanding how to pay for college can feel overwhelming, but it doesn’t have to be. While we will break things down in further detail later, the short video below breaks down the four main types of financial aid—grants, scholarships, loans, and work‑study—so you’ll know exactly what each one means and how they can help you cover your education costs. Whether you’re just starting the FAFSA or comparing award letters, this is a quick and easy way to learn the basics before making big financial decisions.

Grants and Scholarships

Grants and scholarships are free money you can use to pay for college. Unlike loans, you never have to pay back a grant or a scholarship. All you have to do is go to school. And you don’t have to be a straight-A student to get grants and scholarships. There is so much free money, in fact, that billions of dollars go unclaimed every year (Imam, 2015).

While some grants and scholarships are based on a student’s academic record, many are given to average students based on their major, ethnic background, gender, religion, or other factors. There are likely dozens or hundreds of scholarships and grants available to you personally if you look for them.

Federal Grants

• Federal Pell Grants are awarded to students based on financial need, although there is no income or wealth limit on the grant program. The Pell Grant can give you more than $6,000 per year in free money toward tuition, fees, and living expenses (Federal Student Aid, 2021). If you qualify for a Pell Grant based on your financial need, you will automatically get the money.
• Federal Supplemental Educational Opportunity Grants (FSEOGs) are additional free money available to students with financial need. Through the FSEOG program, you can receive up to an additional $4,000 in free money. These grants are distributed through UNO’s Office of Financial Aid on a first-come, first-served basis, so pay close attention to deadlines.
• Teacher Education Assistance for College and Higher Education (TEACH) Grants are designed to help students who plan to go into the teaching profession. You can receive up to $4,000 per year through the TEACH Grant. To be eligible for a TEACH Grant, you must take specific classes and majors and must hold a qualifying teaching job for at least four years after graduation. If you do not fulfill these obligations, your TEACH Grant will be converted to a loan, which you will have to pay back with both interest and back interest. There are numerous other grants available through individual states, employers, colleges, and private organizations.

Photo by University of New Orleans

State Grants

Most states also have grant programs for their residents, often based on financial need. In Louisiana, the Louisiana Office of Student Financial Assistance (LOFSA) offers the GO Grant, a program that provides need-based state financial aid to support nontraditional and low to moderate-income students who need additional aid to afford the cost of attending college. For even more information about the GO Grant visit https://mylosfa.la.gov/students-parents/scholarships-grants/go-grant/

College/University Grants and Scholarships

UNO has their own scholarships and grants. These are distributed through a wide variety of sources, including UNO’s Office of Financial Aid, the school’s endowment fund, individual departments, and clubs on campus.

Private Organization Grants and Scholarships

A wide variety of grants and scholarships and are awarded by foundations, civic groups, companies, religious groups, professional organizations, and charities. Most are small awards under $4,000, but multiple awards can add up to large amounts of money each year! Reach out to UNO’s Office of Financial Aid for assistance in finding these opportunities.

Employer Grants and Scholarships

Many employers also offer free money to help employees go to school! A common work benefit is a tuition reimbursement program, where employers will pay students extra money to cover the cost of tuition once they’ve earned a passing grade in a college class. And some companies are going even further, offering to pay 100 percent of college costs for employees! Check to see whether your employer offers any kind of educational support.

Additional Federal Support.

The federal government offers a handful of additional options for college students to find financial support.

• Education Tax Credits: The IRS gives out free money to students and their parents through two tax credits, although you will have to choose between them. The American opportunity tax credit (AOTC) will refund up to $2,500 of qualifying education expenses per eligible student, while the lifetime learning credit (LLC) refunds up to $2,000 per year regardless of the number of qualifying students. The IRS warns taxpayers to be careful when claiming the credits. There are potential penalties for incorrectly claiming the credits, and you or your family should consult a tax professional or financial adviser when claiming these credits.
• The Federal Work-Study Program provides part-time jobs through colleges and universities to students who are enrolled in the school. The program offers students the opportunity to work in their field, for their school, or for a nonprofit or civic organization to help pay for the cost of college. Interested in possibly applying? Reach out to UNO’s Office of Financial Aid to get started.

Loans

There are a number of different types of loans that students can look into. After reading about the loans below, you can visit UNO’s Loans page for information. To learn about the requirements of federal loans and the steps you need to take to satisfy them, visit UNO’s Loan Resources page.

Student Loans

Federal student loans are offered through the US Department of Education and are designed to give easy and inexpensive access to loans for school. You don’t have to make payments on the loans while you are in school, and the interest on the loans is tax deductible for most people. Direct Loans, also called Federal Stafford Loans, have a competitive fixed interest rate and don’t require a credit check or cosigner.

Direct Subsidized Loans

Direct Subsidized Loans are federal student loans on which the government pays the interest while you are in school. Direct Subsidized Loans are made based on financial need as calculated from the information you provide in your application. Qualifying students can get up to $3,500 in subsidized loans in their first year, $4,500 in their second year, and $5,500 in later years of their college education.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are federal loans on which you are charged interest while you are in school. If you don’t make interest payments while in school, the interest will be added to the loan amount each year and will result in a larger student loan balance when you graduate. The amount you can borrow each year depends on numerous factors, with a maximum of $12,500 annually for undergraduates and $20,500 annually for professional or graduate students. There are also aggregate loan limits that apply to put a maximum cap on the total amount you can borrow for student loans.

Direct PLUS Loans

Direct PLUS Loans are additional loans a parent, grandparent, or graduate student can take out to help pay for additional costs of college. PLUS loans require a credit check and have higher interest rates, but the interest is still tax deductible. The maximum PLUS loan you can receive is the remaining cost of attending the school.

Parents and other family members should be careful when taking out PLUS loans on behalf of a child. Whoever is on the loan is responsible for the loan forever, and the loan generally cannot be forgiven in bankruptcy. The government can also take Social Security benefits should the loan not be repaid.

Private Loans

Private loans are also available for students who need them from banks, credit unions, private investors, and even predatory lenders. But with all the other resources for paying for college, a private loan is generally unnecessary and unwise. Private loans will require a credit check and potentially a cosigner, they will likely have higher interest rates, and the interest is not tax deductible. As a general rule, you should be wary of private student loans or avoid them altogether.

Applying for Financial Aid, FAFSA, and Everything Else

Want to know where to start? Take this first step and apply! Trust us, you need to do this.

The federal government offers a standard form called the Free Application for Federal Student Aid (FAFSA), which qualifies you for federal financial aid and also opens the door for nearly all other financial aid! Most grants and scholarships require you to fill out the FAFSA, and they base their decisions on the information in the application.

The FAFSA only requests financial aid for the specific year you file your application. This means you will need to file a FAFSA for each year you are in college. Since your financial needs will change over time, you may qualify for financial aid even if you did not qualify before.

You can apply for the FAFSA through UNO’s Office of Financial Aid or at studentaid.gov if you don’t have access to a financial aid office. Once you file a FAFSA, any college can gain access to the information (with your approval), so you can shop around for financial aid offers from colleges.

Photo by Joshua J. Cotten on Unsplash

Spotlight on Louisiana Students: State Financial Aid from LOSFA

As mentioned at the start of this module, if you’re going to college in Louisiana, you have access to some powerful state-specific financial aid from the Louisiana Office of Student Financial Assistance (LOSFA) that works alongside federal aid:

• TOPS (Taylor Opportunity Program for Students) — A merit‑based scholarship for Louisiana high school graduates who meet the required TOPS Core Curriculum GPA (at least 2.50), ACT score (minimum 20), and resident status. TOPS covers tuition costs for select Louisiana public universities, community colleges, and approved private schools. Awards begin after filing the FAFSA by July 1st. To maintain eligibility, students must stay full-time, earn sufficient credit hours, and keep up GPA standards in college .
• Louisiana GO Grant — A need‑based grant designed to bridge the gap between your Pell Grant and real college costs. To qualify, you must be a Louisiana resident, file FAFSA, receive Federal Pell Aid, and show remaining financial need (after Pell and other gift aid). Awards range from $300 up to $3,000 per year, depending on need and institutional allocation. Renewal requires continued Pell eligibility and FAFSA completion each year.
• Other LOSFA Programs — If you’re older than 20 or pursuing credentials in workforce‑aligned fields, check out the M.J. Foster Promise Program. LOSFA also offers support through Geaux Teach, National Guard scholarships, and state-run 529 college savings plans (START and LA ABLE).