What Is Financial Aid?

For note-taking purposes, jot down that financial aid is the umbrella term - it denotes all the various ways students can pay for costs associated with education, like tuition and housing.

Self-Help aid and Gift aid are two types of financial aid.

What Is Self-Help Aid?

Self-Help aid refers to forms of aid that are requested by you and require some sort of repayment.

Loans are the most common example. Students go to a lender, and after an evaluation process, the lender gives the student’s institution money to pay towards education expenses. This money is known as the principal balance.

Depending on the stipulations within the loan itself, students may begin accruing interest after the loan is applied to their student account, or there may be a grace period allotted, during which interest does not accrue.

Some student loans have a grace period of six months post graduation, where students must start paying down the loan’s principal balance + interest, and some require payments right away, no matter if the student is still in school, which is why it is essential for you to read the terms of your loan contract and ask questions to the loan provider when necessary. And it is always necessary to ask questions whenever you apply for a loan.

Work-Study programs are another example of Self-Help aid. These programs allow students to earn an income by undertaking employment at their institution. Earnings can be saved to pay for school as well as other life expenses. To apply to work-study programs, students must inquire with their school.

Tuition Reimbursement programs are another example of Self-Help aid. This is because to stay within a tuition reimbursement program, students typically need to be employed for a set amount of time, and if they separate from employment, they are asked to repay the money they used. However, if students stay with their employer and comply with other tuition reimbursement program terms, they are not required to pay any money back.

Paying out of pocket is a Self-Help aid option as well. Some students use money they have saved or elect to put education expenses on a credit card, and then pay that credit card off later. Putting expenses on a credit card does come with the risk of making you less creditworthy by increasing the amount of debt in your debt-income ratio, a factor that is used to assess your credit score by multiple bureaus.

What Is Gift Aid?

Gift aid refers to money given that does not need to be repaid.

Scholarships and Grants are excellent examples of Gift aid. Oftentimes, I am asked by students:

“What is the difference between a scholarship and a grant?”

For the most part, the difference between a scholarship and a grant is a matter of semantics. It is always good to read the eligibility requirements extensively and ask the donor whatever questions come to mind.

Many online sources will say that scholarships are strictly awarded based on merit, whereas grants are awarded based on financial need, but this is not completely correct.

There absolutely are scholarships that require a student to exhibit extreme financial need to be able to apply; likewise, there are just as many grants that are based on meritocracy and extracurricular activities outside of school.

I have a post delving into three questions students should ask themselves and gift aid donors when applying for aid. I call it the Triple A designation.

Above all else, however, if you are eligible for any money-making opportunity, go for it!