Loans, Grants, & Scholarships: A Parent’s Guide

So your child is off to college. Congratulations! That’s amazing, and we’re so excited for you both. But how will you pay for it? Most families use a combination of savings, loans, grants and scholarships. Confusion can come with so many forms of financial assistance, so we’ll walk you through the differences and other important things you should know.


Loans must be repaid after graduation, but are sometimes a necessary tool for affording the cost of college. By filling out a FAFSA (Free Application for Federal Student Aid), your student will be considered for subsidized Federal Direct Loans. Subsidized loans don’t charge interest while your child is in college; these are awarded based on financial need. Any student can qualify for an unsubsidized loan, which does accrue interest while they’re still in school.where the interest is not covered during college. 

If you need additional help bridging the gap, consider a Parent PLUS loan. These are federal loans that can be borrowed in your name. PLUS loans don’t have an annual limit–you can use it to fill any gap between the cost of attendance and financial aid–so make sure you carefully consider exactly how much you need to borrow before filling out a PLUS Loan application.

A final option for families is a private loan. These have different regulations from federally-backed loans so do your research to make sure you’re choosing one that works for your family.


Need-based grants are essentially free money as they don’t need to be repaid under most circumstances (for instance, if you stay in school and graduate). They are often awarded based on your family’s demonstrated financial need. How is this need demonstrated? By applying with the FAFSA. The form is all online and can be sent to every American college your student is applying to.

Grants can be awarded at the federal, state or institutional level. The best-known federal grant is Pell, which is for high-need families. If your child is planning to attend a private college, they may require additional forms like the CSS PROFILE in order to determine and award institutional aid. Make sure you check all the application requirements and have your student keep a close eye on their email–the financial aid office will communicate about any outstanding application materials. You can also do some research for grant opportunities in your state. There are private grants as well.


Scholarships are another form of free money that can be awarded to college applicants. These can either be awarded on merit  or need-based. Some colleges will have a separate application process for scholarships, others will review students for merit scholarships as part of the admissions process. Check with each college to make sure you’re clear on the process.

Many other businesses offer scholarships to college students separate from those given by the colleges themselves, so help your student research and apply for them! These can come from credit unions, professional associations, essay-writing contests and more. Fastweb is a great resource for finding and applying to outside scholarships.

Get an Estimate

Make sure you use a college’s Net Price Calculator before applying. Colleges are required to offer these tools; it’s a way to enter your financial information and get an estimate of how much aid your student may be eligible for from that school. You can run the Net Price Calculator on the website of several colleges and compare costs side by side. It’s important to remember that the number returned is just an estimate and may not match your financial aid package exactly.

Once your kid heads off to college, you’ll want them to be responsible for everyday expenses and tracking their spending. Make sure they have the right financial tools, like a checking account with debit card so they can easily access and budget their money.