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The Ultimate Guide to Understanding Your Financial Aid Package

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This post is from a student, parent, or professional contributor. The opinions expressed by the author are their own and do not necessarily reflect the positions, viewpoints, or policies of Niche.

Depending on which college you decide to attend, odds are you submitted the Free Application for Federal Student Aid (FAFSA) and have likely received your financial aid package

If you’re like most students, then you’re probably having a hard time understanding what your package means. Not to worry. 

Here is a breakdown of the different elements included in a typical financial aid package to help you better understand certain key terms and estimate the total cost of your undergraduate studies. 

What are the different types of financial aid?

Financial aid is any type of financial support given by a college or university to help its students pay for their undergraduate studies. On any given financial aid package, students can qualify for multiple types of aid depending on their FAFSA, financial need, and academic merit. 

 There are four main types of aid a student can qualify for:

  1. Loans
  2. Grants
  3. Scholarships
  4. Work-Study 

What are loans?

Loans are borrowed money from the federal government or a private organization that must be repaid with interest. 

It is a major decision to take out loans since they follow you after you graduate. Therefore, look into all your options first such as grants, scholarships, work-study, or monthly payments.  

If loans are your only option, you should consider federal loans. Ideally, federal loans offer more benefits for students than private loans. Therefore, we will be focusing on these types of loans since they are more likely to be on your financial aid package.  

There are two types of Federal Student Loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans

Direct Subsidized Loans

Direct Subsidized Loans are need-based federal loans that are subsidized by the government or someone else. In other words, the government or someone else pays the interest of the loan up until you graduate.  

It is one of the best loans you can qualify for since you will not accumulate interest on the money you borrowed. For example, if you borrow $10,000, you owe $10,000 when you graduate.  

If you qualify for this loan, the amount you can borrow will vary depending on your college, dependency status, and student classification. 

Direct Unsubsidized Loans

Direct Unsubsidized Loans are federal loans that are not subsidized. With an unsubsidized student loan, you usually don’t have to make payments while you are a student, but interest still accumulates and compounds. For example, if you borrow $10,000, you might owe $20,000 by the time you graduate. 

You do not need to show financial need to qualify for these types of loans. Similarly to direct subsidized loans, the amount you can borrow will vary depending on your college, dependency status, and student classification. 

What are grants? 

Grants are a form of funding awarded by the federal government or academic institution that do not need to be repaid. Because of this, they are one of the best rewards you can receive.

Most grants issued are need-based, meaning they are given based on a student’s financial situation & FAFSA. However, grants can also be issued by the federal government who are looking for students pursuing certain career paths or experiencing unexpected circumstances. 

The main types of grants are: 

  • Federal Pell Grant
  • Iraq and Afghanistan Service Grant
  • TEACH Grant
  • Institutional Grants

Federal Pell Grant

 The Federal Pell Grant is the most commonly awarded and well-known grant. It is only awarded to undergraduate students whose Expected Family Contribution (EFC) falls under a specific threshold determined by their FAFSA. There are also certain requirements you must fall under to qualify for this grant. 


  • Complete a FAFSA form
  • Must be a U.S. citizen or eligible noncitizen
  • Must register for the Selective Service
  • Pursuing undergraduate study
  • You do not already have a bachelor’s or professional degree
  • Demonstrate exceptional financial need
  • Have a valid SSN
  • Have a high school diploma (or equivalent)
  • Enrolled in an eligible, non-foreign school
  • Not currently incarcerated

Most Federal Pell Grants range from $600 to $6,500, and depending on the academic year, the amount you can receive will vary. This is because the amount awarded will be based on your EFC, cost of attendance, enrollment status, and length of study.


FSEOG stands for Federal Supplemental Educational Opportunity Grant. This grant is awarded to students with exceptional financial need and whose federal pell grant does not cover their overall cost of attendance. 

 The grant is awarded on a “first come first served” basis and is often given priority to those whose EFC is 0.

Like the Federal Pell Grant, there are also certain requirements you must fall under to qualify for this grant. 


  • Complete a FAFSA form
  • Be eligible for the Federal Pell Grant
  • Demonstrate exceptional financial need
  • Enrolled at least part-time

Most FSEOG’s range from $400 to $1,000, and depending on the academic year, the amount you can receive will vary. The amount will vary based on your financial need, other forms of funding, when you submitted your FAFSA, and how much funds your institution has left.

Iraq and Afghanistan Service Grant

Iraq and Afghanistan Service Grant (IASG) is awarded to students who are not eligible for the federal pell grant and are children of veterans who have died during military service in Iraq or Afghanistan after 9/11.


  • Complete a FAFSA form
  • Not be eligible for the Federal Pell Grant based on EFC but meet the remaining Federal Pell Grant Requirements
  • Your parent or guardian was a member of the U.S. armed forces that died as a result of military service performed in Iraq or Afghanistan after the events of 9/11.
  • You are under 24 years old
  • Enrolled in college at least part-time at the time of your parent’s or guardian’s death.

Although you cannot receive both grants, the range for both the Federal Pell Grant and the IASG are equivalent to each other typically ranging from $600 to $6,500.  


The Teacher Education Assistance for College and Higher Education Grant (TEACH) is a federal grant awarded to undergraduate, post-baccalaureate, and graduate students pursuing a teaching career in K-12 education.  


  • Complete a FAFSA form
  • Meet the basic requirements for federal student aid programs
  • Be enrolled as an undergraduate, post-baccalaureate, or graduate student at a school that participates in the TEACH Grant Program.
  • Be enrolled in a TEACH-Grant-eligible program.
  • Meet the academic requirements of their college
  • Receive TEACH Grant Counseling that explains the terms and conditions of the TEACH Grant service obligation. You must complete counseling each year that you receive a TEACH Grant.
  • Sign a TEACH Grant Agreement to Serve or Repay

To receive the TEACH grant, you must sign the TEACH Grant Agreement to Serve or Repay which requires you to teach a high-need subject at a low-income school full-time for four years.

 High-Need Subjects:

  • Bilingual Education
  • English as a second language (ESL)
  • Foreign Languages
  • Math
  • Reading
  • Science
  • Special Education

The TEACH grant program provides grants up to $4,000 dependent on your college and FAFSA. Note: Failure to follow through on your 4-year teaching obligation will result in all your funding being converted to an unsubsidized loan.

Institutional Grants

Institutional Grants are grants specific to each college or university and are often awarded based on your financial need. Most importantly, they do not need to be paid back. Contact your college or university to see if you qualify. 

How To Read Your Financial Aid Award Letter

What are scholarships?

Similar to grants, when scholarships are awarded to students, they do not need to be paid back. However, they are often merit-based, meaning they are awarded to students who meet certain requirements such as academic, athletic, cultural, ethnic, gender, religion, etc. 

Most scholarships are awarded to students by their institution or other organizations. They often require students to uphold certain obligations to keep their funds. If you are awarded a scholarship, be sure to keep track of certain obligations you have to meet.  

There is also no limit to how many scholarships you can apply to have. Therefore, apply to as many as you can!

What is Federal Work-Study?

Federal Work-Study is a program that offers part-time employment to undergraduate, graduate, and professional students to earn money for their educational studies. Students must show financial need in order to qualify.


  • Complete a FAFSA form
  • Demonstrate exceptional financial need
  • Be enrolled at least part-time
  • Maintain good progress in the program
  • Attend a college that offers work-study

Participating in Federal Work-Study is a great way to pay off your educational studies without having to pull out a loan. You can also add the work experience to your resume! 

How to calculate your total cost of attendance

Cost of Attendance (COA) refers to the “total cost” of attending an academic institution for a single academic year which includes the following: 

  • Tuition & Fees: the price you have to pay for attending your college/university
  • Room & Board: cost of housing and a meal plan for those living on campus
  • Books & Supplies: cost for textbooks, pencils, notebooks, etc. 
  • Personal Expenses: cost for things like groceries, entertainment, clothing, etc.

Here is an example of how to calculate your total cost of attendance depending on your situation (on or off campus). 

 Tuition & Fees = $25,000

Room & Board = $9,200

Books & Supplies = $1,000

Personal Expenses = $2,000

On-Campus: $25,000 (Tuition & Fees) + $9,200 (Room & Board) + $1,000 (Books & Supplies) + Personal Expenses ($2,000) = $37,200 (COA)  

Off-Campus: $25,000 (Tuition & Fees) + $1,000 (Books & Supplies) + Personal Expenses ($2,000) = $28,000 (COA) 

Note: The amount you spend on books, supplies, and other expenses can vary each year. 

Once you have calculated your total cost of attendance, you can subtract your COA from the amount of financial aid you received. This will help you take the necessary action needed to budget for your educational studies. 

Appealing Your Financial Aid Package

If you’re not satisfied with the amount of financial aid you received, you can always contact your institution’s financial aid office and ask them for more money. 

You may want to reach out and appeal your package if:

  • You have outstanding medical or dental expenses, significant debt, or other factors that affect your ability to pay.
  • Your financial circumstances have drastically changed, such as the death of a guardian, being let go, salary cuts, etc. 
  • If another school has offered you a better financial aid package, ask if they can price match certain types of aid.

Note: Appealing your financial aid package sometimes works, and sometimes it does not, but it does not hurt to try! 

Overall, figuring out how to pay for college is a big decision. Make sure you understand your financial aid offers and choose what works best for you!

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Author: Yolanda Pineda

Yolanda is currently a full-time student at the University of Houston studying Business with a minor in Law, Values, & Policy. She is a recent graduate from Houston Community College where she received her Associate of Science. When she is not making content for Niche, she is dedicated to helping her community and social causes.