What’s the Difference Between Federal and Institutional Financial Aid?

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Navigating the complex world of student financial aid can be difficult, especially since that aid can come from multiple sources.

In this guide, we’ll take a closer look at the differences and similarities between federal and institutional financial aid, each of which can help you pay for college. We’ll also review some tips on how you can get both kinds.

By understanding these easy-to-confuse terms, you can ensure you get the funding you need to finance your degree. Among the questions to answer are…

What is federal financial aid?

The Department of Education distributes federal financial aid to college and graduate students. This comes in a variety of forms, including:

With the exception of unsubsidized student loans, all of this financial aid is typically based on financial need. If you have significant financial need, for instance, you may qualify for the Pell Grant, which is money you don’t have to pay back, or might also gain access to subsidized student loans, which don’t accrue interest while you’re in school.

Unsubsidized student loans, on the other hand, are available to everyone, regardless of family income level; however, they start accruing interest from the date of disbursement.

The amount of federal aid you receive ultimately depends on your need, as well as the amount your college decides to distribute.

What’s more, federal student loans come with borrowing limits. Freshman undergraduates who are considered dependents, for instance, can only borrow up to $5,500 in their first year. Since this might not cover your full cost of attendance, you could need other sources, such as scholarships or private student loans, to fill the gap.

How do you get federal aid?

Accessing federal financial aid is easy — all you need to do is submit the Free Application for Federal Student Aid (FAFSA). The FAFSA opens on Oct. 1 each year, and it’s a good idea to submit it as soon as possible, since some aid is given on a first-come-first-served basis.

Along with submitting the FAFSA, you will of course also need to apply to and get accepted at a college. Once you’re accepted, your school will put together your financial aid package, which will outline how much you can receive in federal aid.

Remember that you don’t have to accept your full offer of federal student loans. To avoid taking on a burdensome amount of debt, only accept as much as you need and can reasonably afford to pay back. Otherwise, you could end up in a bad financial spot after you graduate.

What is institutional financial aid?

Depending on your college, your financial aid package might include institutional aid along with the federal aid. Institutional aid comes from the college itself, and it typically includes grants and scholarships. Note that some colleges also offer their own loans and work-study programs.

Since you don’t need to repay grants or scholarships, these are the best kinds of financial aid. The awards might come from the college itself, or they might come from an organization or alumni offering scholarships to incoming students.

While some of these grants might be need-based, others will be merit-based. For instance, students could get institutional scholarships for strong academic performance or athletics. Some schools even offer full-ride scholarships to a select group of qualifying students.

If you receive institutional aid, make sure to read over any requirements. Some awards will mandate that you maintain a certain GPA throughout school to stay eligible, for instance. Others might only be available for your freshman year and can’t be renewed for later years.

If you have any questions about the aid you receive, reach out to your financial aid office for clarification.

How do you get institutional aid?

Like federal financial aid, you’ll need to submit the FAFSA to access most institutional aid. Again, submit the FAFSA as early as possible to put yourself in the running for institutional aid.

Some colleges also require a form called the CSS Profile, which delves deeper into your family’s financial situation. You can find this form on the College Board website, and it costs $25 for your first school and $16 for additional schools, unless you have a fee waiver.

Reach out to your college to find out if it requires additional school-specific forms. You might need to apply separately for grants or scholarships from your school, as well as meet certain deadlines.

Doing your own research and speaking with a financial aid officer will help you find all the opportunities your school offers for institutional aid.

What other kinds of aid are available?

Federal and institutional aid aren’t the only kinds of financial assistance available — you might also get funding from your state or a private organization. States typically offer grants and scholarships to in-state students attending public universities, though other students might be eligible too — you can check out our state-by-state guide for some possibilities.

Private scholarship organizations also offer money to students who meet certain conditions, such as getting straight As or doing volunteer work. You can apply for scholarships throughout your time in college to secure additional funding for school.

While some awards will require their own applications, the most important step in getting financial aid is submitting the FAFSA. This multi-purpose form opens the door to federal, state and institutional aid, all of which you can use together to pay for college.

Make sure to complete the FAFSA as soon as you can, and keep an eye out for other application forms and deadlines. By staying vigilant about financial aid requirements, you can cover the costs of college without breaking the bank.

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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