How to Understand the Financial Aid Package

High school seniors are busy receiving acceptance notices to colleges. They are also receiving financial aid packages. Many are confused about what is offered, and this blog will attempt to explain (in simplistic terms) the types of aid available.


  • Merit scholarship: This award is given for academic excellence in high school. It is FREE money that does not need to be repaid and is awarded for each year the student is in college. The amount can change up or down (or be rescinded) if the college’s requirements are not met during matriculation.
  • Grant money: Again, this is FREE money that does not need to be repaid and is awarded based on the family’s financial need.


  • The federal government will pay a portion of your tuition for hours worked while on campus. This is FREE money and does not need to be repaid.


  • Direct PLUS Loans: PLUS loans are federal loans that parents of dependent undergraduate students can use to help pay for college or career school. PLUS loans can help pay for education expenses not covered by other financial aid.
  • The U.S. Department of Education makes Direct PLUS Loans to eligible borrowers through schools participating in the Direct Loan
  • The U.S. Department of Education is your lender.
  • You must not have an adverse credit history.
  • The maximum loan amount is the cost of attendance (determined by the school) minus any other financial aid.
  • Subsidized and unsubsidized loans are federal student loans for eligible students to help cover higher education costs at a four-year college or university, community college, trade, career, or technical school. The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Unsubsidized Direct Loans. (Some people refer to these loans as Stafford Loans or Direct Stafford Loans.)
  • Direct Subsidized Loans are available to undergraduate students with financial needs. Your school determines the amount you can borrow, and the amount may not exceed your financial need. The U.S. Department of Education pays the interest on a Direct Subsidized Loan:
  • while you’re in school at least half-time,
  • for the first six months after you leave school (referred to as a grace period), and
  • during a period of deferment(a postponement of loan payments).
  • Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need.
  • Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.
  • You are responsible for paying the interest on an Unsubsidized Direct Loan during all periods (that means while still in college). 
  • Suppose you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods. In that case, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).


  • An outside scholarship is a scholarship awarded by an organization other than the government or your college — scholarships sponsored by your parent’s employer or a community organization, for example.
  • Outside Scholarships and College Financial Aid
  • Suppose all the aid you receive — outside scholarships, financial aid from your college, and government grants and loans — ends up being $300 or more above your calculated need. In that case, the federal government requires your college to reduce the amount of need-based financial aid it awards you.
  • If you don’t report your outside scholarship awards to your college’s financial aid office, you might receive what’s called an “over-award” — and you’ll have to pay back that money.


  • It’s up to your college to decide what type of financial aid to reduce or cut if you receive an outside scholarship. Some cut down the college’s grant. Others may reduce the amount of your loan. That’s to your benefit — it means replacing loan dollars, which you must pay back, with scholarship dollars that you don’t repay. Other colleges may apply your scholarship award toward the following semester.
  • If you win an outside scholarship, tell your college’s financial aid officers about it and ask them about your college’s policy on outside scholarships.

If you have any other questions about selecting a college or the admissions process, please contact me through my website at or call me at 760.877.7200. I’d love to answer your questions!

Andrea K. Frimmer, M. Ed.

Prep 4 College Now, Inc.

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