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Students applying for financial aid for graduate school are likely familiar with the process of applying for federal financial aid, but graduate students should be aware of the fact that they’re almost always considered independent, and many will want to learn the maximum amount they can borrow.

The lifetime graduate student aggregate loan limit for Subsidized and Unsubsidized federal loans is $138,500. Of this amount, no more than $65,500 can be in subsidized loans. This is the aggregate limit that includes loan amounts borrowers use to pay for undergraduate and graduate studies.

Students could also borrow private student loans, which could potentially increase the amount of student loans an individual could borrow. Continue reading for more details on the different types of student loan limits.

Federal Student Loan Limits

Students can apply for federal aid to help fund graduate school. Students are encouraged to fill out the FAFSA® (the Federal Application for Federal Student Aid) to see if they qualify for help. Graduate requirements of FAFSA are similar to those for undergraduate students. Eligibility for federal aid is based on a student’s income, among other factors, so not everybody will be eligible for all types of aid.

As mentioned, the lifetime aggregate limit for Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This is the aggregate limit, so does include student loans borrowed during undergraduate study.

Recommended: High Income Financial Aid

If students want to take out more federal loans, they’ll have to pay off some of their debt first. Then they can borrow up to the limit again. There are also maximum borrowing limits in place for Direct Unsubsidized Loan and Direct PLUS Loans for graduate or professional students. These limits are outlined below.

Direct Unsubsidized Loans

Let’s look at direct subsidized vs. direct unsubsidized loans. Graduate students cannot receive direct subsidized loans. Those loans are only available to undergraduate students who show financial need. If students took out these loans as undergraduates, that amount will be included in the lifetime limit of federal loans they’re allowed to receive.

For direct unsubsidized loans, the annual limit is $20,500. All graduate or professional students are considered independent for this loan. Unsubsidized loans aren’t dependent on students demonstrating financial need. The schools will decide how much students receive based on their annual costs and how much aid they’re receiving from other sources.

Direct PLUS Loans

Graduate students with eligible credit can also take out Direct PLUS Loans, issued by the U.S. Department of Education. These loans have an annual limit of the cost of attendance, subtracting any other aid that is received.

Private Student Loan Limits

The maximum amount that students can borrow with a private student loan will depend on the lender. Usually, they won’t lend students more than it costs to attend school.

The cost of attendance is an estimate of tuition and fees, books and supplies, living expenses, transportation, and other miscellaneous expenses. The estimate can also include dependent care, study-abroad programs, and costs related to disabilities.

Recommended: Private Student Loan Guide

Graduate Student Loans vs Undergrad Student Loans

Undergraduate students may be eligible for Direct Subsidized Loans. The government covers the interest that accrues while a student is enrolled at least half-time in school. Graduate students are not eligible for this loan type.

Direct Unsubsidized Loans are available to both graduate and undergraduate students. The undergraduate student federal loan has a lower interest rate than the unsubsidized loan for graduate students. Undergrads have an interest rate of 5.50% for the 2023-2024 school year, while it is 7.05% for graduate students.

Direct PLUS Loans are available for graduate students. Only undergraduate students who are considered independent, or who are dependent undergraduate students whose parents are unable to obtain PLUS Loans may be eligible to borrow a PLUS loan.

Graduate School Resources

Be sure to fill out your grad school FAFSA to see if you qualify for federal aid including federal student loans. Some students will hit the max of federal aid but still need more. In that case, they have a couple of options. Students can try to pay off some of the loans and then borrow more, up to the limit, again. If they don’t want to or are unable to pay off some of their federal loans to take out more federal loans, they can opt for a private loan.

Grants and Scholarships

When students submit their FAFSA®, their eligibility for certain grants will be considered. The school may also have information on local or institutional-based grant programs.

Grad students also have the option of doing a graduate assistantship, where they teach or work on research under the supervision of a professor. Assistantships sometimes pay a stipend or provide benefits like housing. Students can check with their schools to see if that option is available to them.

Scholarships and fellowships are also available to help pay for graduate school. There are many ways students can go about finding and applying for grad school scholarships. Students can check with their school’s financial aid department, or even the department they’re studying under, to see what is available. There’s usually a wide variety of scholarships available from various sources, including schools, employers, companies, and nonprofit organizations. Scholarships can be either merit based or need based, so the eligibility will vary.

Recommended: Scholarship Search Tool

The Takeaway

The aggregate limit for Unsubsidized and Subsidized loans for graduate students is, as mentioned, $138,500, no more than $65,500 can be in subsidized loans. For the PLUS Loan, the annual borrowing limit is no more than the cost of school minus other forms of financial aid. Limits for private student loans may vary by lender but, generally, a private lender will not let you borrow more than the cost of attendance.

Private loans could be an option for students who have exhausted federal options and still need more to fund their education. SoFi offers student loans with competitive interest rates for qualifying borrowers and an easy, online application. Plus, as a SoFi member, you’ll be able to access additional benefits like career coaching.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Medical school is an academically rigorous undertaking. Finding a way to pay for medical school can be another added challenge. Keep reading for more insight into how to pay for medical school.

What Is Medical School?

Medical school is typically a four-year educational program that leads to graduating students receiving an M.D., D.O. or N.D. degree. After medical school, graduates will generally continue onto a medical residency in the specialty of their choice.

Different Types of Medical School

There are three main types of medical school: allopathic, osteopathic, and naturopathic. All of these programs prepare students for careers as doctors, but they have different academic credentials. Let’s take a closer look at each of these programs.

Allopathic Medical School

Allopathic medicine is also known as conventional or traditional medicine. Allopathic medical schools provide students with a traditional curriculum and approach to medicine. Allopathic doctors rely on traditional methods such as x-rays, prescriptions medications, surgery to treat and diagnose an illness or medical issue, and treating an illness. If a student graduates from an allopathic program, they’ll receive a Doctor of Medicine (M.D.) degree.

Osteopathic Medical School

Osteopathic schools also cover standard medical sciences and practices but supplement those lessons with training on providing touch-based diagnosis and treatment of different health problems. Osteopathic doctors often take a more holistic approach to patient wellness and treatment. Students who attend an osteopathic medical school will end up with a Doctor of Osteopathic Medicine (D.O.) degree.

Naturopathic Medicine School

Naturopathic physicians (ND) or doctors of naturopathic medicine (NMD) attend naturopathic medical school where they study a similar science curriculum as they do in allopathic medical school. The difference with this program is, naturopathic students also study psychology, nutrition, and select complementary therapies such as homeopathy.

Recommended: Average Cost of Medical School

Financing Medical School

The cost of medical school is on the rise and finding a way to finance medical school can be a daunting task. There are quite a few options for medical students to get help doing so. From taking out student loans for medical school to gift aid, students have options.

Scholarships & Grants

A little bit of free money can really come in handy when a student has to pay for medical school and can help students avoid taking on more debt from medical school than they need to. Students can apply for need-based grants and merit scholarships through their medical school or outside sources. Their school’s financial aid office can walk them through their options.

Medical associations and nonprofit organizations also tend to have financial aid, grants for college, and scholarships that medical students can apply for. Again, a school’s financial aid office can help point medical students in the right direction, but they won’t know of every gift aid opportunity available outside of their school, so students may want to do their own research.

The following associations generally offer scholarships and grants for medical students.

•   American Medical Association. This professional group provides financial support through scholarship opportunities, as well as general support for medical students looking to learn more about how to pay for medical school and to prepare for residency.

•   American Medical Women’s Association. Medical students can peruse this association’s list of more than a dozen different scholarships, awards, and grants that they may be eligible to apply to.

•   American Podiatric Medical Association. Every year, the American Podiatric Medical Association gives out more than $200,000 worth of grants and scholarships.

Federal Student Loans

Medical students can apply for federal financial aid, including federal student loans, by <completing the Free Application for Federal Student Aid (FAFSA®). Medical students may qualify for three types of federal loans after they complete the FAFSA. The FAFSA may also qualify students for financial aid such as scholarships and grants from their state or school (if available).

•   Federal Direct Unsubsidized Loans. Also known as Stafford Loans, Federal Direct Unsubsidized Loans allow students to borrow money unsubsidized. When a loan is unsubsidized, this means that the borrower is responsible for paying all of the interest on the loan.

•   Federal Direct Graduate PLUS Loans. If a student still needs help financing medical school after taking out a Federal Direct Unsubsidized Loan, they can take out a Federal Direct Graduate PLUS Loan, which is also unsubsidized. These loans tend to have a higher interest rate than Federal Direct Unsubsidized Loans do and are credit-based.

•   Health Resources and Services Administration (HRSA) Primary Care Loan. Medical students with financial need, and who can demonstrate it, may qualify for this school-based program that offers a few different types of loans for medical students. Not all medical schools participate in this program, but students can check with their school’s financial aid office to see if their school does take part in it.

Recommended: Types of Federal Student Loans

Private Student Loans

After applying for federal student loans, students may be interested in supplementing their federal support with private medical school loans. Generally, private student loans for medical school are available through banks or credit unions. How much a student will pay in interest for a private student loan will depend on what their credit history is, amongst other factors. There are private student loans available at fixed and variable interest rates.

While private student loans can be a helpful option for borrowers, they don’t always offer the same borrower protections as federal student loans — such as income-driven repayment plans or the opportunity to pursue Public Service Loan Forgiveness. Because of this, students generally resort to private student loans only after depleting all other financing resources.

Recommended: Private Students Loans vs Federal Student Loans 

SoFi’s Private Student Loans

SoFi is also a provider of private student loans that can be used to pay for medical school. To apply, students don’t even need to leave their house. The application is done entirely online and it only takes a few minutes to apply, even if the student applies with a cosigner.

To make financing medical school less stressful, borrowers can repay their SoFi student loans in a way that works for them by choosing a monthly student loan payment and rate that fits their budget.

Borrowers never have to worry about fees because SoFi’s student loans are fee free. SoFi also offers borrower’s a six-month grace period after graduation so that they have time to get settled in their new job as a doctor before they need to start making monthly loan payments.

The Takeaway

Between scholarships, grants, and medical school student loans, medical students have some decent options at their disposal for financing medical school. While there’s no denying that medical school can be a stressful time in a person’s life, hopefully all of the hard work and sacrifices will lead to a fulfilling and rewarding career.

For help financing medical school, learn more about SoFi private student loans.

FAQ

What is the best way to pay for medical school?

If a student can secure scholarships and grants, that’s the best way to pay for medical school. Unlike student loans which must be paid back, gift aid is free money that medical students won’t have to pay back after graduation.

How do you get medical school paid for?

Medical students can apply for scholarships and grants to help cover the cost of medical school. After applying gift aid, students can take out federal or private student loans to cover the remaining costs of attending medical school. Paying in cash is also an option, but one that is understandably not within reach for a lot of people.

Is it hard to get loans for medical school?

There are both federal and private student loans available to medical students, so they generally have plenty of options that make it possible to get a loan for medical school.

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Photo credit: iStock/FatCamera

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Figuring out how to pay for school can be stressful, so it’s important to compare financial aid vs student loans so that you can reduce your financial burden as much as possible and find out what’s right for you.

When college financial aid isn’t enough, people use federal or private student loans to help cover costs. Private student loans can also close gaps between what you qualify for and how much you need. We’ll compare student loans vs financial aid and explore some features that can help you determine what makes the most sense for your financial situation.

What Is Financial Aid?

Financial aid is funding that is available to students to help make college or career school more affordable. College financial aid comes in several forms and helps students pay for higher education expenses, including tuition and fees, room and board, books and supplies and transportation.

Here are several types of financial aid available to students:

•   Scholarships: A scholarship is a form of financial aid that’s awarded to students to help pay for school. Scholarships are typically awarded based on academic or athletic achievement, community involvement, job experience, field of study, financial need and more.

•   Grants: A grant is a form of financial aid that doesn’t have to be repaid and is generally based on financial need.

•   Federal work-study programs: The federal work-study program offers funds for part-time employment to help eligible college students in financial need.

•   Federal student loans: Student loans are borrowed money from the federal government or private lenders to help pay for college.

Financial aid can come from federal, state, school, and private sources. Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the U.S. Federal aid is distributed to 13 million students each year, totaling $120 billion.

Recommended: Am I Eligible for Work-Study?

What Are Student Loans?

A student loan is money borrowed from the government or a private lender to help pay for school with the expectation that you will pay it back. Like most other types of loans, the amount borrowed will accrue interest over time. Student loans can be used on school-related expenses including tuition, room and board, and other school supplies.

Loans are different from grants or scholarships and it’s essential that you understand the differences between financial aid vs student loans. If you receive a grant or a scholarship, you typically don’t have to pay that money back. Student loans are also different from work-study programs, where students in financial need to work part-time jobs to earn money to help pay for school.

It’s common for college students to take out student loans to finance their education, but you should first compare federal vs private student loans. Federal student loans offer some borrower benefits that make them preferable to private student loans.

Federal Student Loans

Federal student loans are loans that are backed by the U.S. government. Terms and conditions of the loan are set by the federal government and include several benefits, such as fixed interest rates and income-driven repayment plans. To qualify, students must fill out the Free Application for Federal Student Aid (FAFSA®) every year that they want to receive federal student loans. The FAFSA also allows students to apply for federal aid including scholarships, grants, and work-study. Colleges may also use the information provided on the FAFSA to determine school-specific aid awards.

There are four types of federal student loans available:

•  Direct Subsidized Loans are student loans for undergrads in financial need to help pay for expenses related to higher education. The government covers the accruing interest on this type of loan while the borrower is enrolled in school at least half-time and during the loan’s six month grace period after graduation.

•  Direct Unsubsidized Loans are made to eligible undergraduate, graduate and professional students. Eligibility is not based on financial need. Borrowers are responsible for all accrued interest on this type of loan.

•  Direct PLUS Loans are made to graduate or professional students, known as the Grad PLUS loan, or parents of dependent undergraduate students, known as the Parent PLUS loan. These loans are meant to help pay for education expenses not covered by other financial aid.

•  Direct Consolidation Loans allow students to combine all eligible federal student loans into a single loan.

Private Student Loans

Private student loans can also be used to help pay for college. Private student loans are offered by banks, credit unions, and online lenders. Understanding how private student loans work is essential before borrowing. While federal student loans are generally the first option potential student borrowers pursue, private student loans may be an option to consider for borrowers who are trying to pay for college without financial aid. Unlike federal student loans, which have terms and interest rates set by the federal government, private lenders set their own and conditions that vary from lender to lender.

Private student loans are also credit-based. The lender will review an applicant’s credit history, income and debt, and whether they’re enrolled in a qualified educational program. Applicants who may lack credit history, or have a less than glowing credit score may consider applying with a cosigner to improve their chances of approval.

Unlike federal student loans, interest rates can be fixed or variable. A fixed interest rate stays the same for the life of the loan but a variable interest rate may change. The interest rate a borrower qualifies for will also depend on the lender as well as the borrower’s creditworthiness.

Not all private student loans are the same. Because of this, it’s important that you understand the annual percentage rates (APRs) and repayment terms before taking on the loan.

Financial Aid vs Student Loans Compared

When comparing financial aid vs student loans, you need to be aware of the similarities and differences between financial aid vs student loans. Here are some key comparisons.

Similarities	Differences
They can both be used to help fund education-related expenses.	Financial aid doesn’t typically need to be repaid. Student loans must be repaid within a given loan term, plus interest.
FAFSA® must be filled out for financial aid and federal student loans.	Financial aid and student loans may be paid out differently.
Financial aid and student loans have certain eligibility requirements.	Some financial aid, like scholarships, may be awarded based on merit. Federal student loans can be both need and non-need based. Lending criteria on private student loans is determined by the lender.

Similarities

Financial aid and student loans are both used to help fund education-related expenses, like tuition, room and board, books and classroom supplies, and transportation. Financial aid and student loans backed by the federal government also require students to fill out FAFSA® for each year that they want to receive federal student loans or federal financial aid. Financial aid and student loans also have some sort of eligibility requirements, whether that be based on financial need, merit or creditworthiness.

Differences

The biggest difference between financial aid vs student loans is whether or not you need to pay back the money you are given to help pay for college. Financial aid is either money that doesn’t need to be paid back, known as gift aid, or earned through a federal work-study program.

Student loans must be repaid within a given loan term. Not only are students expected to pay back student loans, but there’s typically interest that accrues over the life of the loan.

There may also be differences in how financial aid and student loans are paid out to the student. Private student loans are usually paid in one lump sum at the start of each school year or semester; however, you may not receive the full amount of a scholarship award upfront. Government grants and loans are generally split into at least two disbursements and If you have a work-study job, you’ll be paid at least once a month.

Some private student loans may also come with greater flexibility and offer more money than financial aid.

Recommended: Gift Aid vs Self Help Aid For College

Pros and Cons of Financial Aid

Pros of Financial Aid

•  Money received through financial aid does not typically have to be repaid.

•  Potential to decrease future debt by minimizing the amount you have to borrow.

•  Opens up new opportunities for many students to attend a better school than they could without financial assistance.

•  Allows students to focus on their education instead of worrying about paying tuition.

Cons of Financial Aid

•  Most financial aid does not cover all school-related costs.

•  Scholarships, grants, and work-study programs can be highly competitive.

•  You may have to maintain certain standards to meet eligibility requirements during each semester.

•  There’s less flexibility on how you can spend funds.

Pros and Cons of Student Loans

Pros of Student Loans

•  Student loans offer financial support for those who would otherwise be unable to attend college.

•  You don’t need any credit history for federal student loans and you can use a creditworthy cosigner for private student loans.

•  Student loans can be used for things beyond tuition, room and board, and books.

•  Paying off student loans may help you build credit.

Cons of Student Loans

•  You start off with debt after graduating from college.

•  Student loans can be expensive.

•  Defaulting on student loans can negatively impact your credit score.

•  If you borrowed a private student loan, the interest rate may be variable.

Private Student Loans from SoFi

Financial aid and student loans financially support students by relieving some of the financial burden that’s often associated with higher education. When financial aid isn’t enough, students may seek private student loans to help cover their college costs. Although private student loans don’t come with as many perks as federal student loans, and are generally borrowers only as a last resort option as a result, they can help fill in the gaps between what you qualify for and how much you need.

Private student loans from SoFi can help serve as a supplement to federal aid. SoFi student loans offer plenty of benefits, such as no origination fees, no application fees, no late fees, and no insufficient fund fees. You can find out if you pre-qualify within minutes.

Learn more about private student loan options available with SoFi.

FAQ

Does FAFSA loan or grant money?

FAFSA is an application that you fill out in order to determine your eligibility for receiving a federal loan or federal student aid such as grants and scholarships. While a federal student loan is borrowed money that must be repaid after graduation, funds received through grants, scholarships, and work-study programs do not need to be repaid.

Can you get financial aid and student loans at the same time?

Yes. If you apply for financial aid at your school, you may be offered loans as part of your school’s financial aid offer to help cover the remaining costs.

Do scholarships count as financial aid?

Yes, scholarships are a type of financial aid that is considered gift aid and typically do not have to be repaid.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Middle-class families today don’t make nearly enough money to afford full college tuition. In fact, many qualify for a significant amount of need-based financial aid.

This scenario is so common that some small, private colleges are beginning to “reset” their tuition prices to reflect what students actually end up paying after receiving financial aid, according to a New York Times report in Dec. 2022. For example, New Hampshire private school Colby-Sawyer dropped its published tuition from about $46,000 to $17,500.

Colby-Sawyer and other colleges are acknowledging what many parents and students already know. Plenty of middle-class kids who go to college don’t pay anywhere near the “sticker price.” Keep reading to learn how your family can maximize its financial aid with the help of a resource called the Common Data Set.

Stuck in the Middle

When you look at published tuition numbers, the cost of higher education has been rising at an astonishing pace over the past 20 years. But the amount that students actually pay is less than it was a decade ago, according to the College Board’s Trends in College Pricing report.

For the 2022-23 school year, students enrolled in private nonprofit colleges paid tuition and fees of $14,630 on average. Yet the sticker price for those institutions was much higher: around $39,400. Similarly, in-state tuition and fees at a public four-year college or university averaged $2,250 for 2022-23, compared to the published price of $10,950.

Even discounted college prices are substantial. Coming up with $60,000 for four years at a private college for one child is still a huge burden. Keep in mind that number includes tuition and fees only, not room and board.

Even with grants and other financial aid, many parents can’t afford the cost of college. At the same time, their earnings are too high to qualify for more need-based aid. College savings for kids can also be hampered by parents’ own federal and private student loans and other financial obligations, such as a mortgage or caring for aging grandparents.

If you’re feeling caught in the middle, know that resources are available to help make college tuition more affordable for your family. Here’s what to look for.

The First Step: Understanding Financial Aid

To maximize the amount of tuition help you get, you need to know how and when to apply for financial aid, the different types of aid, and especially how schools award that aid.

Financial aid can come from federal and state governments, colleges, and private organizations. Some help comes in the form of loans, which have to be paid back. Grants, scholarships and work-study programs do not have to be repaid.

Broadly, there are two types of financial aid: need-based and merit. Let’s take a closer look at both.

Need-Based Aid

Need-based aid is money students receive to help pay for college based on their financial situation.

How much need-based aid you get is largely determined by the information you submit on the Free Application for Federal Student Aid (FAFSA). Aid provided by the state and your college or university is also largely determined by FAFSA information.

Federal need-based aid includes subsidized government loans, Pell Grants, and work-study programs.

Then there’s need-based aid that colleges provide independently of federal financial aid. Many private colleges meet full financial need for admitted students without any loans. This aid is sometimes awarded to families with household incomes well over $100,000. Some colleges come very close to meeting full need, and many colleges will consider requests for more aid from admitted students.

Recommended: FAFSA Guide

How Colleges Calculate Your Need

Most colleges calculate aid based on the information you provide in the FAFSA each year. Factoring in your income and financial obligations, the government calculates your Expected Family Contribution, or EFC. (Starting with the 2023-24 academic year, the EFC will be renamed the Student Aid Index, or SAI.)

The EFC (or SAI) is the amount the government formula determines you can afford to pay for one year of college based on parent and student income, assets, number of dependents, number of children in college, and more. After you submit your FAFSA, you’ll see your EFC number in the confirmation email you receive.

Colleges use the EFC as a reference point, but are not obligated to stick to it. The colleges your student is accepted to may determine that your responsibility is higher than the EFC.

But need-based aid isn’t the only game in town. There’s also something called merit aid, or non-need aid, in the mix.

Recommended: FAFSA 101: How to Complete the FAFSA

What Is Merit Aid?

Merit aid consists of grants and scholarships that are awarded based on something other than financial need. It’s often given for academic, athletic, artistic, or other special interests. Merit aid does not need to be paid back, and it may or may not be renewed each year, depending on the award.

As you may guess, merit aid is far more subjective than need-based aid. During your student’s college search, it’s helpful to know these general trends in merit aid.

Which Schools Award Merit Aid?

Private and high-priced colleges usually award more merit aid than public state schools because of their larger endowments. One exception: Ivy League schools do not grant merit aid.

If your student plans to attend a public college or university out of state, you will likely face higher tuition. But attractive candidates may also be awarded more merit aid to help compensate for those extra costs.

Finally, state school honors programs can come with tuition discounts or academic scholarships.

Recommended: How To Get Merit Aid for College

What Is the Common Data Set and How Can You Use It?

One way to dispel the mystery around how colleges award financial aid is to understand the Common Data Set. The CDS is a standard set of data that schools collect about admissions, student demographics, faculty demographics, financial aid, academics, and campus life. Schools send the data to publications and organizations that rank colleges and universities.

The New York Times calls this data a “rich trove” about campus life and college finances. Most schools post their CDS on their website.

Not every school can meet every family’s full need for tuition. That’s where the CDS comes in: It can tell you how much need, on average, a school is able to meet and how many students receive need-based and merit aid. You and your student can then prioritize schools that either meet the most student need or award the most merit aid regardless of need.

How to Find the CDS

Most schools post their CDS data on their website. Often the best way to get to the data quickly is to type the name of the university and “Common Data Set” in your search engine. You’ll likely come up with a link to a PDF.

Try not to be overwhelmed by the length and less-than-reader-friendly format. As you scroll through, you’ll find lots of useful information on all aspects of admissions and campus life. If you’d like to get straight to the information about financial aid, skip to section H2. This will tell you how much need, on average, a school is able to meet and how many students receive all types of financial aid.

Why Some Schools Don’t Want You to See the CDS

You may discover in your search that some schools don’t post their CDS. That can be because they don’t want families to know they got a below-average aid offer, or they don’t want the public to know how many or few people are paying full price.

As efforts continue to encourage full disclosure and diversified, equitable student bodies across the country, the number of schools that don’t post this information is dwindling.

How You Can Fill the Gap

Even as savvy parents exhaust all sources of need-based and merit aid, you may find that you’ll still have to pay for some college costs. Here are some additional resources that may be available.

Scholarships

Scholarships are available for all types of students in virtually every area of study. Scholarship money, which does not have to be paid back, can be found through nonprofit groups, corporations, state governments, and community organizations, to name just a few. Start your search with SoFi’s scholarship search tool.

Federal Grants

•   Pell Grants. You do not have to pay back Pell Grants. They are awarded based on financial need to low-income families.

•   Work-study grants. As the name implies, these grants allow students to work at various part-time jobs at or around campus. You do not pay federal taxes on earnings from work-study programs.

Federal Student Loans

•   Subsidized Direct Loans. The government pays the interest on subsidized loans while you’re in school, during grace periods, and during periods of deferment. Interest rates are usually lower than private student loans, and there is usually a cap on how much you can borrow. You can learn more in our look at subsidized vs. unsubsidized loans.

•   Unsubsidized Direct Loans. These are not awarded based on financial need, but students with need often use them. Because the loan is “unsubsidized,” the principal will accrue interest while you’re in school. You may make interest-only payments during that time, but you’re not required to do so. If you don’t, the interest that accrued is added to the principal amount of your loan.

•   PLUS loans. Direct PLUS loans are fixed-interest rate loans available to parents of undergraduate, graduate, and professional degree students to help pay for tuition. They are not subsidized.

Private Student Loans

Once you’ve exhausted need-based and merit aid, you may find you still have some costs of attendance to cover. That’s where private student loans come in. The details vary, because terms and criteria will depend on the individual lenders and borrowers. SoFi offers no-fee private student loans for a variety of situations. You can find out more in our look at private vs. federal student loans.

The Takeaway

Middle-class families can often feel “caught in the middle” of the college financing situation. They earn too much to qualify for enough need-based aid but not enough to pay for all college costs. To maximize your financial aid award, it helps to know how and when colleges award their aid. First, use the Common Data Set to help you prioritize schools that award more need-based or merit-based aid. Then complete the FAFSA each year your student is in school. Also make sure to search for state and private scholarships that are not tied to the FAFSA.

SoFi private student loans can help families fill the gap between financial aid and the cost of attendance. There are never any fees: no origination fees, no late fees, and no insufficient-funds fees. And the application process takes just 3 minutes online.

FAQ

What income qualifies for need-based financial aid?

There’s no income cap for financial aid. Your need is determined by information you provide in the Free Application for Federal Student Aid (FAFSA) about your assets and financial obligations. Many families making six figures qualify for need-based aid.

Can middle-class families get financial aid?

Absolutely. It’s not unusual for families with annual income above $100,000 to receive financial aid.

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Photo credit: iStock/jacoblund

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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