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Dollars & Sense: Understanding Grants, Scholarships & Loans

By Roberta L Nestor

For those entering their senior year in high school there will be many things on your “to-do” list.  If you are college bound, your list will also include finding the best way to pay for college.  According to Sallie, the average student paid $26,226 on their college education in 2018-2019.  The good news?  Over 55% of the cost was covered by scholarships, grants, and loans.  The catch – you have to file your FAFSA forms and you can do this as early as October 1st.

Once you have completed and filed your FAFSA (Free Application for Federal Student Aid) the first communication, the student aid report, will be mailed to you.  On this report, they will tell you of the Expected Family Contribution (EFC).  The EFC is the amount of money you and your family are expected to pay.  This is subtracted from the cost of attendance.  Cost of attendance includes tuition, fees, room and board, books and supplies, and a few other incidentals.  On this report, you will also see the loans (money you will have to pay back with interest), grants (money for free sometimes with conditions), and scholarships (totally free).

There are two types of loans, government loans and private loans.  Of the two, government loans are preferable because they usually have fixed, lowered interest rates, and better repayment plans than private loans.  The Federal Government offers 3 types of loans:

  • Direct Subsidized Loans – eligibility is based on financial need. The government will pay interest while you are in school and they offer a 6 month “grace” period after graduation where you do not have to pay interest.  The current loan rate is 4.53%;
  • Direct Unsubsidized Loans – this loan is available to most students and is not based on financial need. The FAFSA application determines how much you would have available for an unsubsidized loan.  You are not required to pay interest while you are at school, however, if you do not make interest payments, the interest accrued will be added to the principal – it can build up.  Unsubsidized loans have the same current rate of 4.53%; and
  • Direct Plus Loans – eligibility is not need-based and you will need a co-signer with good credit. The cosigner will also sign a Master Promissory Note.  The interest accrued while you are in college is not subsidized and the current rate is 7.08%.

Grants are considered free money and they generally do not have to be paid back.  The most common grant is the Federal Pell Grant.  You would only have to repay this grant if you withdrew early from the program for which the grant was given.  Some grants require you to be a fulltime student, so if you change your enrollment status, you might have to pay back part of the grant.  Grants are given through the FAFSA application and eligibility is need or merit-based.  Each grant will have its own eligibility requirements.  Since the number of grants offered is limited, it is important to file your FAFSA as soon as possible.

Scholarships are absolutely free and are need or merit-based.  You can apply for a scholarship through FAFSA, however, more often than not, you have to seek out scholarships on your own.  You can start by asking your financial aid office at your high school or at your college.  Google search “scholarships in CT” to get started (be wary of scams though).  There are literally thousands of opportunities for scholarships, but you will have to be diligent.  The good news is that there is a scholarship out there for everyone.  Scholarships can be based on academic major, age, artistic or athletic ability, employer, ethnicity, gender, military affiliation, physical disabilities, race or faith – the list is endless.

The key to scholarships is to start early!  Start in your junior year, senior year and even throughout your college years.  Local businesses, cities and towns all have scholarship opportunities.  Don’t dismiss the small $100 scholarship.  A hundred dollars can be used toward books and every little bit counts.  Think of it this way, for an hour’s worth of work, applying for a scholarship could earn you $100.

Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue in Milford, CT offering retirement, long term care, investment and tax planning services.  She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser.  Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth. Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice.  You should consult a legal or tax professional regarding your individual situation.  Roberta can be reached at Nestor Financial Network, 203-876-8066 or

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