Types of Federal Student Aid: Grants, Loans, and Work-Study Explained

Introduction to Federal Student Aid

Federal student aid is money from the U.S. Department of Education to help you pay for college or career school. It comes in three main forms: grants (which generally don’t need to be repaid), work-study (a part-time job), and loans (which you must pay back with interest).

Most federal aid is awarded based on financial need, but some aid depends on other factors. Your eligibility is determined by the Free Application for Federal Student Aid (FAFSA®).

• Grants: Free money for eligible students, typically based on exceptional financial need.
• Work-study: Part-time employment that helps you earn money for educational expenses.
• Loans: Borrowed money, with options that offer different benefits and repayment terms.

Sources: Federal Student Aid (U.S. Department of Education)

Pell Grant: eligibility

The Federal Pell Grant is the largest federal grant program and is generally reserved for undergraduate students who show exceptional financial need and have not yet earned a bachelor’s, graduate, or professional degree. In some cases, students in a postbaccalaureate teacher certification program may also qualify.

For the 2026–27 award year specifically, students with a Student Aid Index (SAI) of $14,790 or more generally will not qualify for a Pell Grant. You may be eligible for the maximum award if your household income falls below 175% of the federal poverty guidelines (or 225% for single-parent households), or if your parent is not required to file a federal tax return.

Pell Grants do not need to be repaid except in rare situations, such as withdrawing from a class early, and you can only receive Pell Grant funds from one school at a time.

• Eligibility: Exceptional financial need; undergraduate status (with exceptions for teacher certification).
• Important: New SAI cap of $14,790 for the 2026–27 award year.

Sources: Federal Student Aid (U.S. Department of Education), Campus

What Is Campus-Based Aid?

Campus-based aid refers to federal student aid programs that are administered directly by individual colleges and universities. Unlike other federal aid, the school determines your eligibility and the amount you receive, based on your FAFSA results and the funding available at that institution.

These programs include the Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study, and, for eligible students, certain loan programs.

• Administered by your school, not directly by the federal government.
• Funding is limited, so apply early.
• Eligibility is based on financial need as determined by the FAFSA.

Sources: Federal Student Aid (U.S. Department of Education)

Types of Campus-Based Aid

Campus-based aid includes several federal programs. The main types you may encounter are listed below.

• Federal Supplemental Educational Opportunity Grant (FSEOG): For undergraduate students with exceptional financial need, with priority given to Pell Grant recipients. Awards range from $100 to $4,000 per year, depending on need and fund availability.
• Federal Work-Study: Provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money for educational expenses.

Sources: Edvisorly, Federal Student Aid (U.S. Department of Education)

How Aid Is Awarded

After you submit the FAFSA, your school’s financial aid office uses the information to determine your Student Aid Index (SAI). The school then prepares an aid offer that lists the types and amounts of aid you can receive, including campus-based aid.

For campus-based aid like FSEOG and Work-Study, the school awards funds based on your financial need and the availability of program funds. Because these funds are limited, it’s important to complete the FAFSA as early as possible and meet any school-specific deadlines.

• The FAFSA is the starting point for all federal aid.
• Each school has its own process for awarding campus-based aid.
• Priority is given to students with the greatest financial need.

Sources: Federal Student Aid (U.S. Department of Education)

Other Federal Grants: FSEOG and TEACH

Besides the Pell Grant, federal grants include the Federal Supplemental Educational Opportunity Grant (FSEOG) and the Teacher Education Assistance for College and Higher Education (TEACH) Grant.

The FSEOG is for undergraduate students with exceptional financial need, giving priority to Pell Grant recipients. Awards range from $100 to $4,000 per year, depending on the student’s financial need and the funding available at the school.

The TEACH Grant provides up to $4,000 per year to students who agree to teach in a high-need field in a low-income area for at least four years after graduation. If that teaching obligation is not met, the grant converts to a Direct Unsubsidized Loan that must be repaid.

Both programs are campus-based, meaning the school determines your eligibility and how much you receive.

• FSEOG: Up to $4,000 per year based on exceptional financial need and available funds.
• TEACH Grant: Up to $4,000 per year for future teachers who meet service requirements.

Sources: Federal Student Aid (U.S. Department of Education), Edvisorly

Federal Work-Study: What It Offers

Federal Work-Study (FWS) is a part-time employment program that provides jobs for undergraduate and graduate students who have financial need. It allows you to earn money to help cover educational costs.

Your pay depends on your hourly wage and the number of hours you work, and the total amount you can earn is based on your financial need and the funding your school assigns to the program. If you are eligible, the federal government pays a share of your wages, and the rest is often paid by your employer.

• Part-time jobs can be on or off campus.
• Earnings are paid directly to you, not automatically deducted from your bill.
• Eligibility is determined by your FAFSA results.

Sources: Federal Student Aid (U.S. Department of Education)

Federal Student Loans vs. Grants

Loans are borrowed money that you must repay with interest, while grants are gift aid that generally doesn’t need to be repaid. Federal student loans typically offer lower interest rates and more flexible repayment options than private loans.

• Direct Subsidized Loans: For undergraduate students with financial need. The government pays interest while you’re in school at least half-time and during certain deferment periods.
• Direct Unsubsidized Loans: Available to undergraduate and graduate students; there is no financial need requirement, and you are responsible for paying all interest that accrues, even while you’re enrolled.
• Direct PLUS Loans: For graduate students and parents of dependent undergraduate students. These require a credit check.

Sources: Federal Student Aid (U.S. Department of Education)

How Grants Are Awarded Through the FAFSA

All federal grants, work-study, and most federal loans require you to complete the Free Application for Federal Student Aid (FAFSA). Your school uses the information you provide to calculate your Student Aid Index (SAI), which replaces the old Expected Family Contribution (EFC).

Your school’s financial aid office then prepares an aid offer that lists the types and amounts of aid you can receive. Priority is given to those with the greatest financial need.

• File the FAFSA as early as possible to maximize your aid.
• Check with your school for specific deadlines.
• Grants are applied to your student account, and any remaining funds are given to you to pay for other expenses.

Sources: Federal Student Aid (U.S. Department of Education)

Scholarships vs. Grants: Key Differences

Scholarships and grants are both types of gift aid, meaning they do not usually need to be repaid. The main difference is how they are awarded: grants are generally based on financial need, while scholarships are often based on academic merit, athletic ability, or other talents, and may come from private organizations, states, or colleges.

• Grants: Mostly need-based, funded by the federal government, states, or schools.
• Scholarships: Can be merit-based or need-based, offered by many organizations.
• Federal grants require FAFSA; scholarships may have separate applications.

Sources: Federal Student Aid (U.S. Department of Education)

Where to Find Legitimate Scholarships

Scholarships can come from many sources, including your college, private foundations, and community organizations. Always check the official website of the scholarship provider to confirm it’s legitimate before applying. You can also search using free scholarship databases.

• Start with your college’s financial aid office.
• Search trusted national scholarship databases.
• Never pay to apply for a scholarship.

Tips to Maximize Grant and Scholarship Aid

To maximize your grant and scholarship aid, do the following: complete the FAFSA as soon as it becomes available, meet all deadlines, and research and apply for scholarships early. Also, consider applying to schools that meet a higher percentage of financial need.

• Submit the FAFSA as early as possible.
• Apply for scholarships throughout the year, not just in the fall.
• Re-apply for scholarships each year you’re in college.