Skip to main content

Financial aid

Thinking about scholarships, grants, and loans can make your head spin. Find out what they are and how they can affect your college plan.

Determining your federal financial aid

For some families, financial aid is a major source of money to help pay for college.

Federal financial aid comes from the U.S. government and includes grants, loans, and work-study programs. This kind of aid is "need based," which means it depends on your income and assets.

To apply, you'll fill out a Free Application for Federal Student Aid, or FAFSA. Many schools also use the FAFSA to decide how much, if any, financial aid they'll give you. So you should plan to fill one out even if you don't think your family will qualify for federal aid.

You can get an idea of how much federal aid your child might qualify for using the calculator below.

How America pays for college

A visual showing the breakdown of how families pay for college based on borrowing, income and savings, and money from grants, scholarships, and family.

Source: How America Pays for College 2014: A national study by Sallie Mae and Ipsos. Numbers are rounded.

Financial aid types: What are they?

Some kinds of college financial aid are based on need, and some on merit (for example, a music scholarship or a grant that's awarded based on community service).


Grants are "free money" that doesn't have to be paid back. Need-based grants are available as part of a federal aid package. You can also apply for grants from private organizations.


Scholarships also don't have to be paid back. Some scholarships cover multiple years and could be lost if your child doesn't meet a required grade point average, for example.

Scholarships could be part of a college's aid package, and you can also apply for scholarships from private organizations.

Work-study programs

As part of a federal aid package, your child could qualify for a work-study program, which gives him or her paid employment through the college during the school year.

Student loans

Need-based student loans for both parents and students are available through the federal aid program. Student loans are also available through private loan providers.

Loans may seem like a great source of college money, but unlike other types of financial aid, they must be repaid, with interest. They should be used as a "last resort."

Tax credits

Though they aren't technically part of the federal financial aid program, you may qualify for tax credits during the years in which your child attends college. The American Opportunity Tax Credit gives you a credit of up to $2,500 for up to 4 years of school, while the Lifetime Learning Credit gives you a credit of up to $2,000 during the years in which your child attends school.

Note that you can't take both credits in the same year.

Handy tools

You're planning to put money away for their future, but how do you know if you're saving enough?

Tips for grandparents

Learn some smart tips on giving the child you love a head start on college.

The Vanguard 529 Plan

Discover the many benefits of our premier college savings plan.


Layer opened.

How America pays for college

This visual shows that on average, of the money used to pay for college in 2014, 31% came from grants and scholarships, 30% came from parent income and savings, 15% came from student borrowing, 12% came from student income and savings, 7% came from parent borrowing, and 4% came from relatives and friends.

Source: How America Pays for College 2014: A national study by Sallie Mae and Ipsos. Numbers are rounded.