What are college grants and how do they work?

Student loans don’t have to be your first choice when paying for college. Combined, grants and scholarships cover about 29 percent of college costs for students. Even though this likely won’t cover the full cost of attendance, it can still keep you from accruing an overwhelming amount of student loan debt.

This free money is available through the federal government, a state government, colleges or third-party organizations, but is often reserved for those who exhibit financial need. Unlike student loans, they don’t have to be repaid.

College grant options

This free source of federal aid helps minimize the amount you need to borrow to fund your education. College grants are available in many forms and are often based on financial need.

Pell Grants

Federal Pell Grants are geared toward undergraduate students who have demonstrated financial need and have not earned a degree yet. However, students enrolled in a postbaccalaureate teacher certification or licensing program may also be eligible. Pell Grants do not need to be repaid, and the amount you’re eligible for can change every year.

Note that you cannot receive a Pell Grant for more than one school at a time, and you can receive this grant for a maximum of 12 school terms or six years of higher education.

Amount: Maximum of $7,395 for the 2024-25 school year.

Federal Supplemental Educational Opportunity Grant (FSEOG)

The Federal Supplemental Educational Opportunity Grant (FSEOG) program is not offered by every school. In general, these grants are awarded based on which students have the most financial need. Only undergraduates who have not yet earned a bachelor’s degree are eligible. This grant is available on a first-come, first-served basis, so interested students should fill out the FAFSA as soon as possible to be eligible.

Amount: Between $100 and $4,000 per year, depending on your financial need and how much funding your school has set aside.

Iraq and Afghanistan Service Grants

Iraq and Afghanistan Service Grants are available to students who are not eligible for a Pell Grant based on their expected family contribution (EFC) but who meet other Pell Grant requirements. To qualify, students must have lost a parent or guardian due to military service in Iraq or Afghanistan after the events of 9/11. Applicants must have also been under the age of 24 or enrolled in college at least part-time at the time of their parent’s or guardian’s death.

Amount: Varies depending on the amount of your Pell Grant award

Teacher Education Assistance for College and Higher Education (TEACH) Grant

Teacher Education Assistance for College and Higher Education (TEACH) Grants are available to aspiring teachers who meet the requirements for federal student aid and are enrolled as an undergraduate, postbaccalaureate or graduate student at a participating school. Applicants must also meet certain academic requirements, which include scoring above the 75th percentile on one or more portions of a college admissions test or having a GPA of 3.25 or higher.

Applicants must also sign a TEACH Grant Agreement to Serve, in which they agree to serve in a high-need field or teach at an eligible school that serves low-income families. Applicants must serve for at least four complete academic years within eight years of completing the course of study for which the grant was awarded.

Amount: Maximum of $4,000 for the 2024-25 school year.

Grants vs. scholarships

How are grants different from scholarships?

Both grants and scholarships are considered “gift” aid that does not need to be paid back. However, there are subtle differences between these two forms of aid.

Scholarships are usually merit-based, and they’re offered by a wide range of organizations, businesses and schools. For example, a college or university may offer full-ride scholarships to academic high achievers or talented athletes. Businesses and organizations may also offer annual scholarship opportunities to students who meet their requirements or who have unique skills or hobbies.

Meanwhile, grants are typically awarded by the federal government, individual states or the school that an applicant has chosen to attend. Grants are more likely to be given out based on financial need, meaning you may not be eligible if your family income exceeds a certain level.

Who are grants best for?

Because grants are typically based on financial need, they work best for people who would be unable to afford higher education without outside help. Unlike merit-based aid, grants prioritize those who fall below a certain income threshold. Grants are also a better starting point than student loans, which can take a decade or more to repay after graduation.

How hard is it to get a grant for college?

Getting a grant for college can be difficult if your family’s finances don’t meet the requirements. The U.S. Department of Education in particular offers three basic types of grants:

• Discretionary grants awarded to students based on a competitive process.
• Formulaic grants awarded to all students who meet set criteria without an application process.
• Grants based on financial need.

Each type of grant has its own requirements and application guidelines. The Pell Grant, for instance, is awarded only to students who demonstrate “exceptional” financial need. Earning a state-based grant can also be impossible if you’re not attending college locally. However, it’s worth filling out the FAFSA in any case; even if you don’t qualify for the largest grants, it’s possible that your college or your state will award you something smaller.

How to apply for a grant for college

Here’s how to access college grants:

• Step 1: Complete the FAFSA. Most grants for students are awarded only if you fill out the FAFSA. Since grants and other financial aid are often given out on a first-come, first-served basis, it makes sense to fill out this form as soon as possible.
• Step 2: Search for private grants. It also doesn’t hurt to check for other sources that may offer grants for college students, including your college or university and professional organizations you are affiliated with. Applying for as many opportunities as possible gives you the best chance of lowering your college costs.
• Step 3: Review your award letter. If you’re eligible for federal grants, they will appear on your award letter. Private grants may be distributed directly to the student or the university — the latter will also appear on your award letter, but you could be notified beforehand.

Bottom line

With grants, students have the opportunity to overcome financial obstacles often associated with paying for college. Even if they don’t fully cover tuition, books, fees and other college expenses, grants lower the out-of-pocket cost and keep students from taking on too much student loan debt.

If you want to increase your chances of getting grants and other types of financial aid, it’s best to complete your FAFSA as soon as possible.