Most people are familiar with student loans, as student loan forgiveness has been a contentious subject in the news recently. However, student loans are not the only type of student financing available. The Free Application for Federal Student Aid, also known as the FAFSA is another type of educational financing that can help students pay for higher education. The FAFSA is incredibly common for those who have plans to attend a college, career school, or university. In fact, over half of all high school seniors completed the FAFSA in 2023.

Despite this, many prospective and current students overlook the various federal grants that are awarded to students in need each year.

While the net costs of college impact families differently, it's important for students to take advantage of every possible opportunity for aid.

Wealth Enhancement advisors can help you plan for educational expenses.\

Don't take it for granted: Grants vs. Loans

Federal grants are different from loans. Loans are borrowed money, and must be repaid with interest. Grants, on the other hand, are essentially a gift. There's no need to repay—unless certain conditions aren't met.

However, these more favorable "terms" come with stricter eligibility requirements. While loans are available to most students, grants are typically based on financial need.

Now that you're familiar with the basics, let's explore the most common types of federal grants for education.

Types of Student Grant Programs

The Department of Education offers multiple aid packages as part of the Federal Student Grant Program. The following three are granted most often, and each has different requirements for eligibility. The following information applies to the 2024-2025 academic year:

• Federal Pell Grants. With a maximum award of $7,395, Pell Grants are typically reserved for undergraduate students who have exceptional financial need and have not earned a bachelor’s, graduate, or professional degree yet. Under certain circumstances, such as summer school, an eligible student can receive up to 150% of their Pell Grant award for a single award year.
• FSEO Grants. On top of the Pell Grant, Federal Supplemental Educational Opportunity Grants award a maximum of $4,000 to those who demonstrate exceptional need and have not yet earned a bachelor’s or graduate degree. FSEO Grants give priority to Pell Grant recipients over other applicants.
• TEACH Grants. Teacher Education Assistance for College and Higher Education Grants award a maximum of $3,772 to students in teaching preparation programs. Recipients must also agree to teach for a minimum of four years at the elementary or secondary school level in a high-need field.

Do you need to complete the FAFSA for Federal Grants?

Yes, you need to complete the FAFSA to be awarded a federal grant, because any grant recipient must have a FAFSA application on file with the Department of Education. So, no matter who you are or your financial situation, you may want to consider submitting a FAFSA—and remember to fill it out again every year you're in school!

Reasons You May Need to Repay a Federal Student Grant

While they're essentially "free money," grants do come with a few strings attached. The following points explain under which circumstances you might need to repay your grant:

• Withdrawal from program. If you withdraw from your educational program early, you may have to repay the portion of the grant you received for the time you are not enrolled.
• Change in enrollment status. If you reduce your course load from full-time to part-time, your eligibility could change, which may require you to repay some of your grant.
• Non-completion of requirements. Some grants, like the TEACH Grant, convert into a loan if you don't meet the specific service obligations. These cases are rarer, and should be made clear to you when you receive the grant.

Incorporating Education into Your Greater Financial Plan

Federal grants can reduce the upfront costs of education, and minimize future debt by precluding the need for loans. Incorporated with the right strategy, this extra flexibility can augment your financial future, both during school and beyond.

If you're wondering how to plan for your own or your child's education, you're in the right place. Schedule a free, no-obligation meeting with a Wealth Enhancement financial advisor today and take the next step towards a robust financial strategy.