Financing higher education: Scholarships, grants, and financial aid

Financing higher education: Scholarships, grants, and financial aid

As college expenses increase, financial aid has become a lifeline for most students and families. According to Experian, for the 2024-2025 school year, tuition and fees ranged from $11,610 at in-state public colleges to $43,350 at private nonprofits. When you factor in housing, meals, and supplies, the total price tag drastically increases, with some students paying as much as $62,990 a year.

Scholarship Institute breaks down how to find and maximize financial aid for college.

Understanding the current cost of higher education

College costs are rising. The Education Data Initiative reports that in 2025, the average in-state public tuition was $9,750. Out-of-state students paid roughly $28,386, and private nonprofit tuition cost $38,421. For 2024-2025, Bankrate tracked costs as high as $62,990 at private schools.

Beyond tuition: total cost breakdown

Tuition is only part of the story. When you include housing, food, books, supplies, and transportation, the numbers look like this:

• $27,146 for in-state students
• $45,708 for out-of-state students
• $58,628 at private nonprofits

Community college is cheaper, but not free. According to Education Data Initiative, in-district tuition averages $3,598, with a total yearly cost of around $17,439.

Types of financial aid available

Federal financial aid

Grants don't need to be repaid. For 2025-2026, the maximum Pell Grant is $7,395. Students can also borrow federal loans, including:

• Subsidized Stafford Loans, which don't accrue interest while a student is in school.
• Unsubsidized Stafford Loans, which do.

Borrowing limits range from $5,500 for undergrads to $20,500 for grad students.

State-specific aid

States have their own programs. For example:

• California: Cal Grant (based on GPA + need)
• New York: TAP for in-state residents

Institutional aid

Colleges often offer need-based or merit-based scholarships. One example is the University of California's Blue and Gold Plan, which covers tuition for families earning under $100,000.

The FAFSA: Your gateway to aid

Key changes for 2025-2026
The FAFSA form is shorter — just 36 questions. The Student Aid Index replaces the old EFC. Students are now required to use the IRS data retrieval tool. Students also learn Pell Grant eligibility earlier.

Timeline and application process

The FAFSA opens October 1, 2025, for the 2026-2027 school year. The federal deadline is June 30, 2026, but most states and colleges set much earlier deadlines, often in February or March.

Step-by-step FAFSA guide

1. Create FSA IDs for the student and a parent.
2. Gather tax and banking documents.
3. Complete FAFSA online.
4. Submit early — don't miss priority deadlines.
5. Review the Student Aid Report and fix any errors.

Scholarships: Merit-based and need-based

Types of scholarships

• Merit-based (including but not limited to academics, athletics, and arts)
• Need-based (generally income-driven)

Top awards include the Marshall Scholarship (up to $85,000) and Rhodes Scholarship (up to $250,000).

Scholarship strategies for 2025

• Apply to at least 10-15 scholarships.
• Use scholarship search tools and school counselors.
• Focus on local awards — there's less competition.
• Start early, tailor your essays, and proofread carefully.

Work-study and student employment

Federal work-study benefits

This program offers part-time jobs with flexible hours. The best part? The money earned won’t count against future aid eligibility. Most students work 10–15 hours per week.

Common work-study jobs:

• Library aide
• Admin support
• Tutor
• Cafeteria staff

Some schools also offer roles in research, media, or tech support. Apply early, and pick jobs aligned with your career interests. Try to limit hours to 10–20 per week to stay focused on academics.

Student loans: Federal vs. private

Federal loan benefits

Federal loans come with fixed interest, income-driven repayment plans, and forgiveness options. Most don’t require a credit check or cosigner.

When to consider private loans
Students should consider private loans only after exhausting all other options. Private loans often need cosigners, carry variable rates, and lack the flexibility of federal loans.

Maximizing financial aid

• Smart financial planning: Student assets weigh more heavily (20%) in FAFSA calculations than parent assets (5.64%). Moving funds into retirement accounts can help.
• Timing matters: Submit the FAFSA as soon as it opens on October 1. Many programs are first-come, first-served.

Alternative funding sources

Non-traditional options:

• Income-share agreements (ISAs): Pay a percentage of future income instead of borrowing.
• Employer assistance: Some jobs offer tuition support.
• Crowdfunding: Try GoFundMe or local community grants.

Top ways to cut costs:

• Start at community college.
• Establish in-state residency.
• Live at home or off-campus.

Special cases

• First-generation students: Many colleges offer mentoring and transition support.
• Non-traditional students: Adult learners or career changers should check how part-time status affects aid.
• International students: Federal aid isn't available, but institutional scholarships and private loans may help.

College financial aid timeline and action plan

Junior Year:

• Research colleges, compare costs, and start a scholarship list.

Fall senior year:

• Submit FAFSA, apply to schools and scholarships.

Spring senior year:

• Review aid offers, appeal if needed, and finalize your decision.

After graduation:

• Plan for loan repayment, look into forgiveness programs.

Common mistakes to avoid

Application errors:

• Missing key deadlines
• Inaccurate financial info
• Generic or weak essays
• Incomplete or sloppy submissions

Strategy fails:

• Assuming you won't qualify.
• Ignoring small or local scholarships.
• Taking out loans first.

Conclusion

College is expensive, but planning smartly can make it manageable. File your FAFSA on time. Apply for every type of aid: grants, scholarships, work-study, and federal loans. Avoid private loans unless you absolutely need them. Start early, stay organized, and you’ll be in a better position to afford college without drowning in debt.

This story was produced by Scholarship Institute and reviewed and distributed by Stacker.