If you’re planning on attending college, you may be worried about the cost — and with good reason. With rising tuition and room and board fees, the majority of college graduates leave school with student loans.
However, you can reduce the need for loans by taking advantage of free money to pay for school, also known as gift aid. You can even combine different types of gift aid to pay for college, offsetting your expenses.
Student loans vs. gift aid
A recent survey found that student loans and parent loans cover approximately 20% of undergraduates’ education costs, whereas scholarships and grants covered approximately 25% of students’ costs during the 2020-2021 academic year.
With federal and private student loans, you must repay the amount borrowed in installments over a set term with interest. While federal loans always have fixed interest rates, private loans can have variable interest rates, meaning your rate can change over time. By contrast, gift aid doesn’t have to be repaid if you continue to meet the programs’ criteria, which can help you save substantial amounts of money in the long run.
How gift aid impacts your finances after graduation
Gift aid can range in value. Depending on the source of the award, scholarships and grants can range from $500 to an amount covering the total cost of attendance. Even if you only qualify for smaller awards, they can be combined to reduce your education costs dramatically. Over time, they can help you save even more in interest charges.
To show you how powerful gift aid can be, consider this example:
When Sarah graduated, her loan balance was $35,000. She had a 5% interest rate and a 10-year repayment term. Her minimum payment would be $371 per month, and she’d pay a total of $9,548 in interest.
Jessica went to the same college as Sarah, but she was more aggressive in searching for gift aid. She received multiple scholarships and grants that allowed her to graduate with just $20,000 in student loans. If she had the same repayment term and interest rate as Sarah, Jessica’s payment would be just $212 per month, and she’d pay just $5,456 in interest.
Not only did Jessica save $15,000 by not taking out more student loans, but she also saved an additional $4,000 in interest charges since she had a smaller balance and less interest accrued. In total, we calculated that Jessica would pay over $19,000 less than Sarah, thanks to gift aid.
|Sarah||Jessica||Difference in repayment|
|Loan balance at graduation||$35,000||$20,000|
|Loan term||10 years||10 years|
|Minimum monthly payment||$371||$212||-$159 per month|
By taking advantage of gift aid, you can enjoy the following benefits during repayment:
- You’ll have more room in your budget: By reducing how much you need to borrow in student loans, you’ll have a smaller monthly payment once you graduate. A lower payment gives you more breathing room in your budget, allowing you to spend more on nonessentials, like traveling abroad or entertainment.
- You’ll have less stress: Having a large amount of debt can be incredibly stressful. By graduating with a smaller amount, you can reduce your stress since your debt is more manageable.
- You’ll have more money to save for your future: With a lower loan balance and smaller monthly payment, you can dedicate more money toward your other goals, like saving for a house or tucking away money for retirement.
Where to find free money for college
The two primary forms of gift aid are scholarships and grants. Scholarships are typically awarded based on achievements in specific areas, such as academics, athletics, or music. Grants are usually issued according to financial need.
Gift aid can come from many places, and you can combine multiple awards to lower the need for student loans. When looking for free money for school, consider the following sources:
The federal government operates four grant programs:
- Pell Grant: Designed for undergraduate students with a substantial need for financial assistance, the Pell Grant program gives eligible students up to $6,495 per year.
- Federal Supplemental Educational Opportunity Grant (FSEOG): The FSEOG program is for undergraduate students with exceptional financial need that haven’t earned a bachelor’s or graduate degree yet. If you qualify, you could receive up to $4,000 per year.
- Iraq and Afghanistan Service Grant: This grant is for students whose parent or guardian was a member of the U.S. armed forces and died due to their service in Iraq or Afghanistan after the events of 9/11. Eligible students can receive up to $6,124.79 per year.
- Teacher Education Assistance for College and Higher Education (TEACH) Grant: The TEACH program gives loans to undergraduate and graduate students enrolled in majors to prepare them to teach in elementary or secondary schools after graduation. After graduation, the loan can be forgiven if the student works for at least four years as a full-time teacher in a high-need area at a qualifying school. The TEACH Grant gives students up to $3,772 per year.
To qualify for federal financial aid, including the above grants, you must complete the Free Application for Federal Student Aid (FAFSA). It’s what the federal government, state governments, and schools use to calculate what aid you should receive.
Many states have programs to encourage residents to go to college and work within the state. For example:
- Pennsylvania: Pennsylvania residents may qualify for the Pennsylvania State Grant Program. Grants are awarded based on your family’s income as reported on the FAFSA but range from $500 to $4,525.
- Washington: The Washington College Grant is designed to help low- and middle-income families afford a college education. Depending on your income, you could qualify for a grant that covers the full cost of tuition at an eligible college or university.
You can find out if your state offers grants or scholarships by contacting your state education agency.
Most colleges operate their own gift aid programs. Depending on the school, there may be grants and scholarships awarded based on financial need or accomplishments. Awards can range from small grants that cover just the cost of textbooks to scholarships that cover the full cost of tuition.
- Duke University: Duke University awards athletic scholarships for multiple sports, but it’s best-known for its basketball team. The average athletic scholarship amount for incoming first-year students was $37,097, but only about 100 students qualified.
- University of San Diego: The University of San Diego offers multiple scholarships, including awards for talented musicians. For example, the Music Endowment Scholarship gives up to $5,000 to qualifying music majors.
- William & Mary: William & Mary offers academic scholarships to undergraduate and graduate students. Through its 1693 Scholars Program, seven elite students per year receive an award covering tuition, fees, and room and board.
Contact the financial aid offices of the colleges you’re interested in to see what institutional grants or scholarships may be available.
As part of their efforts to give back to communities, several major companies give students scholarships. For example, The Home Depot has the Orange Scholars program that gives up to $2,500 to dependents of full- or part-time hourly associates. Applicants must attend an accredited, nonprofit university.
Penguin Random House, a publishing company, offers the Creative Writing Awards program. Each year, five students can receive up to $10,000 each for college expenses. To qualify, students have to submit an original literary composition.
5. Religious institutions
If you are religious, you may be eligible for financial aid from your local place of worship or a religious advocacy organization. For example, the United Church of Christ Undergraduate Scholarship provides up to $10,000 in financial assistance to members of the church attending a four-year school.
The Islamic Scholarship Fund has multiple scholarship programs for law, journalism, politics, or film students. Through the Media Scholarship Program, eligible students can receive up to $5,000 to pay for their education.
Contact your religious leaders or a local faith-based organization to find out what scholarships or grants may be available.
6. Nonprofit organizations
Many national nonprofit organizations, including advocacy groups and professional associations, have their own scholarship programs. Depending on your intended major and location, you could qualify for an award covering a significant portion of your expenses.
For example, the Society of Women Engineers offers scholarships of varying amounts to people who identify as women enrolled in an undergraduate or graduate program in engineering, engineering technology, or computer science.
And the Outdoor Writers Association of America’s Bodie McDowell Scholarship gives up to $5,000 to students that intend to work in outdoor communications fields like photography, print, or broadcasting.
7. Labor unions
If you or one of your parents is a labor union member, you may be eligible for a grant or scholarship from that organization. For instance, the Union Plus Scholarship awards are given to union members, spouses, or dependent children. Qualifying members can receive $500 to $4,000 for college.
Contact your local union leaders to see if you are eligible for college aid.
8. Affinity groups
An affinity group can be a formal club or an informal group of people that share the same traits or identities. Affinity groups can be based on gender, race, sexual orientation, religion, language, or social class. Affinity groups provide members with a safe space to discuss relevant issues and share their experiences, and they also may provide scholarships to their members. For example:
- Hispanic Scholarship Fund (HSF): Through the HSF Scholar program, eligible students can receive up to $5,000 in scholarships. They can also benefit from career assistance, mentorship, and training opportunities.
- Chinn Scholarships for LGBTQ Atheist Activism: Students that identify as atheists and are part of the LGBTQ community can qualify for the Chinn Scholarship for LGBTQ Atheist Activism and receive up to $500 in financial aid.
- United Negro College Fund: Students enrolled in an accredited historically Black college or university (HBCU) may be eligible for the United Negro College Fund’s Frederick Douglass Bicentennial Scholarship Program. Each year, the program awards two $10,000 scholarships to exceptional seniors.
9. Banks and credit unions
Some national and local banks and credit unions operate scholarship programs, too.
US Bank gives scholarships worth up to $10,000 to students that register for its program to learn about student loans, budgeting, and other personal finance topics.
The Railroad & Industrial Federal Credit Union offers scholarships to its members graduating high school seniors or enrolled in undergraduate programs. Chosen students will receive $500 scholarships for their college education.
If you have a bank account, contact your local branch or call customer service to find out if your bank or credit union has a similar program.
10. Veteran organizations
If you or your parent served in the U.S. military, you might be eligible for free money to pay for college from veteran organizations. For instance, the Air Force Aid Society’s General Henry H. Arnold Education Grant program gives need-based awards to the dependents of Air Force and Space Force service members. Qualifying students can receive up to $4,000.
To take advantage of these programs, visit the U.S. Department of Veterans Affairs website or ask your school if it has a veterans benefits coordinator that can help you.
Other resources for finding free money for college
Utilizing gift aid will reduce how much you have to pay for your education out of your pocket or with student loans. Over time, using gift aid can help you save money and pursue your other financial goals faster.