One of the biggest questions on the minds of high school seniors is, "How do grants work?" The main difference between a student loan and a grant is that loans must be repaid after college, sometimes with high interest. Even a small grant is worth the minimal effort that it takes to apply for this free money. Nobody wants to graduate from college with a ton of student loan debt.

Paying for School

College can be a very expensive experience. Most students pay for their education through a combination of personal savings, part-time employment, family contributions, grants, scholarships and work-study jobs. Some students only qualify for loans from the government or through a private lender. Eligibility for a grant is usually tied to family income. The most common grants are government appropriated need-based awards. Scholarships are more likely to be based on merit, but financial circumstances are often taken into consideration in the selection process.

How Does Grant Money Work?

Grant money is part of a financial aid package that is awarded to eligible students directly or through a pass through grant. For instance, the Federal Pell Grant is a popular direct grant awarded to low-income or disadvantaged undergraduate students. The federal government issues funds directly to the student through the school. Federal Pell Grants can either be applied to the student's account or sent directly to the student. By contrast, a pass-through grant can be received when the state applies for it to the government, and it is then passed back to the state, and then to the student.

Applying for a Grant

When trying to understand how do grants work for college, you should start by reading up on the Free Application for Federal Student Aid (FAFSA). To apply for financial aid, including grants, you can complete the FAFSA in print form or through the FAFSA website. To complete a FAFSA form, you will need to answer several questions related to personal and family income and assets. Eligibility for a grant is calculated by factors such as the estimated cost for attendance, estimated family contribution, number of family members attending college and enrollment status.

Receiving the Grant

Once your FAFSA form has been processed, a Student Aid Report (SAR) is sent to you. This will indicate how much financial aid the government is willing to offer you. The SAR is also sent to your school. After your school receives the SAR and you have started classes, the grant will be disbursed in one of three ways: it will be credited to your school account, you will be paid directly by check or direct deposit, or some grant money will go to the account and you will receive the rest. Students receive the grant money directly from their school, not the government.

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