Types of Financial Aid for Grad Students

Last week we announced our new Veritas Prep Guide to Financial Aid, a free resource for new admits or anyone else who's thinking ahead and wondering how they'll pay for their graduate degree. We spend most of our time working with applicants who are stressed about just getting into school; how to pay for it is considered a "nice problem to have." Once you are faced with this problem, however, it will likely hit you like a ton of bricks, so it pays to start thinking ahead and familiarize yourself with the financial aid landscape.

The following descriptions will help students understand the various types of financial aid awards:

• Scholarships – Almost always merit-based, scholarships are "free money" awards that are generally awarded with no strings attached. Some scholarships will carry a performance condition that requires a minimum academic standing, but that is somewhat rare in the graduate school arena. Scholarships are open to all students, regardless of need, and are often used both altruistically (to help students pay for school, which is often the intent of the original donor) and strategically (to woo – through incentives and flattery alike – top admitted students).


• Fellowships – Often just another name for scholarships, fellowships are more likely to carry with them an obligation to belong to certain organizations or to pursue particular career paths. Furthermore, fellowships can often be applicable only to a narrow group of admitted students who meet specific criteria as it relates to experience, geography, or demographic information.


• Grants – Grants are also "free money" in the sense that they do not need to be repaid; however, grants are typically awarded based on level of need and not based on merit. A grant is truly a gift from schools to students so that individuals who otherwise cannot pay for their education through their own contributions and standard federal loans will still be afforded the same opportunities as those who can pay for it. Grants are often the most strategic point of an award package, where schools calculate the necessary award to induce enrollment and often restructure packages upon appeal from the students.


• Subsidized Loans – The federal government provides two kinds of loans to graduate students: subsidized and unsubsidized. Subsidized loans are the most preferable because the government pays the interest on the principal amount until a period
  (typically six to nine months) following the student's graduation date. The two most common subsidized loans are:
  
  - The Federal Stafford Loan – Up to $8,500 of the total loan (which has a maximum of $20,500) may be subsidized. Subsidized amounts are determined by unmet student need, while any student can apply for up to the full $20,500 of unsubsidized loan money. The loan carries a capped interest rate of 8.25% and a maximum repayment period of 10 years.
  
  - The Federal Perkins Loan – Up to $6,000 per year of subsidized loan money, determined by both student need and the allotment from the Perkins loan to the school in question (some institutions receive a larger allocation than others). The Perkins loan is often used in financial aid packages for students with a very high level of unmet need (known as "exceptional need"). The loan features a 5% interest rate and must be paid back to the school in question over a maximum repayment period of 10 years.
  
  Subsidized loans are available to qualified students who are U.S. citizens or permanent residents.


• Unsubsidized Loans – Unsubsidized federal loans are often confused with private loans. They are still federal loans, but unlike subsidized loans, the interest begins to accrue even while the student is in school. Payment is still delayed until after graduation, but the principal amount will already be greater than what was initially borrowed when that day comes, given the interest.


• Private Loans – Private educational loans work in the same fashion as any other private loan such as a mortgage or a car payment in that the student borrows money from a private lender at a fixed interest rate. The interest rate varies depending on the year and current lending climate but is often more competitive than other types of private loans. Most elite graduate schools are part of larger universities with their own lending relationships, which makes the process easier and can often lead to slightly better rates than one could get on the open market. Private loans are often used to cover any "gaps" in a financial aid award and also to cover the student's expected contribution.

You can download the full report for free here. If you want more help in getting into business school, law school, or medical school, call us at (800) 925-7737 and speak with a Veritas Prep admissions expert today!