Do You Have to Pay Back FAFSA/Financial Aid?

Navigating the college financial aid process can be as tricky as the admissions process itself. What does FAFSA do? What types of awards will you receive? And do you have to pay back your financial aid?

Keep reading to find out what exactly financial aid is, the types that are available to you, and which ones you need to repay.

What is the FAFSA?

First, if you’re planning to apply for financial aid, you need to know what the FAFSA is. The Free Application for Federal Student Aid (FAFSA) is a document prospective and current college students must complete to receive government financial aid to help pay for their education. In addition to the federal government, most states and individual colleges use the information you’ve provided in the FAFSA to determine their own awards.

To complete the application, you’ll need your family financial information. Because many high school students are not self-supporting, you’ll need your parents’ tax returns, bank statements, and other information that attests to their finances and you own.

So, you will not need to “pay back FAFSA” because it’s a document you need to submit. You may, however, need to pay back some forms of financial aid you receive. Let’s go over the different types of aid and how they work. 

Different Types of Financial Aid

Need-Based Aid

Need-based financial aid is awarded based on your financial need. When you are informed about your financial aid package from a particular school, it will typically be broken down into the following components:

• Grants: These are government or institutional awards that you don’t have to pay back. There are different types of federal grants, such as the Pell Grant, which is awarded to students from low-income families. Most of the grants you receive are likely going to be from the college itself, however.
• Work-study: Work-study programs allow students to work in part-time jobs as part of their financial aid.
• Loans: Loans for college are usually low-interest and must be paid after you graduate according to a specific timetable. You may receive federal or institutional loans.

Merit-Based Aid

Merit-based financial aid is awarded based on talent rather than need. Colleges and outside organizations offer these scholarships to help students pay for their education, and students do not need to pay them back. There are many different types of scholarships targeted to specific skills, career paths and majors, and demographics.

Different Types of Loans

Private vs. Federal

Federal student loans are funded by the federal government and typically have more flexible terms. Meanwhile, private loans are awarded by institutions like banks, credit unions, or schools.

Subsidized vs. Unsubsidized

Subsidized loans are only available to undergraduate students who demonstrate financial need to fund their education. While you’re in school, the federal government pays interest on these loans, provided you’re attending at least part-time. You must, however, begin paying interest once you graduate. 

Meanwhile, unsubsidized loans are available to undergraduate, graduate, and professional students. Financial aid is not a prerequisite for obtaining an unsubsidized loan, and students must cover the interest, including when they’re in school.

There are limits on how much you can borrow for each type of loan, and these are lower for unsubsidized loans.

How Does Loan Repayment Work?

After you graduate or drop out of school (or if you decrease your enrollment status to less than part-time), you must begin repaying your loans. With some types of loans you have a several-month grace period.

Your repayment plan depends on the type and amount of your loans, among other factors. You can choose a payment plan that works best for your circumstances. While other plans may give you more time to pay back your loans, under the Standard Repayment Plan, you’ll repay them within 10 years and end up paying the least amount of interest than with other plans.

For the most part, you’ll make payments on a fixed schedule. (For the Standard plan, this is monthly.) You’re always welcome to pay more than the minimum amount that’s due at each increment, which will help you repay your loans sooner and save you money on interest in the long run.

Typically, you’ll make your payments directly to the lenders (check with your institution if you’re not sure where to send the money).

Do You Need Loans to Pay for College?

You can absolutely pay for college without student loans. The most effective ways to make this happen are to:

• Maximize your savings by starting to save early and using a 529 plan.
• Research schools that typically offer generous financial aid, such as colleges that meet 100% of demonstrated need.
• Apply to less selective colleges where you have a particularly strong profile, which will increase your chances of securing merit scholarships.
• Make sure you submit your FAFSA on time and complete it correctly. 
• Work a part-time job during college through work-study or on your own.

Another option is to start your education at a community college, which is far cheaper than most four-year colleges (in some cases, it’s free). Then, you can transfer to a four-year institution and graduate with that degree, while still saving money over the first two years. 

Once you receive your financial aid package, you can also try negotiating with colleges. Many colleges have some wiggle room in their budgets and may offer you more aid to win you over. To streamline the process, we created our Advocate tool, which will facilitate the negotiation process with your top two colleges. After you upload your financial aid offers, the two colleges will see the competing offer, and often come back to you with a better aid package.

If the financial aid process seems complicated to you, you’re not alone. Fortunately, CollegeVine is here to help you navigate it. Through our college search tool, you can learn your estimated cost of attendance based on your family income. Our chancing engine also provides estimates of your financial aid and merit scholarships, taking into account your financial information and the strength of your profile. Sign up for your free CollegeVine account to get started!