Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate student loans to write unbiased product reviews.
- The type of aid you receive after filling out the FAFSA determines if you need to pay it back.
- Grants, scholarships, and work-study money don't need to be repaid but have finite funding limits.
- You will need to repay subsidized, unsubsidized, and Direct Plus Loans.
When you complete the FAFSA, your school may offer you any one of three types of federal loans: subsidized loans, unsubsidized loans, and Direct PLUS Loans. The interest rate on federal loans is fixed. Each of these loans needs to be repaid.
If your college costs aren't covered completely by the aid offered through the FAFSA, you may have to take out private student loans as well. You will have to pay those back, and these should be your last option as private loans often come with worse terms and protections than federal loans.
Types of assistance
You need to complete the FAFSA to determine what type of assistance you qualify for, though you don't have to accept all the financial aid offered to you.
Grants, scholarships, and work-study money are types of aid you don't need to repay. The earlier you submit your FAFSA, the more likely aid will still be available — the pool of money is finite.The FAFSA determines your eligibility for a mix of aid:
Grants: Often given based on exceptional financial need or if you belong to a designated group. There are a couple of federal grants for students with exceptional financial need: one for students who commit to teaching for four years at a low-income school, and another for students whose parent or guardian died serving as a member of the military in Iraq or Afghanistan. Learn more about types of federal grants here.
Work-Study: Often given based on when you apply, your level of financial need, and the amount of money your school has available. Work-study is a type of financial aid that provides part-time positions, such as library receptionists and research assistants, for students with financial need to earn money for academic expenses.
- Scholarships: Often given based on academic merit, athletic talent, or other achievements. Scholarships are offered through your school itself, and the amount of money available depends on the school.
Student Loans: These DO have to be repaid with interest
You can get various types of aid from the FAFSA, and you'll know what you qualify for once your school gives you your complete financial aid package. You'll need to repay some, while you won't have to pay back others.
Main types of student loans
Subsidized federal loans
Subsidized loans are given outbased on financial need. The government covers the interest on your loan while you're in school, so it doesn't accrue while you're in school or during your six-month grace period. A grace period is a length of time after you graduate before you have to start repaying your loan in full.
Unsubsidized federal loans
Unsubsidized loans don'ttake financial need into account. Interest begins to accrue immediately and continues to accrue during your six-month grace period. This is a more expensive option than a subsidized loan.
Direct PLUS Loans
Direct PLUS loans don't consider financial need and require a credit check. Graduate and professional students, as well as parents of undergraduate students, can take out Direct Plus Loans. Interest accrues during school and during a six-month grace period.
FAQs
How do I avoid taking out more loans than I need?
Carefully consider your budget and only borrow what's essential to cover costs.
What if I can't afford to repay my student loans?
Contact your loan servicer ASAP if you can't afford to repay your student loans. There may be options like income-based repayment or deferment.
What are good alternatives to student loans?
Scholarships, grants, part-time jobs are all ways to reduce how much you need to borrow for student loans.
Do I have to pay back money from FAFSA?
The FAFSA is your application for federal financial aid. Some types of aid you receive through the FAFSA, like grants or scholarships, do not need to be repaid. However, federal student loans received through your FAFSA do have to be repaid with interest after you graduate or leave school. It's essential to understand the types of aid included in your financial aid award letter.
Conclusion
The FAFSA opens doors to various financial aid options, some you repay, and some you don't. Being informed about the types of aid you're offered is key to making smart borrowing decisions and maximizing your free money for college.
Loans Reporter
Ryan Wangman was a reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. He is also a Certified Educator in Personal Finance (CEPF).In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe.
Top Offers From Our Partners
Western Alliance Bank High-Yield Savings Premier Earn 5.31% APY on your entire account balance – more than 10 times the national average 5.31% annual percentage yield (APY) is accurate as of 7/11/2024 and subject to change at the Bank’s discretion. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Accurate as of the time of publication. The national average rate referenced is from the FDIC’s published National Rates and Rate Caps for Savings deposit products, accurate as of 8/19/2024. See the FDIC website for more information. https://www.fdic.gov/resources/bankers/national-rates/index.html
