Key Terms

Direct costs are those the student pays directly to the college, including tuition, housing, meal plans, fees, and medical insurance if needed. Each college's direct costs are different.

Indirect costs are those the student pays on their own, including books, school supplies, travel expenses, clothes, entertainment, and personal items like shampoo. College financial aid awards provide estimates for these costs, but use your best judgment. Some general examples:

Books and school supplies: costs tend to range from $1,200–1,500 per year, but this can vary. For example, a new computer will add to general costs. If your intended major requires special equipment or gear, those items will cost extra.

Travel: this can be significantly impacted if air travel is required. Check flight costs to get an idea of what it will cost to go home during breaks or holidays. Otherwise, taking a bus, getting a ride and sharing gas costs, or taking a train can save money.

Personal expenses: divide these into two categories. First, personal items such as shampoo, medication, a new winter coat or shoes. Next, spending money or an allowance for things like entertainment, pizza, snacks, and small gifts.

This is the college's estimate of the cost of one academic year at their school, which includes tuition, housing (dorm), food (a meal plan), fees, books, travel, and personal expenses. It's the starting number for the college to build each student's financial aid award.

This is free money from the federal government that helps pay for a student's cost of college attendance. The amount awarded is based on a student's financial need. The maximum Pell Grant is $7,395 (as of the 2026–27 school year) — check studentaid.gov for the current maximum. These funds can be provided to every eligible student.

The Supplemental Educational Opportunity Grant is also free money from the federal government used to help pay for the cost of college attendance, with the amount based on a student's financial need. Not all schools have access to SEOG funding, so this award may not be granted by every school even if a student has high financial need. Also, each school's total SEOG funding is limited — once the school awards all of it, they can't give out any more that year. That's why applying for financial aid early matters: grants like this are essentially first come, first served, and students who file the FAFSA late may find the funds already gone. Awards can reach as high as $4,000 per year per student. Learn more at studentaid.gov.

This is free money from such places as private foundations, funds, religious groups, and local organizations. It's important to note that such grants or scholarships are often for one year only. They may not necessarily be renewable, so it's important for the student to plan their finances accordingly.

This is free money awarded by each college. Some is need-based and some is merit-based. Merit-based scholarships can include academic merit, athletic merit, and arts-related merit.

Subsidized Loan: a loan to the student from the federal government, and often the best type of loan a student can receive. The main difference from an unsubsidized loan is that the government pays the interest on a subsidized loan while the student is in college. Loan repayment begins six months after the student graduates, leaves school, or drops below half-time enrollment.

Unsubsidized Loan: also a loan from the federal government to the student, but the interest starts accruing when the student starts college — so it adds up over the full time the student is enrolled.

Learn more at studentaid.gov: interest rates and fees, loan limits, and repayment plans.

Families sometimes consider outside loans, including bank loans, or other federal loans such as Parent PLUS. Interest rates on such loans are usually higher than what the federal government offers the student through their subsidized or unsubsidized loans. Also, colleges sometimes offer loans directly from their school to the student. Occasionally the rates for such loans are more favorable, but sometimes not. The student can always contact a school’s financial aid office if they have questions about the terms of such loans.

Families should carefully evaluate how outside loans could impact their financial health and long-term plans, including retirement. As much as parents strive to help their children, they need to be mindful of their own financial well-being. It can be more helpful for parents to assist students with such things as personal expenses or interest payments on an unsubsidized loan instead of taking out a loan themselves.

Paid jobs are available on campus for students who are awarded work-study as part of their financial aid package. It's up to the student to secure a job by checking the school's student employment site and applying for jobs. If you're unsure how to go about this, speak with your college's financial aid office for guidance.

The information you provide on the FAFSA determines your Student Aid Index (SAI), which will appear in your FAFSA account as a number. The SAI is an eligibility index: it’s the number colleges start from when figuring out your need-based aid. The lower your SAI, the more need-based aid you should be eligible to receive each year of college. You can think of it, roughly, as the government's measure of what your family can afford to contribute.

When you fill out the FAFSA, be sure to list every college you're applying to, because that's how each school receives your SAI. Each college's financial aid office then uses that number to build your financial aid award. However, even though your SAI is the same everywhere, the award letters will not all look the same. That's why it's important to compare them!

This is the difference between what the college asks you to pay and your SAI — the FAFSA-generated number colleges use to determine your need-based aid. For example, say a family has an SAI of $2,000. One school's financial aid award says the student must pay $7,500 per year, and another says $3,500. The first school "gapped" the student $5,500 per year ($7,500 − $2,000) and the second school gapped the student $1,500 per year ($3,500 − $2,000). You want to look for the smallest gaps when comparing awards!