Not All College Financial Aid Created Equal

Understanding the types of college financial aid is important to long-term financial stability.

My wife’s experience working in an emergency room has influenced my perspective on the term “aid.” I envision someone swooping in to provide life-supporting treatment that truly makes a difference.  In nearly every context, aid has positive connotations.  But there’s one type of aid that can go either way: Financial aid for college can be beneficial, or it can be the first step into a deep financial hole.

Let’s take a look at four college funding sources that fall under the banner of financial aid:


I mention them first, but ideally borrowing money should be your last resort when paying for college. Americans owe more than a trillion dollars on outstanding student loans, and headlines show they are a growing burden. If you have to borrow, always start with federal loans. They typically provide more flexibility and repayment options than their private counterparts. And make sure your repayment plan will be manageable based on your career’s earning potential. No matter your financial situation, it’s critical to begin the process by completing the Free Application for Federal Student Aid (FAFSA).


At my son’s graduation last summer, school leaders listed the seven scholarships one of his classmates had earned. I had to admire her hard work; clearly, this young woman had looked far and wide for opportunities to earn free money for college. Scholarships are out there. Employers, nonprofits and a host of other organizations and associations offer money for higher education that can help you dodge deep debt.


Typically based on financial need, grants provide college money that doesn’t have to be repaid. Pell and Federal Supplemental Educational Opportunity grants are examples. Speak with your college’s financial aid office to see what’s available. And be quick: Many students compete for these prime opportunities.


This type of program allows students to work part-time to help offset their education expenses. Typically, they work in civic education or a field related to their studies. Check out the details at

Make your approach to financial aid a positive one. Don’t bury yourself in stressful debt; create a plan with bills that won’t send you to the emergency room for that other kind of aid.

About the Author

JJ Montanaro
Joseph “J.J.” Mon­ta­naro is a CERTIFIED FINANCIAL PLANNER™ prac­ti­tioner at USAA with more than 19 years of expe­ri­ence in the finan­cial ser­vices indus­try. JJ also served in the U.S. Army for six years on active duty, and in 2009, he retired as a lieu­tenant colonel in the U.S. Army Reserve.