The 5 Pillars of College Planning #4 - Navigating College Scholarships and Loans

Damian Winther, CFP® CSRIC®
Jun 20, 2024 9:04:31 AM

Welcome back to the 5 Pillars of College Planning. We now shift our focus to Pillar #4 — Navigating College Scholarships and Loans. We recommend to our clients that they encourage their children to apply for scholarships at the same time they complete the Free Application for Federal Student Aid (FAFSA), outlined in Pillar #3. It’s important to remember that one application doesn’t have to be completed before the other can be started.

Most colleges and universities begin accepting scholarship applications well before making an acceptance or denial decision. Consider applying early–even if your student hasn’t made their final school choice. Understanding scholarship eligibility and awards before the FAFSA is processed could be incredibly helpful as you evaluate the different schools on your student’s shortlist.

Read more of the Pillars of College Planning: 

At this stage in the game, your student has submitted their college applications to a handful of carefully selected schools and has filed the Free Application for Federal Student Aid (FAFSA).

If college applications were submitted “early action,” your student should start receiving early (non-binding) responses from the school(s) before January of the following year.

The sooner you complete the FAFSA, the sooner you will know what level of need-based financial aid you may be entitled to. Also, some colleges base both their merit-based aid and their need-based scholarships on information contained in the FAFSA. My advice is that everyone should complete the FAFSA, regardless of their income or net worth.

It is now time for you and your student to begin the scholarship application process for most, if not all, of the schools that have been applied to. Let’s take a few minutes to discuss the types of scholarships, grants and aid available to today’s college students.

Scholarships, Grants & Loans

Let’s discuss different types of “money” your student may be eligible to receive and what that means regarding potential repayment requirements in the future.

Scholarships – Also known as gift aid since scholarships don’t have to be repaid. Scholarships vary dramatically from school to school and can be classified as merit-based or need-based. Not all colleges and universities offer scholarships. While scholarships can be offered by the college or university, they may also be privately funded by various organizations, non-profits, alumni and other individuals.

Merit-Based Scholarships Funding for merit-based scholarships is dependent upon something special the student has achieved (e.g., GPA, ACT or SAT score, AP test scores, athletic achievement, etc.).

Need-Based Scholarships With need-based scholarships, the student may be eligible for a certain level of funding based on family income, family net worth, unique family situation, cost of the school, etc.  

Grants Generally speaking, grants do not have to be repaid. Most often, grants are made based on the student’s financial need, and the student may need to meet certain requirements for eligibility to continue (e.g., maintaining a certain GPA, progressing towards a unique major, etc.).

Loans – These carry an interest rate and must be repaid over time. Loans are not automatic; they must be applied for through the Federal Government or a private lender. There are several different types of student loans, including:

Direct Subsidized Loan – Available to undergraduate students with demonstrated financial need. Current eligibility is up to $5,500 (depending on grade level).

Direct Unsubsidized Loan – Available to undergraduate students, graduate students and students in a professional program. Current eligibility is up to $20,500 (less other subsidized loans received for the same period).

Direct PLUS Loan – Available to parents who borrow money for their dependent undergraduate children or graduate/professional program students.

For more information on types of loans, visit

Aggregate the College Funding Sources

Once your student receives their official financial aid award letter, you and your family can finally begin comparing the actual “out-of-pocket” costs associated with these colleges and universities.

Consider the following example, which is typical of what today’s financial aid offer letters look like:

Tuition & Fees $45,000
Room & Board $15,000
Est. Books & Supplies $1,500
Est. Personal Expenses $1,500
  $63,000 Total Cost of Attendance
Merit Scholarship (GPA) ($15,000)
Local Scholarship (VFW) ( $2,000)
Direct Unsubsidized Loan ( $5,500)
  ($22,500) Total Scholarships & Loans
  $40,500 Total Out of Pocket Cost (After Loan)

Stay Tuned for Pillar #5 – Finalizing the College Decision

At Birchwood Financial Partners, we work with our clients to help them feel empowered and knowledgeable about the financial decisions they are making every day. Please visit our website ( to learn more about our Firm, our team, our processes and services, and our clients.

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