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Types of Aid

Most financial aid awards fall within two categories:

"Gift aid," in the form of grants and scholarships, are awards that do not have to be repaid, though could have requirements to maintain them. 

"Self-help" refers to awards that require something in return from you. Awards include work-study and student loans. Work-study requires you to secure a part-time position, usually on campus, to receive your paycheck. Loans require repayment with interest.

You could be offered a financial aid package consisting of various types of aid. The rule is: free money first (scholarships and grants), then earned money (work-study), then borrowed money (federal student loans). Start from the top of this table and work your way down:

Type of Aid What to Keep in Mind
Grants and scholarships Make sure you understand the conditions you must meet. For instance, you might have to maintain a certain grade-point average in order to continue receiving a grant.
Work-study You don’t have to pay the money back, but you do have to work for it, so take into account that that’ll mean less time for studying. However, research has shown that students who work part-time jobs manage their time better than those who don’t.
Federal student loans You’ll have to repay the money with interest. Subsidized loans don’t start accruing (accumulating) interest until you leave school, so accept a subsidized loan before an unsubsidized loan.
Private loans You’ll have to repay the money with interest, and the terms and conditions of the loan almost certainly will not be as good as those of a federal student loan.