The U.S. Department of Education is the single largest source of financial aid available to students. Their mission is to ensure that all eligible individuals benefit from federal financial assistance for education beyond high school. The federal aid programs available help millions of students manage the cost of education every year.

There are three categories of federal student aid:

Grants—financial aid that doesn’t have to be repaid (unless, for example, you withdraw from school and owe a refund). Work-Study—allows you to earn money for your education. Loans—allow you to borrow money for your education. You must repay your loans, with interest.

Federal Grants

There are five types of federal student aid grants:

Federal Pell Grant Federal Supplemental Educational Opportunity Grant (FSEOG) Academic Competitiveness Grant (ACG) National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) Teacher Education Assistance for College and Higher Education (TEACH) Grant (this grant is converted to an Unsubsidized Direct Stafford Loan and must be repaid if you don’t fulfill your teaching agreement). Unlike loans, grants are not repaid unless, for example, you are awarded funds incorrectly or you withdraw from school prior to the planned end of term or, if you have a TEACH Grant, and you do not meet the terms in your “Agreement to Serve” (additional details on that will follow).

Federal Pell Grant

Pell Grants are the foundation of federal student financial aid, to which aid from other federal and nonfederal sources might be added. Pell Grants are generally awarded only to undergraduate students—those who haven’t earned a bachelor’s or graduate degree. In some limited cases, however, you might receive a Pell Grant if you’re enrolled in a postbaccalaureate teacher certificate program. Amounts can change yearly. The maximum award for the 2008–09 award year was $4,731.

Federal Supplemental Educational Opportunity Grant (FSEOG)

FSEOGs are awarded to undergraduate students with exceptional financial need—those with the lowest Expected Family Contribution (EFC) numbers. Federal Pell Grant recipients receive priority for FSEOG awards. FSEOG awards range from $100 to $4,000 a year. The amount of the award is determined by your school’s financial aid office.

Academic Competitiveness Grant (ACG)

The maximum award for a first year eligible undergraduate student is $750; the maximum award for a second year eligible undergraduate student is $1,300. ACG

To receive an ACG, you must:

Be Pell Grant-eligible during the same award year; Be enrolled at least half-time; Be a first-year or second-year undergraduate student or a student in a certificate program of at least one year in a degree program at a two-year or four-year degree granting institution; Have completed a rigorous secondary school program of study; and If a first-year student—have completed secondary school after Jan. 1, 2006; not have been enrolled in ACG-eligible program while at or below age of compulsory school attendance, or If a second-year student—have completed secondary school after Jan. 1, 2005, and have at least a 3.0 grade point average as of the end of the first year of undergraduate study.

National Science and Mathematics Access to Retain Talent Grant (National SMART Grant)

This grant program is for full-time undergraduate students who are enrolled in the third or fourth year of undergraduate study. The award is for up to $4,000 for each of the third and fourth years.

TEACH Grant

The Teacher Education Assistance for College and Higher Education (TEACH) Grant Program, provides up to $4,000 a year in grant assistance to students who are completing or who plan to complete course work needed to begin a career in teaching. In exchange for the grant, a student must sign an Agreement to Serve as a full-time teacher at certain low-income schools and within certain high-need fields for at least four academic years within eight years after completing (or ceasing enrollment in) the course of study for which the candidate received a grant. TEACH Grant recipients must submit evidence of employment as certified by the chief administrative officer of the school upon completion of each year of teaching service. If the grant recipient fails or refuses to carry out his or her teaching obligation, the amounts of the TEACH Grants received are treated as an unsubsidized Direct Loan and must be repaid with interest.

Federal Work-Study Program

Under the Federal Work Study Work Program (FWS Program), you can work part-time to earn money for your education. The FWS Program:

Provides part-time employment while you are enrolled in school. Helps pay your educational expenses. Is available to undergraduate and graduate students. Is available to full-time or part-time students. Is administered by schools participating in the FWS Program. Encourages community service work and work related to your course of study, whenever possible.

Federal Loans

Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and home mortgages. You cannot have these loans canceled because you didn’t like the education you received, didn’t get a job in your field of study or because you’re having financial difficulty. Loans are legal obligations, so before you take out a student loan, think about the amount you’ll have to repay over the years.

Federal Perkins Loans

Made through participating schools to undergraduate, graduate and professional degree students. Offered to students who demonstrate financial need. Perkins Loans are made to students that are enrolled full-time or part-time, and are repaid to your school.

Stafford Loans

Are for undergraduate, graduate and professional degree students. You must be enrolled as at least a half-time student to be eligible for a Stafford Loan. There are two types of Stafford Loans: subsidized and unsubsidized. You must have financial need to receive a subsidized Stafford Loan. The U.S. Department of Education will pay (subsidize) the interest that accrues on subsidized Stafford Loans during certain periods. Financial need is not a requirement to obtain an unsubsidized Stafford Loan. You are responsible for paying the interest that accrues on unsubsidized Stafford Loans.

PLUS Loans (Direct or FFEL)

These are loans parents can obtain to help pay the cost of education for their dependent undergraduate children. In addition, graduate and professional degree students may obtain PLUS Loans to help pay for their own education.

Consolidation Loans (Direct or FFEL)

These allow student or parent borrowers to combine multiple federal education loans into one loan with one monthly payment.