Navigating Financial Aid | WaterStone Bank

February is National Financial Aid Awareness Month, and navigating financial aid can often feel like a minefield. But before you grab your helmet and armor, it helps to do some reconnaissance work and understand the different types of aid available to students.


Grants cover all funds that don’t need to be repaid, providing a student finishes their schooling. Federal grants include Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance for College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants. Grants are typically awarded based on need.


Scholarships are awarded to students based on merit, talent or other factors, like interest in a particular field of study. Nonprofit and for-profit organizations, as well as educational institutions, all offer scholarships.

Federal Loans

Loans must be paid back—with interest—and are arguably the most complex of the financial aid equation. When a student completes the Free Application for Federal Student Aid (FAFSA) as part of their application for financial aid, they may be offered federal loans as part of their aid package. Federal loans include:

    • Direct subsidized loans: loans eligible to undergraduate students based on financial need
    • Direct unsubsidized loans: loans eligible to undergraduate, graduate and professional students that are not based on financial need
    • Direct PLUS loans: loans for graduate and professional students to pay for expenses that aren’t covered by grants, scholarships and other financial aid
    • Direct consolidation loans: these allow you to combine all of your federal loans into a single loan, which is then managed by a loan servicer

With federal subsidized loans, the government pays the interest on the loan while the student is still in school; once a student has graduated, they are responsible for paying the interest. The amount of money a student receives in a federal loan varies, but it’s smart to start with federal loans before looking into private student loans.

Personal Loans

Private loans are dispensed by financial institutions like banks, credit unions and other lenders. The lender sets the terms for repayment, interest rate and more. Depending on the lender, interest rates can be variable or fixed, and could be higher or lower than federal rates. Private loans aren’t typically subsidized and cannot be consolidated, but they can be refinanced as needed.

When taking out a private loan, it’s important to ask the following questions:

    • When will payments come due?
    • How long do I have to repay the loan?
    • What is the interest rate? Is it fixed or variable?
    • Do I need a credit record or cosigner?
    • What are my options for postponing or lowering payments?
    • Are there any prepayment penalty fees?
    • Will I be eligible for any loan forgiveness programs?

Prior to accepting a loan, whether federal or private, it’s important to understand the loan's terms and conditions to ensure that you have all the facts at your disposal. Knowledge is power—the more you know, the better off you’ll be when it comes to do battle with financial aid.

Still have questions? We invite you to with one of our bankers to discuss your borrowing needs and learn more about personal loans.

Source: Federal Student Aid (

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