When you wonder, “Do I need to pay financial aid back?” and “How does financial aid work?”, you’re joining thousands of other prospective students who search for this information every month.

Wonder no more. This guide breaks down the various grants, scholarships, and loans available to help you finance your college education without breaking the bank. Understanding these financial aid options can empower you to make informed decisions that fund your education.

But first, let’s start with the basics of financial aid.

How does financial aid work?

Financial aid is monetary assistance that helps make college affordable and accessible for students. However, common misconceptions surrounding financial aid create unnecessary stress and confusion for students considering higher ed.

Financial aid helps pay for tuition, fees, room and board, textbooks, and essential supplies. Eligibility for financial aid programs is based primarily on information provided through the Free Application for Federal Student Aid (FAFSA).

FAFSA considers factors such as household income, family size, and assets among college students. However, some types of financial aid also take into account academic merit and achievements.

Some forms of financial aid need to be paid back, and some do not.

Types of financial aid you don’t have to pay back

Grants are essentially free money for education—no repayment required under any circumstances. Scholarships also have a no-return policy; more on that further down. Plus, a work-study program can guarantee you’ll have a job for as long as you’re enrolled at school, under certain circumstances.

For grants, you’ll typically need to create a separate application for each, so make sure to keep track of which grants are available to you and when the deadlines are.

Major grant programs

The Federal Pell Grant, one of the most prominent grant programs, provides need-based aid to undergraduate students, offering the maximum award set annually.

The Federal Supplemental Educational Opportunity Grant (SEOG) offers additional funding for students with the greatest financial need. Funds are limited and awarded on a first-come, first-served basis, so submit your application ASAP!

Many states, including Connecticut, offer grants to residents attending eligible colleges and universities, with award amounts and eligibility varying by program.

Work-study programs

With work-study, you are earning a guaranteed income while attending college, some of which goes directly to your tuition and expenses. As such, work-study positions are often on campus, usually allowing flexible hours that accommodate class schedules. However, some off-campus opportunities may also be available.

Scholarships

Scholarships are awards that often address academic achievement or exemplary conduct, such as starting social initiatives or volunteering in your community. The primary feature of scholarships is that there are no repayment obligations. Scholarships are available for both academic merit and financial need.

How to apply for financial aid

Applying for FAFSA should be an annual priority for college students, and timing is crucial. For example, the 2025–26 FAFSA deadline has passed, and the 2026–27 FAFSA form opens October 1, 2025, for the award year running July 1, 2026, to June 30, 2027. (State and school deadlines may be earlier.)

To maximize your award potential, stay in touch with your school’s financial aid office, since they can guide you through additional opportunities or requirements. Make sure to submit all supporting documents promptly, as delays can affect your eligibility.

Types of financial aid you must pay back

All financial aid is designed to help students afford college upfront. For example, loans are considered financial aid because they provide money to cover your college costs upfront.

Unlike grants, scholarships, or work-study programs, though, loans must be repaid (usually with interest). Even though repayment is required, loans still make college accessible at the current moment by bridging the gap between your expenses and what you can pay out-of-pocket.

Loan categories

Essentially, student loans are borrowed funds with responsibilities in repayment at some later date.

Direct Subsidized Loans and Direct Unsubsidized Loans are both federal student loans. However, the key difference is that Direct Subsidized Loans are only available to undergraduate students with demonstrated financial need.

The US Department of Education pays the interest on these loans while a student is in school at least half-time, during a six-month grace period after graduation, and during periods of deferment, such as military or Peace Corps service.

In contrast, Direct Unsubsidized Loans are available to both undergraduate and graduate students regardless of financial need, and borrowers are responsible for paying all interest, including while they are in school or in deferment.

Learn how to make college affordable through Goodwin University

Caveats to free financial aid

Although grants are never repaid, failing classes may affect your future eligibility through Satisfactory Academic Progress (SAP). If you do fail or withdraw from a class, you can build a better GPA over time and receive the federal and state grants you lost.

Many grant-like scholarships are renewable each year. You do not need to repay them, but some require maintaining a GPA or reapplying each semester. Otherwise, you could lose the scholarship, so it is important to stay on top of the scholarship requirements.

Things to watch out for with student loans

Watch out for the borrowed loans section, and don’t just accept it without reading the fine print. Be sure to borrow only what you need.

It may be tempting to accept the full loan amount offered, but if you can cover part of your expenses out-of-pocket and thoroughly apply for free grants and scholarships, you’ll reduce your future repayment burden.

Understanding payment options

Federal loans offer different repayment options, such as income-driven repayment, that can adjust your monthly payment based on your earnings. Explore these before graduation, so when the time comes to pay back any loans, you’ll have an action plan and avoid missing payments that could damage your credit.

Once repayment begins, your loan servicer will manage your account. Staying in touch and keeping your contact information updated helps you avoid missed payments.

Financial aid at Goodwin University: Your advantage

At Goodwin University, financial aid is designed with students’ success and affordability in mind. In fact, 90% of Goodwin students received grants or scholarships in fall 2024.

Also, 58% of Goodwin undergraduate students received Pell Grants to help pay for college that same year. Overall, $4 million in institutional scholarships were awarded to students in fall 2024.

Apply today or request more information on how student financial aid covers your education at Goodwin University.