Should You Pay Back FAFSA or Financial Aid?

pay back fafsa

Do you have to pay back FAFSA for any financial aid you receive for graduate school or college? The answer depends on the type of financial aid you get. If you receive scholarships or grants (usually called gift aid), you won’t pay back financial aid. 

However, if you borrow student loans, you’ll need to pay the money back, usually with interest. Of course, you can choose to pay the tuition yourself, but today’s college tuition has skyrocketed. And that has made it impossible for some people to afford their education. That’s where FAFSA comes in. 

Now, financial aid can be a complicated process for both parents and students. Usually, several questions pop up: 

  • Do you have to pay back FAFSA money? 
  • Will I get adequate funds to pay for my education? 
  • What forms must I fill?

What Is Financial Aid? 

Financial aid is any funding that helps you pay for your education, including grants, scholarships, work-study programs, and student loans. Before you receive any assistance, you need to complete the Free Application for Federal Student Aid (FAFSA). 

The Federal government, colleges, states, and other organizations use this form to award financial aid. If you plan on going to college, completing the FAFSA is the first step to take. 

However, you should know what alternatives are available, including the amount you can borrow. On average, it takes 30 minutes to complete if you’re fully prepared. 

This guide will help you take a closer look at different types of financial aid. That will help you which situations will require you to pay back financial aid or not. We’ll also explore other vital areas you need to watch out for. That can help you make an informed decision. 

Now, let’s talk about how you can be eligible for financial aid. 

How To Be Eligible For Financial Aid 

pay back fafsa

Generally, there are two ways to meet the requirements for financial aid: 

Aid Based On Merit

Private organizations and colleges award scholarships to students with talents in athletic, academic, or artistic fields.

Need-Based Aid 

The federal government determines your financial need based on the information you give on FAFSA. Most grants and work-study programs are need-based. Some colleges may need a CSS Profile to determine your eligibility for non-federal financial aid. 

The CSS Profile, however, costs money to submit, unlike the FAFSA. You’ll also need to provide more information compared to the FAFSA. 

Keep in mind that qualifying for need-based financial aid doesn’t mean you’ll get it. It’s not the responsibility of colleges to completely meet every student’s needs. Some awards like scholarships and Pell Grants are usually awarded on a first-come, first-served basis. 

However, there is a way to increase your chances of getting need-based aid. You have to submit your college applications and financial aid applications as fast as you can. 

Every institution has its financial aid award letter that arrives with your college acceptance letters. It details the amount and types of financial aid you’ve been awarded. 

Where To Acquire Financial Aid 

There are various sources where you can get financial aid. Examples include your state, the federal government, private organizations, and your institution. When you fill out the FAFSA, you’ll be in the position to get all federal aid and likely some institutional and state aid. 

After submission, contact your financial aid offices at the college where you applied and your state’s higher-education agency to determine if you qualify for other institutional and state scholarships and grants.  

You can use the Scholarships Search Tool by the U.S. Department of Labor to determine any outside awards you may be eligible for. 

Types of Financial Aid 

1. Grants 

Do you have to pay back financial aid when you opt for a grant? Well, unlike other forms of financial assistance, you don’t have to pay back grants. You only pay back grants in certain circumstances. 

For example, if you discontinue a program, you might have to pay back some or all of the grant given you. Furthermore, if you acquired outside grants or scholarships that lowered your need for federal aid, you might also pay all or part of the federal grant. 

Usually, the federal government allocates grants based on financial need rather than merit. When you receive a grant, it can decrease the student loan amount you need to borrow. The government issues five types of grants. Let’s go through them: 


You can qualify for a maximum of $4,000 annually in grants if you’ve not acquired your graduate or bachelor’s degree. However, the aid you get will depend on whether the school you attend has enough funds. 

Federal Pell Grants. 

As of the 2021-2022 academic year, undergraduate students with low income pursuing a bachelor’s degree can get up to $6,495 each year. 


 Teachers working toward a graduate or bachelor’s degree can get a maximum of $4,000 annually in grants. However, you must accept to teach for at least four years in a high-need area at a low-income school for you to qualify for the grant. 

State-issued grants. 

Aside from the federal government giving you a grant, you can qualify to get a grant from your state. 

Iraq and Afghanistan Service Grants. 

If your guardian or parent was a military personnel and died during their service in Afghanistan or Iraq, you could get up to $5,983.34 for the 2021-2022 academic year. Keep in mind that the amount changes every year. Also, you can only get this grant if you don’t qualify for Pell Grants. 

2. Scholarships 

Do you have to pay back financial aid when you opt for scholarships? Just like grants, scholarships are a type of gift, so there’s no need for repayment. Broad organizations offer scholarships, including employers, private companies, schools, non-profits, religious groups, communities, and social and professional organizations. 

Scholarships range from small funds to large amounts that can pay all of your tuition costs. Numerous organizations usually ward scholarships based on merit, unlike grants. A good example is when you exhibit exceptional skills and talent in athletics or get good grades. 

It’s easier to get a scholarship from your college compared to other organizations. It requires more work on your end to make it successful. In most situations, you need to submit your information to the sponsoring organization directly for you to apply for the scholarship. 

If you want to find potential scholarships, you can use numerous scholarship search engines. Remember that even though you don’t have to pay back FAFSA, some come with contingencies. For example, if your GPA falls, you can lose your scholarship. 

3. Student Loans 

Student Loans

Do you have to pay back FAFSA with student loans? Unlike scholarships and grants, you have to repay your loans, including interest. Loans are money you borrow, which means they must be paid back, usually with interest. 

You have to pay back your student loans in some situations, even if you don’t finish your degree. It doesn’t even matter if you were not happy with your school’s education or experienced financial difficulties due to bankruptcy or unemployment. 

However, keep in mind that there are a few exceptions. If your institution defrauded you or can’t continue working due o a disability, you may be eligible for a student loan discharge. But since most students need to pay back their student loans, most of them prefer scholarships and grants. 

However, it’s unlikely to cover your tuition costs with just scholarships and grants. 

Pay Back FAFSA: What You Should Know About Student Loans 

The federal government awards student loans based on the information you submit on your FAFSA. Federal student loans come with several benefits: income-driven repayment plans, Public Service Loan Forgiveness, deferment, forbearance, etc.

Some federal loans come with low-interest rates compared to private student loans. There are three types of federal loans: 

  • Direct subsidized loans. The amount of money you borrow varies according to the school year you’re in. It also varies whether you’re an independent or dependent student. For the 2020-2021 academic year, the interest rate for direct subsidized loans is 2.75%. The government takes care of the interest that accumulates on your loans while you’re in school. And this is due to the subsidized loans. 
  • Direct unsubsidized loans. Just like direct subsidized loans, the amount you borrow varies according to the year of school you’re in. Not only that, but whether you’re dependent or not. For the 2020-2021 academic year, the interest rate for professional and graduate students is 4.30%. The rate for undergraduate students is 2.75%.
  • Direct PLUS loans. As a professional or graduate degree student, or a parent of an undergraduate student, you can borrow any amount you need. But that excludes any other aid you receive. The current rate is 5.3%.

Apply For A Private Student Loan If You Have No Other Options 

If you’ve used up all your federal student loan options, you can opt for private student loans. That can help you cover the remaining tuition cost. However, private lenders center their loan approvals on income and good credit scores. 

Furthermore, private loans don’t come with the same benefits as federal student loans. That means if, for example, you can’t make any more payments or lose your job, your servicer might not give you any other option for repayment. 

However, whether you choose private or federal student loans, you still have to pay back FAFSA. So you need to be sure that you understand before you proceed. 

4. Federal Work-Study 

Federal work-study helps you earn money to help you pay for your tuition. As a professional, undergraduate, or graduate student, you can get a part-time job while still in school to cater to your financial needs. 

You can get at least minimum wage or sometimes more depending on your skills and the work you need to get the position. The work-study award relies on your financial need, date of application, and your institution’s funding level. 

If you want to proceed, check with your college’s financial aid office to see if they participate in the federal work-study program

Aids That Requires You To Pay Back FAFSA

Do you need to pay back financial aid that has federal loans? Yes. Every federal student loan needs to be paid back. As explained in the previous sections, repayment of student loans varies according to your repayment plan and loan terms. 

It’s advisable to learn more about the multiple repayment options to know which alternative is the best choice for your situation. It’s also worth noting that some students can qualify for student loan forgiveness

The federal government can grant loan forgiveness in specific situations. For example, if you work in public service and make 120 qualifying payments or make monthly payments for ten years, you can get your loans forgiven. 

Aids That Doesn’t Require You To Pay Back FAFSA 

Aids That Doesn’t Require You To Pay Back FAFSA

Do you need to pay back FAFSA for need-based financial grants? The good news is that you don’t have to pay back any funds awarded through FAFSA. Of course, it includes need-based financial aids. 

However, as explained above, there are some stipulations you need to follow. For example, you may have to maintain a certain GPA to continue benefiting from the aid. 

How To Acquire The Money You For Education

 Do you have to pay back financial aid? This question doesn’t have a straightforward answer. By now, you know the different financial aids available, including their repayment term. 

We’ve discussed it earlier in this guide, but you need to complete your FAFSA for you to qualify for student loans, scholarships, or grants as an overview. Now, the funds for the grants have limitations, so you need to apply early to increase your chances of getting aid. 

However, if you choose to take out a student loan, remember that you’ll have to pay it back with interest. The only time you won’t have to pay back is if you’re eligible for a loan discharge, repayment assistance, or loan forgiveness programs.

Final Thoughts 

Keep in mind that you don’t have to take out all the financial aid you get necessarily. It’s one of the vast misconceptions students make. You can ultimately choose to take advantage of specific financial aid options. And don’t forget that you may have to pay back FAFSA. It may make sense to receive any grant aid awarded to you. However, It might not make sense to go in for all the student loans offered to you. You’ll need an expert to help you out. Call 800-881-0687 to get a free assessment!