A Pell Grant is free money from the federal government that does not have to be repaid. For 2024-25 the maximum Pell Grant is $7,395 per year. Eligibility is based on financial need from your FAFSA. A student loan is money you borrow and must repay with interest. Federal Direct Subsidized Loans do not accrue interest while you are in school at least half-time. Always accept grants first, then subsidized loans, then unsubsidized loans. Never take private loans until you have exhausted all federal options.

FAFSA (Free Application for Federal Student Aid) is the form used to determine eligibility for federal financial aid. File as early as possible — FAFSA opens October 1 each year for the following school year. Many states and schools award aid on a first-come, first-served basis. Filing late means less aid. You need a student FSA ID and your parent's tax information (or yours if independent). You must file FAFSA every year. Even if you think you won't qualify, file anyway — aid calculations change based on many factors.

Federal Direct Unsubsidized Loans for undergrads currently charge 6.53% interest (2024-25). If you borrow $40,000 and choose the standard 10-year repayment plan, you pay about $447/month and $53,600 total — $13,600 in interest. On an income-driven repayment plan you pay less monthly but potentially much more total due to extended repayment. Private student loans have rates from 5-17%, no forgiveness options, and no income-driven repayment. The total cost of private loans can be double the borrowed amount over the repayment period.

PSLF forgives the remaining balance on federal Direct Loans after 120 qualifying monthly payments (10 years) while working full-time for a qualifying employer. Qualifying employers: government agencies (federal, state, local), 501(c)(3) nonprofits, public schools, public hospitals. You must be on an income-driven repayment plan. After 10 years of on-time payments, any remaining balance is forgiven tax-free. This program is especially valuable for teachers, nurses, social workers, and public defenders with high loan balances.

The answer depends on: what you study, where you go, and how much debt you take on. The general rule: total student loan debt should not exceed your expected first-year salary. If you expect to earn $50,000/year, borrow no more than $50,000 total. College graduates earn about $1 million more over a lifetime than non-graduates on average, but this varies enormously by major. Engineering, nursing, computer science, and accounting have high ROI. Fine arts, philosophy, and general humanities often do not. Community college + transfer is frequently the smartest financial decision available.