Grants, subsidized and unsubsidized loans, work-study: the difference

Most college aid offers mix four or five kinds of money in one list. They look alike on the page, but they work very differently: some you keep, some you earn, and some you repay with interest. Knowing which is which is the first step to judging any offer.

The quick answer

• Grants and scholarships: money you don't repay, as long as you meet the conditions.

• Federal Work-Study: the most you can earn from a part-time job, paid as you work.

• Direct Subsidized Loan: a federal student loan with no interest charged while you're in school at least half time or during the six-month grace period.

• Direct Unsubsidized Loan: a federal student loan that charges interest from the day it's paid out.

• Parent PLUS Loan: a federal loan your parent borrows and repays.

Grants and scholarships

Grants are usually based on financial need. Scholarships are often based on merit, talent or field of study, though the labels overlap. Both can come from the federal government, your state, the college or private groups.

The main federal grant is the Federal Pell Grant. It's need-based, and federal rules make it the first source of aid for students with financial need. Some schools also award a Federal Supplemental Educational Opportunity Grant (FSEOG), another need-based grant, when funds allow.

What to check: Is the grant renewable? Does it require a minimum GPA, a full course load or a particular major? A grant that lasts only one year changes the four-year picture.

Federal Work-Study

Work-study is not a discount. It's an award that lets you earn up to a set amount from a part-time job, usually on campus or with an approved community employer. Federal rules say:

• you earn the money when you do the work;

• the school must make sure you're paid at least once a month;

• you must be paid at least the federal minimum wage, or a higher state or local minimum where one applies;

• the school can't credit your earnings to your tuition bill without your permission.

What to check: How do you find a job? What does the award amount mean in hours per week? Earnings arrive through the year, so they rarely help with the first bill.

Subsidized vs unsubsidized loans

Both are Direct Loans from the U.S. Department of Education. Both require you to be enrolled at least half time, both have a six-month grace period after you leave school, and both have a fixed interest rate for the life of the loan.

The difference is interest:

• Subsidized: for undergraduates with financial need. You aren't charged interest while you're in school or during the grace period.

• Unsubsidized: available to undergraduate and graduate students regardless of need. Interest starts building from the first payout, and you're responsible for all of it.

Financial need, in federal terms, is your cost of attendance minus your Student Aid Index (SAI), the number your FAFSA form produces. Unsubsidized eligibility is worked out differently: cost of attendance minus other aid.

Annual limits for dependent undergraduates (federal figures; check StudentAid.gov for current limits):

• First year: up to $5,500 in total, of which up to $3,500 can be subsidized.

• Second year: $6,500 total, up to $4,500 subsidized.

• Third year and beyond: $7,500 total, up to $5,500 subsidized.

Independent students, and dependent students whose parents can't get a PLUS loan, can borrow more in unsubsidized loans.

Sample (fictional): Jordan, a first-year student at Northgate College, is offered $3,500 subsidized and $2,000 unsubsidized. If Jordan needs to borrow, Federal Student Aid suggests accepting the subsidized loan first, then only as much unsubsidized as needed. Jordan can also decline either loan or ask for a smaller amount.

Parent PLUS loans

A Parent PLUS loan is in the parent's name, and the parent repays it. It often appears in a student's aid offer, which can make the offer look larger than the help you actually keep.

Rules changed for many families on July 1, 2026. For parents borrowing under the new rules, Parent PLUS is capped at $20,000 a year and $65,000 in total per dependent student, no matter how many parents borrow. Families who were already borrowing for a student enrolled before that date may keep the older limits for a limited time. Ask the aid office which rules apply to you before counting on a PLUS amount.

How the pieces fit together

Federal rules make the Pell Grant the first piece of a package for students with financial need. After that, each school follows its own packaging policy, and many letters list loans last.

To compare offers, add up only grants and scholarships and subtract them from the cost of attendance. That's the net price. Work-study and loans are ways to pay that price, not reductions to it.

Questions to ask the aid office

• "Which of these grants renew each year, and what are the conditions?"

• "How do students find work-study jobs here, and how many hours a week is typical?"

• "If I decline the unsubsidized loan now, can I request it later in the year?"

• "Does the Parent PLUS amount in my offer follow the new limits or the older ones?"

Have your offer sorted for you

EasyToDecode, launching soon, will read your aid offer and quote each line, then sort it into money you keep, money you earn and money you repay. It also flags loans listed as aid. See how it works or join the waitlist to hear when it opens.