Douglas Olsen
The cost of college has increased over the years, and so has the need for student loans and other forms of financial aid. Students can receive financial aid from federal and state/local governments, as well as private sources. Federal financial aid is mostly need-based, and students can receive grants, loans, work-study programs, and additional education-related benefits. Students can also receive private aid in the form of institutional scholarships, grants, work-study, and student loans from credit unions and other private lenders. As of 2025, about 92% of all student debt is comprised of federal student loans, with the remaining amount being private student loans.
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What You'll Learn
Federal grants, loans, work-study programs, and education benefits
Federal Grants
Federal grants are available to students based on financial need. For the 2023-24 academic year, Alabama college students received a total of $525.40 million in federal grants, with an average award of $5,233.07. The largest average federal grant disbursals went to students in Puerto Rico, who received an average of $6,098.80, while New Hampshire students received the lowest average annual federal grant of $4,451.13.
Federal Loans
Federal loans are also available to students to help finance their education. Projections for 2025 federal program disbursals include $93.100 billion in new federal direct loans. The average federal loan amount varies by state, with District of Columbia students receiving the highest average annual loan of $19,911.29, while North Dakota students receive the lowest average loan of $10,193.55.
Federal Work-Study Programs
The Federal Work-Study Program provides students with the opportunity to gain work experience while attending college, career school, or trade school. Unlike federal loans, work-study funds do not need to be repaid. Students must submit the Free Application for Federal Student Aid (FAFSA) form to be considered for the program. Work-study jobs are typically part-time and are intended to help cover day-to-day expenses.
Education Benefits
In addition to grants, loans, and work-study programs, there are also education benefits available to specific groups, such as former foster youth and military families. For example, the federal Chafee Educational and Training Voucher (ETV) program offers up to $5,000 per year for tuition and other costs of attendance to current and former foster youth between the ages of 14 and 26. Military families may also be eligible for scholarships and low- or no-interest educational loans.
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Student loan debt statistics
Student loan debt is now the second-highest consumer debt category after mortgages. 20% of American adults with undergraduate degrees have student debt, and 24% of postgraduate degree holders report outstanding student loans. In addition, 20% of US adults have paid off their student loan debt.
In the 2019-20 academic year, 72% of undergraduates received some form of financial aid, with 55% receiving federal student aid, 23% receiving state aid, and 28% receiving institutional aid. The average amount of federal student aid received by undergraduates was $8,700, which varied by student race and ethnicity. Non-Hispanic Black undergraduates and undergraduates of two or more races received the highest average amounts of federal student aid ($9,700), while undergraduates who were Hispanic, Latino, non-Hispanic Native Hawaiian, or Pacific Islander received the lowest amounts ($7,000-$7,500).
The average amount of student loan debt has been increasing over time. The average amount borrowed by 2022-23 bachelor's degree recipients who took out loans to pay for college was $29,300. This is a significant increase from $34,800 in 2012-13 and $35,200 in 2017-18. As of March 2024, 32% of borrowers owed less than $10,000, 21% owed between $10,000 and $20,000, and 28% owed less than $10,000 in federal loan debt.
There are various sources of financial aid available to students, including federal and state governments, private lenders, and institutional scholarships and grants. Federal student aid includes grants, loans, work-study programs, and additional education-related benefits. In 2023-24, undergraduate and graduate students received a total of $256.7 billion in aid from grants, federal loans, tax credits, and federal work-study. The total amount of grant aid received by students was $160.2 billion, including $44.3 billion in federal grant aid and $31.4 billion in Pell Grants.
While financial aid is available, many students struggle with the mismanagement and deliberate deception of companies servicing student loans. Some students are unaware of their eligibility for income-driven repayment plans on federal loans, and servicers often fail to assist them in enrolling in these plans. As a result, borrowers may be placed in suspended payment options that increase their interest burden.
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State and institution aid
Federal and state governments provide a range of programs to alleviate the financial burden of college education. Federal aid includes grants, loans, work-study programs, and other education-related benefits through various agencies. For instance, the federal Chafee Educational and Training Voucher (ETV) program offers up to $5,000 annually for tuition and other expenses to current and former foster youth between 14 and 26 years old. Additionally, federal and private aid is available to students from military families in the form of scholarships and low-interest or no-interest educational loans.
State financial aid programs vary across the country. For instance, Alabama college students received an average of $12,166.99 in federal loans for the 2023-24 academic year. In contrast, the average federal loan amount for students in the District of Columbia was $19,911.29 for the same period, exceeding the nationwide average by over $6,000. The State of New Mexico leads in spending the most on student financial aid concerning its gross domestic product (GDP), while Montana spends the least.
Institutional scholarships, grants, and work-study programs are also available from private sources and organizations. Students can explore these opportunities through resources like the U.S. Department of Labor's scholarship search engine, which lists over 9,680 private organizations offering aid. Additionally, credit unions and other private lenders provide student loans, contributing to the diverse landscape of financial aid options available to students across the country.
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Private lenders and loan relief companies
Private student loans are offered by credit unions and other private lenders. These loans typically cover tuition, fees, room and board, and other necessary expenses. Private student loans have fixed or variable interest rates, with fixed rates remaining the same over the loan period, and variable rates starting low and increasing over time.
There are a variety of private student loan options, and it is important for students to research which option is best for them. Students should be aware of the annual and cumulative loan limits, interest rates, fees, and loan terms. Sites like Credible offer tools to help students find loans that match their criteria and provide personalized prequalified rates from multiple lenders.
Some private lenders have been criticized for predatory lending practices, collaborating with for-profit schools to offer loans to students who would likely not repay them. Sallie Mae, now Navient, is one such lender that has been accused of these practices. In recent years, there has been some progress toward getting predatory private student loans cancelled for school misconduct, and organizations like the Project on Predatory Student Lending (PPSL) have helped borrowers in this regard.
Private loan relief companies like Navient offer programs to forgive private loans for borrowers who were defrauded by their schools. However, borrowers need to be aware of these opportunities and actively request an application. While federal student loan forgiveness has received much attention, less relief has been directed toward private student debt.
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Federal student aid by student race/ethnicity
Federal student aid in the US is available in the form of grants, loans, work-study programs, and other benefits through multiple federal agencies. Most federal financial aid is need-based. Students can also receive financial aid from state and local governments, institutions, and private sources.
Data from the 2015–2016 school year shows that the percentage of full-time, full-year undergraduate students who received grants from any source varied by race/ethnicity. A higher percentage of Black (88%) and American Indian/Alaska Native (87%) students received grants than multiracial (79%), white (74%), and Asian (66%) students. A higher percentage of Hispanic students (82%) received grants than white and Asian students, and a higher percentage of Pacific Islander students (84%) received grants than Asian students.
Similar patterns were observed for Federal Pell Grants. The percentage of students who received Pell Grants was highest for Black students (72%) and lowest for Asian (36%) and white (34%) students.
In the same year, Asian students received a higher average annual amount of grant aid ($13,840) than multiracial ($11,940), white ($11,420), Black ($11,390), Hispanic ($11,090), American Indian/Alaska Native ($10,750), and Pacific Islander ($10,280) students. Asian students also received a higher average annual amount of Federal Pell Grant aid ($5,030) than Hispanic ($4,860) and white ($4,610) students. Black ($4,900), Hispanic, and multiracial ($4,830) students also received higher average annual amounts of Pell Grant aid than white students.
Among part-time or part-year undergraduate students who received grants from any source in 2015–2016, Asian students again received a higher average annual amount of grant aid ($5,420) than all other racial/ethnic groups: multiracial ($4,710), Black ($4,390), white ($4,220), Pacific Islander ($4,120), Hispanic ($4,030), and American Indian/Alaska Native ($3,750) students.
During the 2019–2020 academic year, multiracial students received the largest average loan amount at $14,930, followed by Asian students at $14,210. American Indian/Alaskan Native students received the lowest average loan amount at $10,590.
Student Loan Debt by Race
Student loan debt statistics among racial and ethnic groups reflect significant differences in financial health, habits, and resource availability. Black and African American college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, Black students owe an average of 188% more than what white students borrowed. Black and African American student borrowers are the most likely to struggle financially due to student loan debt, with monthly payments of $258.
Asian college graduates are the fastest to repay their loan debt and the most likely to earn a higher salary to help pay off their student loans. 40% of Black graduates have student loan debt from graduate school, while only 22% of white college graduates have graduate school debt. 45% of the gap between Black and white students' debt is from student loans for graduate school.
Scientists, economists, and sociologists agree that racial and ethnic variations in student loan debt and repayment are the result of socioeconomic factors.
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Frequently asked questions
55% of undergraduates received federal student aid, with the average amount of aid being $8,700.
$135 billion was projected to be disbursed in federal student aid in 2025, including $40.651 billion in grants.
New Mexico spends the most on financial aid per student, with $2,349 per fall postsecondary enrollee, while New Hampshire spends the least, with $16.84 per undergraduate in 2021.
The average amount of student loans directly to students was $7,900. However, there is over $1.6 trillion in total student debt, with 42.7 million borrowers.
36% of undergraduates took out loans themselves in 2019-20.
