Understanding Federal Grants-in-Aid

Understanding Federal Grants-in-Aid

Federal grants-in-aid support the projects and programs of state and local governments, organizations, and educational institutions. Let me explain what they are: a federal grant is financial aid awarded to fund a specific project or program. Recipients include state, local, and municipal governments as well as organizations. These grants-in-aid are funded with money from income tax revenues. They're not loans, so no repayment is required, but you must spend the funds according to the federal government's guidelines for that particular grant.

Key Takeaways

A federal grant-in-aid is federal money granted to a recipient to fund a project or program. These aren't loans and therefore require no repayment. Federal grants can be awarded to university faculty members to pursue a particular line of research. Parts of a state government may procure and earmark grants to support nonprofits that provide aid to its constituents.

How Federal Grants-in-Aid Work

A federal grant-in-aid allows the government to publicly fund a project and still operate independently from the state. The funds come with standards and requirements. Entities that offer grants might divide the resources across one or more periods annually; they might also divide the funds among potential recipients. This can make pursuing such grant funding a competitive effort among applicants.

The United States government awards over $500 billion annually in Federal Assistance Agreements, consisting mostly of grants. Grants-in-aid can be awarded to university faculty members to pursue a particular line of research; however, there are restrictions on how the money can be used. For example, you might use the funds to pay undergraduate students to assist with the research, but not to pay university utility bills.

As a recipient, you'll have to meet certain requirements to qualify for the aid. For instance, an individual recipient might need to meet citizenship and/or residency requirements.

Types of Federal Grants

Federal grants can take on a variety of forms and have different requirements. For instance, a university might make a federal grant-in-aid to support a program that lowers the tuition rate to make it more affordable for military veterans and their spouses. A university might also make this type of funding available to support conferences that have a particular subject matter or area of study at its core.

In the case of research efforts that receive a grant-in-aid, it may be stipulated that the funding is not intended to cover all expenses for the project. Furthermore, the grant may be given with the intent of encouraging and attracting other, more substantial funding to the project. This makes the federal grant-in-aid a sort of seed funding that lends some credibility to the endeavor.

Foundations and professional associations might offer federal grants as a form of financial assistance to graduate students who are developing a thesis focused on specific topics relevant to the organization. Parts of a state government, such as its legislative body, might procure and earmark federal grants to support nonprofit organizations that provide aid to its constituents. The money, however, is often stipulated as a supplemental rather than primary source of funding.

Finding and Using Federal Grants-in-Aid

You can find available federal grants-in-aid through Grants.gov, which maintains a search feature that allows organizations to search for eligible grants by specific criteria. You can also navigate to other grant databases that may include funding from private sources from the site.

Typically, you can't get a federal grant as an individual. Most federal grants are awarded to local or state governments, nonprofit organizations, and businesses. You may receive a grant funded by a federal grant from the organization that received it.

You can't use a federal grant for any purpose. Most federal grants are earmarked for specific uses, such as research, community building, or funding programs. If you're awarded a federal grant, there will likely be stipulations on how the money is used. For example, a research grant might cover staffing costs but not utilities on the research facility.

Grants-in-aid don't have to be paid back, as they're a form of financial aid. While loans can also be considered financial aid, like student loans, these do have to be repaid because the borrower is taking on debt. Grants-in-aid, meanwhile, are more like gifts.

The Bottom Line

Federal grants-in-aid are valuable to those that qualify since they don't have to be repaid. However, applying for grants can be time-consuming, and they're typically only available for businesses, organizations, and state or local governments. If you're an individual, government loans will likely be a more accessible option.