Federal Grants-in-Aid: Overview and Examples

What Are Federal Grants-in-Aid?

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. Federal grants-in-aid are funded with money from income tax revenues. These grants aren't loans; therefore, no repayment is required, but funds must be spent according to the federal government's guidelines for that particular grant.

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; furthermore, they might divide the funds among potential recipients. This can make the pursuit of such grant funding a competitive effort among applicants.

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, a permitted use of the funds might be to pay undergraduate students to assist with the research, while a non-permitted use might be the payment of university utility bills.

The recipient will also have to meet certain requirements to qualify for the aid. For example, an individual recipient might be required to meet certain 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 that are 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.

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.