Financial Aid: What You Need To Know

Just because you’re in college doesn’t mean the financial aid process is over! Most schools require students to file a Free Application for Financial Aid (FAFSA) every academic year in order to determine the appropriate scholarships, loans, and grants to award based on their financial information and Estimated Financial Need (EFC). Trekking through the financial aid jungle could be a bit overwhelming, so this blog will hopefully make the process clearer and easier to understand.

First off, every student should apply for a pin and file a FAFSA. Schools use information from your FAFSA to determine your financial aid package for the upcoming academic year. Although it is recommended to check with your institution about their FAFSA deadline, I highly recommend students fill out and send their FAFSA as soon as possible (early January) to receive priority consideration for grants, loans, and scholarships. Scholarship foundations also use the FAFSA to determine whether a scholar is eligible to renew their scholarship. It is helpful to have your parents file their tax forms as soon as possible, so that they’ll receive their tax returns in time to finalize and verify information on your FAFSA.

For those of you confused about common financial aid terms, here are some definitions:

Cost of Attendance (COA) - this is how much it costs for you to attend your institution for the academic year. Your COA includes amounts for tuition, room and board, books and supplies, transportation, and personal expenses. The financial aid office at your institution determines what and how much can be included in your COA.

Aid - the scholarships, grants, loans, and work study offered to you for the academic year to help pay for your COA. Scholarships and grants are known as “gift aid,” while loans and work study are “self-help”

Expected Family Contribution (EFC or FC) - an amount, determined in part by information provided to FAFSA, that your family is expected to contribute towards tyour COA. It includes both Parent AND Student Contributions.

Need - the amount that is left when you subtract your EFC from your COA. E.g., if your COA is $20,000 and your EFC is $2,000, your Need is $18,000.

Unmet Need - The amount of your Need that is not “paid for” by any aid. E.g., if your Need is $18,000 and you have received $10,000 in aid , your Unmet Need is $8,000.

*Contact your institution or scholarship foundation to inquire about how they calculate your financial aid.

Finding scholarships does not stop after your senior year of high school. Websites such as http://www.finaid.org/ and http://www.fastweb.org/ may help you search for scholarships that match your profile. Free scholarship lotteries are also an option. Your best bet is finding local scholarships or those through your institution. Regularly visit your school’s financial aid office to ask about new scholarships you could apply for.

There are specific scholarships ranging from those for volunteering, military aid, or employer tuition assistance. There are also Student Profile-Based Aid for international students, students with disabilities, female students, minority students, older and nontraditional students ect. Search the web for foundations that are targeted specifically towards these students.
Fortunately, there are plenty of Federal and State Government Aid to help pay for college. If you are an in-state resident, tuition may be much cheaper for you. If not, look into your state’s requirements for establishing residency. However, be aware that most private institution’s tuition is the same for both in-state and out-of-state students.

Grants are a form of financial aid, based on need, which you do not have to repay. Institutions will automatically award federal and state government grants based on financial need and availability, which is why it is important to fill out a FAFSA as soon as possible. The difference between grants and scholarships is a grant is money that is given by a non-profit organization that will be generally be tax exempt. Scholarships will require students to meet certain requirements before and after they’ve obtained it. Most scholarships require students to meet certain GPA requirements and be enrolled with a minimum number of credits.

Student employment or work-study is usually offered in your financial aid package and it's just like a regular job except the money is used to pay for your tuition. Check with your financial aid office to see what jobs are available at your campus.

To save money, some schools offer to waive your room and board if you are a Resident Advisor (RA) for the academic year. Resident Advisers supervise a floor on an on-campus dormitory, plan hall activities and make rounds at night. If interested, check with your institution for more information on how to apply.

An education loan is a form of financial aid that must be repaid, with interest. Education loans come in three major categories: student loans (e.g., Stafford and Perkins loans), parent loans (e.g., PLUS loans) and private student loans. Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. Most students will need to take out some kind of loan, so it is helpful to learn about the different kinds of loans are available in order to choose the most appropriate one. Institutions will list several loan options in a student’s financial aid package that the student can accept or deny.

The main federal loan for students is the Stafford Loan, which has two variations:

-Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.

-Federal Direct Student Loan Program (FDSLP) loans or "Direct Loans", administered by "Direct Lending Schools", are provided by the US government directly to students and their parents.

All Stafford Loans are either subsidized (the government pays the interest while you're in school) or unsubsidized (you pay all the interest, although you can have the payments deferred until after graduation).

About 2/3 of subsidized Stafford loans are awarded to students with family AGI of under $50,000, 1/4 to students with family AGI of $50,000 to $100,000, and a little less than 10% to students with family AGI over $100,000.

Repayment begins six months after the student graduates or drops below half-time enrollment. The standard repayment term is 10 years, although one can get access to alternate repayment terms (extended, graduated and income contingent repayment) by consolidating the loans
The Perkins Loan is awarded to undergraduate and graduate students with exceptional financial need. This is a campus-based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government. (The Perkins Loan is the best student loan available. It is a subsidized loan, with the interest being paid by the federal government during the in-school and 9-month grace periods. There are no origination or default fees, and the interest rate is 5%. There is a 10-year repayment period.

The amount of Perkins Loan you receive is determined by your school's financial aid office. The program limits are $5,500 per year for undergraduate students and $8,000 per year for graduate students, with cumulative limits of $27,500 for undergraduate loans and $60,000 for undergraduate and graduate loans combined.

The federal Parent Loan for Undergraduate Students (PLUS) lets parents borrow money to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance. There is no cumulative limit. Like the Stafford Loan, PLUS loans are either FFELP (provided by private lenders, such as banks) or Direct (funds provided by the government).
Parent PLUS loans are the financial responsibility of the parents, not the student. If the student agrees to make payments on the PLUS loan, but fails to make the payments on time, the parents will be held responsible

See http://www.finaid.org/loans/ for more information on loans.