What is financial aid?

Financial aid is any type of financial assistance including grants, scholarships, loans, or work-study that is used to fund a college education.  According to the U.S. Department of Education’s Institute of Education Sciences, sixty-six percent of all undergraduate students received some type of financial aid during the 2007-08 school year and forty-seven percent of these students received federal student aid. 

Because of the downturn in the economy financial aid applications are up more than 10% since 2008, reports fastweb.com.   So it is really important to start charting out your plan to pay for college with your parents as early as your freshman year of high school.  Start looking into different organizations, like churches, corporations, and private foundations that may offer grants (free money) to fund your education. 

Apply for as many scholarships as possible.   Do not let writing an essay stand in the way of you applying for and possibly receiving money for college.  When you’ve graduated and six months later the loan bill comes, you will regret that you didn’t at least put forth the effort to get free money.   Fastweb.com and finaid.com are two places where you can start your scholarship hunt.   

Earlier we mentioned that forty-seven percent of financial aid was funded through the federal government.  Filling out and submitting the FAFSA (Free Application for Free Student Aid) puts you in the running for federal and state loans, grants, and work-study.  The amount of aid you may receive will depend on your family’s financial need, availability of funds, and when your application is submitted.  Most post secondary institutions suggest Jan 1 – March 15 of your senior year as a great window for submission.  The earlier you submit the better your chance for receiving a portion of everything that may be available at that time.  You will need your parents’ tax return to submit a completed application, so be persistent, but gentle, in reminding them to get those taxes done.   

I Don’t Understand… What?

When you receive your award letter the following terms and there meanings will be helpful in furthering your knowledge of financial aid as well as determining whether you will accept certain types of assistance.  Make use of your high school guidance counselors as well as the financial aid counselors at your chosen institution, they are great resources for scholarships, grants, and helping you and your parents to understand the funding process.

FAFSA – free application for free student aid – this is the application you’ll need to complete if you’re applying for federal and state grants, loans, and work-study.  The paper version of the FAFSA is available in your guidance office, public library, or the financial aid office of a local college.  You can have a paper copy of the FAFSA mailed to you by calling 800-433-3243.  For additional information or to fill the form out online, visit www.fafsa.ed.gov

• Stafford Loan subsidized – these need-based student loans have an ultralow interest rate and the federal government pays the yearly interest while you’re in school
• Stafford Loan, Unsubsidized – students who don’t demonstrate significant financial need can still take out a Stafford loan to help pay the family share of costs, but they’ll be responsible for the interest on the loan while in school
• Perkins loan – perkins loans, need based loans of up to $4,000 per year, are awarded by the financial aid office, The interest rate is a flat 5 percent for the life of the loan, and you don’t make any loan payments while in school
• Pell Grant – These federal grants are awarded to the neediest undergraduate students as part of the financial aid package and do not have to be repaid.  To be considered you must fill out the FAFSA
• Work Study – federal work study money, which may be promised as part of a financial aid package, supports jobs for students with financial need.  You can expect to work between eight and twenty hours a week and earn at least minimum wage.
• Parent Plus Loan – these loans are taken out by parents who wish to fund their child’s education.  The child must be the parents’ dependant and enrolled at least half-time in an eligible program at an eligible school.

If you’re a federal student loan recipient, there are two key points to remember. First, the interest you pay is lower than commercial rates because the federal government subsidizes the rate. Second, if you are a student borrower, you don’t have to begin to repay your Perkins or Stafford Loans until you leave school or drop below half-time (usually below six credit hrs, but check with your specific educational institution).

Closing It Out

• Remember start early.  Sit down with your parents to chart out a plan for funding your college education.  Find out if your parents will expect you to take out loans or if they will pay a certain portion.  FAFSA has a program called the FAFSA4caster which has information about financial aid and also allows you to get an early idea of your aid eligibility.  Visit www.fafsa4caster.ed.gov
• Don’t wait until your junior or senior year of high school to start preparing to fund your college education. 
• If you work during the summers or on the weekends, ask your parents to help you open a savings account to put away a certain portion towards your education, if they have not already started a college fund for you. 
• Research different funding sources and don’t be afraid or too lazy to write essays for scholarships, you’ll be glad you did!!