If you're a high school senior, or the parent of one,
January is when you should start thinking about filling out your first Free
Application for Federal Student Aid, or FAFSA. Having an idea of what to expect
in a financial aid package can go a long way in making the decision as to which
college will be the best fit. While state and institutional aid options vary
significantly, you can at least get an idea of what you can expect to receive
under the various federal student aid programs.
Some, but not all, federal aid types are based on
"need." Need is defined in federal statute as the difference between
the FAFSA-calculated expected family contribution and the school's cost of
attendance. So if your school of choice has a cost of attendance of $20,000 and
your expected family contribution is $15,000, your "need" will be
$5,000.
Need-Based Aid
There are three types of federal need-based aid: grants,
subsidized loans and work-study. If you have need as defined above, you may be
awarded one or all of these types of aid, but you cannot be awarded more than
what shows in the need calculation.
Grants are some of the best kinds of student aid in that
they do not need to be repaid. The Pell Grant is the most well-known federal
grant and is awarded at the undergraduate level, with exceptions for some
higher-level teaching certificates, to students who have not yet achieved an
undergraduate or professional degree. The annual limit for the Pell Grant for
the current academic year of 2015-2016 is $5,775. The amount you receive will
depend on your financial need, the cost of attendance at your school of choice
and whether you are a full- or part-time student.
A lesser-known type of grant is the Federal Supplemental Educational
Opportunity Grant. Unlike the Pell Grant, which is awarded to every eligible
student, these funds are given to schools in limited and varying amounts. The
grant is awarded in amounts between $100 and $4,000 to the neediest Pell
Grant-eligible students. Because of the limited nature of this grant, it's
important to get your aid applications into your school of choice by the posted
deadlines, to ensure that if you are eligible, money is still available.
If you must borrow to attend school, Perkins and subsidized
Stafford loans are often the most desirable loans in that they do not accrue
interest while the student is in school at least half time. All Perkins, and
most subsidized Stafford loans, also do not accrue interest while in their
grace period or while in deferment.
The Perkins loan program is another limited funds program,
and not all schools participate. Congress is intent on winding down this loan
program, so if you haven't been awarded a Perkins loan in the past, the chance
of being awarded one now is much slimmer. Every school has different income
criteria, and generally award funds to only those with the greatest need.
Undergraduate students may receive up to $5,500 per year, while graduate
students may be eligible for up to $8,000 per year. Aggregate loan limits are
$27,500 and $60,000, respectively.
The subsidized Stafford is not a limited funds program, so
if you are an eligible undergraduate, you will receive the maximum allowed.
You must be attending at least half time to receive Stafford loans of any
kind, like with Perkins loans, and the amount awarded depends on your need,
grade and dependency status.
Non-Need-Based Aid
One of the big myths about federal student aid is that
there's an income cutoff, and that's simply not true. If you have no financial
need according to the FAFSA calculations, or if you've maxed out the need-based
aid you are eligible for, unsubsidized Stafford, graduate and Parent PLUS loans
can fill the gap.
Unsubsidized Stafford loans have almost the exact same terms
as their subsidized brother, but interest does accrue from the moment these are
disbursed. While not required, you can pay that interest while in school. All
Stafford loans become due six months after the student becomes less than half
time in school or graduates. You cannot receive student aid beyond the cost of
attendance of the school you are attending.
Graduate PLUS loans are for graduate students only. There is
no aggregate limit, and the annual limit is the cost of attendance minus other
aid. There is a mild credit check required for these Education Loan in India,
but unqualified borrowers can obtain an endorser to gain access to this
resource.
Unlike the loans we've talked about so far where the student
is the borrower, Parent PLUS loans are different in that, as the name suggests,
the parent of the undergraduate student is the borrower. There is also no
aggregate limit and the annual amount is only limited to the cost of attendance
minus other financial aid.
Before accepting any type of financial aid, it's important
to fully understand the details on the terms and the full requirements for each
program. If borrowing is part of a financial aid plan, families should also
think about the total borrowing needed to achieve the desired credential, and
understand what that will translate into for monthly payments down the line.
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