Student's Guide to Financial Aid

Free Money is Best

Apply for as many scholarships as you can. You can start by using this search engine. Once you are accepted to the school of your choice, get to know the financial aid office. They are a great source for scholarship information. Many students are often surprised at the availability of scholarships and other assistance for which they may be eligible.

Scholarships Aren’t The Only “Free” Game in Town

Federal and State government also provides assistance, mostly need-based, in the form of grants. Completing the Free Application for Federal Student Aid (FAFSA) is the first step toward securing Federal grant money. Here are the most common types:

• Pell Grants – These constitute the largest of the government programs. Grants generally range between $400 and $5,350. In general, families showing financial need are eligible for grants, although families with higher incomes may also be eligible under special circumstances.
• Supplemental Education Opportunity Grants (SEOG) – For families exhibiting the greatest need, the SEOG offers grants ranging from $100 to $4,000 a year. SEOG funds are limited, so it is important to submit an application as early as possible.
• State Programs – Most states provide grants based on a combination of merit and financial need. Contact high school guidance counselors or state office of grants to learn what types of aid may be available and how to apply.
• College Grants – Most institutions offer several kinds of grants based on need, scholastic achievement and/or talent in a special area. Some colleges give cash grants, while others offer tuition discounts.
• Private Grants – Thousands of grants and scholarship programs are available to students with superior academic records, special interests and other qualifying characteristics. Check with employers and local, state and national organizations with which you or any member of your family may be affiliated. The local library is also an excellent reference.

If loans are required to fund your education expenses, you should always take the maximum amount in federally subsidized loans. Here’s more about the various loan types:

Government Perkins Loans are designed for undergraduates and graduate students who have exceptional economic need. Perkins loans are often desirable if eligibility requirements are met because the interest rates are set at 5 percent. Repayment begins nine months after the student graduates, leaves school or drops below halftime status. Loan amounts range from $3000 per year for undergraduates, to $5000 per year for graduate students.   

Stafford Student Loans (formerly Guaranteed Student Loans) are available to virtually all students. Students demonstrating financial need may qualify for subsidized loans, meaning the government will pay the interest on the loans while the student attends school, as well as for a 6-month grace period after graduation. If the loan is unsubsidized (not need-based), interest accrues while you attend school and repayment must begin immediately after graduation. The typical repayment term is five to ten years. Students can borrow up to $5,500 for their first year, $6,500 for their second year, and $7,500 for their third, fourth or fifth years. For graduate students the maximum is $8,500 per year (subsidized, $20,500 total including unsubsidized). 

NOTE: An important thing to remember about both the Perkins and Stafford loans is that the students, not the parents, are the borrowers and are therefore solely responsible for paying back the money. 

Parent Loans to Undergraduate Students Parent Loans to Undergraduate Students (PLUS) are made to parents. PLUS Loan limits are capped by the cost of attendance, less any other awarded student financial aid and scholarships. A PLUS loan borrower must be credit worthy. Parents may choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly.

It is very important to understand that PLUS loans are made to parents who are themselves solely responsible for loan repayment -- not the student.  Parents will be held responsible for any late payments or loan default.  In addition, the interest rate is higher than Stafford loans. Visit www.studentloans.gov for information on terms and conditions.

NOTE: Recent legislation will affect student loan programs in several ways. Many loans that formerly were processed through banks and other lending institutions are now granted directly through the Department of Education. In addition, thousands of students will be able to pay off their government loans through work in a National Service Corporation, such as AmeriCorps and the National Health Service Corps. Those entering this program could pay off as much as $5,000 worth of student loans for every year of service up to $10,000. For the latest information on all of the federal loan programs described here, call the Department of Education hotline at 800-4-FED-AID.

Other Loan Sources

Private or Alternative Loans – Several commercial lenders specialize in college lending. Your not-for-profit credit union now offers a private student loan solution through Credit Union Student Choice, a program designed to fill the funding gaps federal aid can leave behind with lower loan rates and fewer fees than other major lenders.   

Don't Forget to Investigate Work-Study Program Options

College Work-Study Program (CWS) The work-study program permits eligible students to work on campus to help offset educational expenses and reduce loan obligations. Students from higher-income families have a better chance of getting a part-time job under CWS than of getting most kinds of grants.     

Source:Balance for general financial aid information, other than private loans.