Unsurprising for many students, the financial aid package is a huge factor in determining which college they’ll attend. Every college creates their financial aid packages differently, but the types of awards you see are similar. Understanding the awards is crucial to evaluating who is providing the best aid.
Let’s start with a quick vocab lesson. The three important terms to know: the Cost of Attendance (COA), Expected Family Contribution (EFC), and need.
The Cost of Attendance typically includes your estimated tuition and fees (generally based on full-time enrollment). It also estimates the following: room and board, transportation, books, and other miscellaneous costs. Pay close attention to each college’s estimated COA because some may include more factors than others.
Your Expected Family Contribution is the number your FAFSA application generates based on the info you input. This is the amount that the government believes you/your family can contribute towards your college education per academic year. You have to renew your FAFSA each year, so your EFC can change throughout your time in college.
If there is a difference between your cost of attendance and your EFC, that is known as need. Financial aid offices do their best to cover your need by providing various forms of financial aid. Simply stated: cost of attendance – expected family contribution = need
Grants and Scholarships
You want your financial aid to consist of grants and scholarships because this is “free money” that you don’t have to pay back. Grants and scholarships come from colleges, the government, the state, and from outside sources. It is important to let your college know about any outside scholarships you earn because they can impact your financial aid package. Some grants, such as the TEACH grant, convert to student loans if you do not fulfill the associated service obligation post-graduation. Make sure to read the fine print!
Direct Stafford Loans
Direct Stafford loans are available for eligible students at colleges to help fund their education. Backed by the federal government, these loans typically have lower interest rates and more flexible repayment options than most private loans. Students are capped on the amount they can take per year. For example, a first-time college freshman classified as a dependent can only utilize $5,500 per academic year. The amount increases per year in college, up to $7,500 per academic year. There are two kinds of Direct Stafford Loans you may see: subsidized and unsubsidized.
Subsidized loans DO NOT accrue interest while you are in-school (enrolled at least half-time) or during the grace period of the loan. The grace period is for the 6 months after you leave school or drop below half-time status. A portion of your direct loans may be in the form of subsidized loans if you have a high financial need.
You will also see unsubsidized loans; these loans begin accruing interest as soon as they disburse (are applied to your bill or direct deposited to your bank account). All of the interest accrued while you are in school capitalizes (aka it will be added to your principal balance). If you can, it’s super beneficial to start making interest-only payments while still in school, so that amount does not continue to grow.
For Direct Stafford loans, you complete a master promissory note (loan contract) and entrance loan counseling (covers terms of loan, repayment etc.). These are really important so definitely pay close attention and take notes.
The acronym PLUS means “Parent Loan for Undergraduate Students.” You may see a PLUS loan estimate on your financial aid package. This means your parents have the opportunity to apply for the PLUS loan to cover your remaining cost of attendance. The PLUS loan is solely in the name of the parent, and approval is based on a satisfactory credit check. If your parents are denied the PLUS loan, they may request an endorser, or you have the option to receive additional Direct Stafford unsubsidized loans. Repayment for PLUS loans typically begins upon disbursement unless your parent applies and is granted deferment.
The Federal work-study program provides part-time jobs for students with financial need. These jobs are typically on-campus. If you are interested in being considered for work-study opportunities, be sure to indicate this on your FAFSA application. Your work-study opportunity will have a certain amount of money you are eligible to earn through this program; therefore, your hours will be capped once this amount is reached. The school will pay you directly either via direct deposit to your bank account or you can choose to have this payment applied to your student account for tuition and fees.
Understanding the different award types will provide you a solid foundation to evaluate your options. It is always beneficial to have the Financial Aid office explain your package to you and answer any questions that you have. Always remember, you can pick and choose what aid to accept, and even reduce amounts. For loans, it is wise to take only what you absolutely need and be sure to ask about payment deadlines and payment plan options. Being in the know of all things financial aid definitely pays off!