Financial aid is money provided to students to help pay for higher education
costs. It can be used toward tuition fees, room and board, books and supplies,
transportation, living expenses and other costs associated with going to
college.
There are two basic types of financial aid:
Merit-based aid - awarded to students based on
individual achievements, such as grade point average, test scores, activities,
special talents, community service, etc.
Need-based aid - awarded to students and families
based on eligibility and demonstrated need.
For additional information and a better understanding of what financial aid is
available, please browse through the links on the left side of this page.
Once you know the kinds of financial aid available, you should estimate the
costs involved in attending the colleges you're considering. Every school uses
the same formula to determine how much federal financial aid to award to
students, though the numbers will vary between every school. The formula is:
COA
The school's COA includes tuition, fees, room and board, books and supplies,
travel, and personal and incidental expenses.
EFC
Your EFC is the financial amount a family is estimated to be able to contribute
toward college costs each year. The EFC is a commonly used financial aid term,
which indicates both a student's and a parent's current ability to pay. The
federal government uses a formula to assess families' financial circumstances,
and will come up with the EFC.
Additionally, the PLUS program requires a credit check. The PLUS credit check
isn't as rigorous as many personal lending programs, and instant
pre-approvals
are available and save a lot of time and hassle.
The college financial aid office will develop a financial aid package for your
child, taking into consideration all the financial options available at that
particular school. Basically, the award letter will tell you the total amount
of financial aid a school is offering. The aid list includes scholarships,
grants, work-study, and loans. Every school has its own guidelines for putting
together a package. Some will begin by awarding every student the maximum
Stafford loan amount possible and then providing other aid. Other schools will
award grant aid first, followed by work-study and educational loans.
Most financial aid administrators follow these basic steps in putting together a
financial aid package:
- Determine the student's expenses or total cost of attending the school.
- Review the EFC (Expected Family Contribution) as determined by the federal government.
- Compare the total cost with the EFC to establish a student's need and
eligibility for federal and state financial aid programs.
- Reevaluate the EFC to determine eligibility for institutional aid (every
financial aid office has different rules and guidelines for this step; this
will include need-based and merit-based aid).
- Put together a complete financial aid package to offer the student.
There are several things that should affect your decision when taking out a
loan. With the MPN (Master Promissory Note), using one lender throughout the
course of your education is encouraged. If you stay with the same lender and
school, a single note can cover all federal Stafford loans. This also
simplifies repayment terms, facilitating one bill each month, one lender to
update with changes, and one source for information and assistance.
Some things to consider are:
- Borrower benefits
- Payment methods
- Account access
- Customer service
Student loans have a repayment term of up to 10 years. Repayment options include:
Standard repayment: Principal and interest payments
are due each month throughout the loan repayment term.
Graduated repayment: Payments are smaller at the
beginning of repayment and step up at specified periods and in specified
amounts over the term of the loan.
Income-based repayment: Monthly loan payments are
based on a percentage of the borrower's monthly gross income.
Extended repayment: Extended repayment provides
eligible federal Stafford, federal PLUS, and alternative loan / federal
consolidation loan borrowers with payment relief through a lengthened repayment
term of up to 25 years.
Looking for free scholarship information? Getting into college and paying for
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