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Home > Consumer Focus Archive > ABC's Financial Aid
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Consumer Focus: ABC's of Financial Aid
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ABC's
of Financial Aid
The cost of higher education
and the process of applying for financial aid have major effects on your life
including: your choices in college or university, your expected financial
contribution toward tuition, the methods students employ to pay for school, and
your credit rating after graduation. Here is some useful information to guide
you through the process of applying for financial aid and to prepare you for
what happens after you graduate.
Posted: September 1, 2003
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 Who is Eligible?
The US Department of
Education along with many states and schools uses information about you
collected on the Federal Application for Federal Student Aid (FAFSA) to
determine eligibility for financial aid. The Department of Education's
website lists the following examples of requirements to receive aid from
Federal Student Aid programs:
- Be a citizen or eligible
noncitizen of the United States with a valid Social Security Number;
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Have a high school diploma or a General Education Development (GED)
certificate or pass an approved "ability to benefit" test;
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Enroll in an eligible program as a regular student seeking a degree or
certificate;
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Have registered for Selective Service,
if you are a male between the ages of 18-25; and
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Have a result of Eligible or Partially Eligible on the Drug Conviction question
(Question 35). Any conviction for using or selling illegal drugs prior to
applying for financial aid or after the reception of financial aid, may affect
your eligibility for aid.
Note: When applying for
financial aid, your answers on the FAFSA will be used to determine if you are
dependant
or independent. Most students are dependent, which means that the
income of your parents will be considered when determining your expected
financial contribution to the cost of school. This means that even if you
completely support your self and you parents cannot contribute to the cost of
your education, for financial aid purposes your parents are expected to pay
part of the bill.
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Free Application for Federal Student AID
(FAFSA)
Applying for financial aid
begins with filling out the Free Application for Federal Student Aid (FAFSA). Federal and State governments
as well as individual schools, determine student's financial aid needs and
expected contributions based on the results of the FAFSA
Before you begin fillingout the FAFSA
make sure you've gathered all the supporting
documents you'll need to fully complete the application.
The deadlines for submitting financial
aid applications at the federal and state levels
and at your school may differ so pay close attention
to these dates. You should also keep in mind that
although you may also use the FAFSA to apply for
aid from other sources, such as your state or school,
you may be required to complete additional forms. Top |
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Types of
Financial Aid
Financial aid is either need
or merit based and comes in five basic forms:
- Work Study - Part time
employment at the University or College you attend. Work Study is awarded to
the student, but they are required to find a position and earn the money. This
is not a hand out, just an opportunity to work.
- Scholarships - Free
money or funds awarded to you to pay for higher
education. Criteria, such as academics, sports
ability, talents, affiliations with various
groups, or career plans are used to award scholarships.
There are a number of resources that are useful
for you when searching for scholarships including FinAid.
Be aware of scholarship scams.
- Loans - Money for school
that has to be paid back. Education loans carry significant responsibilities.
You must apply for your own loans and manage the amount that you borrow. Also,
you are responsible for repaying the full value of their student loans plus any
accrued interest after graduation. While there are a myriad of individual loans
available to pay for school, Sallie Mae (a semi-governmental agency)
manages the three standard loans that student's and their families use: the
Stafford Loan, the PLUS Loan, and the
Perkins Loan.
- Grants -Money awards
that do not have to be repaid. There are a ton of private grants awarded to
defray the cost of school for students each year. Each grant has it's own
requirements that may include anything from grade point average, to degree
being pursued, to income. In addition to private grants, the federal government
offers the Pell Grant
and the
Federal Supplemental Educational Opportunity Grant.
- Fellowships - A form of
aid awarded by schools that is typically given to graduate students but in some
cases to undergraduates to help support their education. Some fellowships
include tuition waivers or payments to universities in lieu of tuition. Most
fellowships include a stipend to cover reasonable living expenses. Students
should contact their academic department to inquire about
fellowships.
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After
Graduation
Graduating from college
brings many opportunities and challenges including finding a job, moving, and
if necessary managing your student loans. Most loans provide a grace period
after graduation. The purpose of this grace period is to allow you time to find
a job and settle into post-school life. Your loan provider will send you a
repayment schedule that details the amount owed, when payments are due, and
where payments should be sent. Money saving programs and loan consolidations
are often offered to students upon graduation as well.
Students are warned to avoid
delinquency and default at all costs. Late payments are reported to all credit bureaus
and will negatively affect the your ability to get credit cards, buy a
car, and even buy a house.
Note: It typically takes
seven years for a bad credit item to be removed from a credit report.
If you miss nine months of
payments you are considered in default on your loans. Results of default
include: garnishment of wages, possible legal action by the lender, loss of
future eligibility for financial aid, loss of forbearance and deferment
options, higher costs due to increased interest, and negative credit
reports.
Paying for college is
typically the first major debt of your life. But, on average college graduates
earn seventy percent more than non-graduates. So, while we recommend you give
serious thought to debt management, keep in mind that your student loans are
financing your future earning and promotion opportunities.
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Other Resources
This is just a brief
overview. For more information on Financial Aid, check out these
resources: Read these
publications online or order them from FCIC:
Websites*:
* Names of resources and
organizations included in this online article are provided as examples only,
and their inclusion does not mean that they are endorsed by the Federal Citizen
Information Center or any other Government agency. Also, if a particular
resource or organization is not mentioned, this does not mean or imply that it
is unsatisfactory.
*If you
click on these links, you are leaving FCIC's website. Please bookmark us before
you leave so you can return easily. FCIC is not responsible for the content of
these websites.
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For more information on other popular consumer issues check out FCIC's
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