College costs increase due to many factors, such as increase in faculty salary, building and energy costs, technology costs, and the fact that the number of college-bound high school seniors is declining. Some schools play "robin hood" by raising tuition that wealthier students can afford, and monies are distributed to those with less money. However, COLLEGE IS MORE AFFORDABLE THAN MOST PEOPLE THINK. Seventy-five percent of college students receive some type of financial aid. It does not cost you anything to apply. Even if you think you may not qualify, it is worth applying to find out. Some colleges require that the Free Application for Federal Student Aid (FAFSA) be filed, even if the student's aid is based solely on academic or athletic performance. Even if you do not qualify for need-based aid, you may still qualify for merit-based or no-need based loans. IT IS TO YOUR BENEFIT TO APPLY FOR FINANCIAL AID.
Typically, aid resources come from:
Parental contribution; every family is expected to pay something.
Need based scholarships or grants from a college or outside organization
Your own contribution from savings, loans, and jobs.
Assistance unrelated to demonstrated financial need.
Types of Financial Aid
Financial aid monies come from a variety of sources:
Federal Government
The Federal government sponsors grant and loan programs, i.e. - Pell Grants, the Supplemental Educational Opportunity Grant (SEOG), Perkins loan, Federal Stafford loans, Federal Parent Loan for Undergraduates, Federal Direct Loans, and Federal Work Study programs.
State Government
State governments also provide a variety of monies. These financial aid programs vary from state to state, so be sure to contact your state's department of education. State programs may constitute grants, loans, and work-study programs. Many state programs are jointly funded by the state and federal governments through the Federal State Student Incentive Grant Program. State grant programs require that you be a resident of the state awarding the grant. Most states require that you attend a college in your state of residence in order to receive state-based aid.
Institutional Funds
Institutional funds are those monies that are offered by the schools themselves. The monies are typically in the form of scholarships, grants, and loans. Requirements and qualifications vary from school to school. Eligibility for institutional-based scholarships comes from some or all of the following criteria:
athletic skill
exceptional academic ability
specific backgrounds
specific major or career objective
special talents
specific geographic areas
criteria developed by the individual school
exceptional financial need
Merit-based scholarships are often based on the following criteria:
grade point average
admission test scores
difficulty of high school curriculum
high school course load
class rank
special talents
Private Sector
There are also monies offered by the private sector. Non-profit groups, organizations, companies, and individuals sponsor grant and scholarship programs. Requirements vary from group to group. Loans are also available from privately owned and operated banks, savings and loans, and other institutions.
There are four main categories of financial aid: scholarships, grants, work-study, and loans.
Scholarships and Grants
Scholarships and grants are considered "free money" or "gift aid. " This means that you do not have to repay this type of aid. There are many ways that students receive scholarships. While most scholarships are awarded on the basis of academics, athletics, or special talent, at times a student's financial need is also given consideration. Schools often have their own scholarships and therefore have their own requirements for each scholarship. In some cases, you do not apply directly for the scholarship. That is, your application for financial aid in combination with your qualifications may make you eligible for certain scholarships. There may be other scholarships for which you may have to fill out specific applications. Schools are not the only institutions that award scholarships. Many companies and non-profit groups offer scholarships. These groups often have their own eligibility requirements and their own applications. Just as you would inquire at your school of interest about the scholarships being offered, you must also do some searching to find out which scholarships are available within the private sector. You can start looking at the library, in the newspaper, in scholarship books, or on the Internet.
The following are a couple of Federal grants available to students:
Federal Pell Grant
The Federal Pell Grant is awarded to undergraduates by the federal government. The eligibility for the Pell grant is determined according to a formula developed by the US Department of Education. Use the FAFSA to apply for the Pell grant. Your Student Aid Report will notify you if you are eligible for the Pell grant. Awards range from $600 to $2400.
Supplemental Educational Opportunity Grant (SEOG)
The SEOG is another federally funded program. This grant is awarded to students with exceptionally high need. The SEOG is typically valued at $4000 per year. Application and eligibility for the SEOG is done and determined by the FAFSA.
Work-Study
Work-study programs are funded by either the federal or state government. These programs allow students to have on-campus jobs while taking classes. These jobs may range from work in administrative offices, grounds keeping, or work in an academic department. Rate of pay may depend on year in school. Work-study programs may differ from school to school. In many instances, the work-study award is need-based. The jobs pay at least current federal minimum wage. Work hours may be limited by the school and the amount of the award. Wages are paid directly to the student and at least once a month.
Loans
Loans are a type of financial aid which you will have to pay back; loans are also called "self help aid." In most cases, loan amounts are disbursed per term in schools, such as per semester or quarter. Loans may vary in a number of ways: eligibility, interest rate, maximum amount borrowable, etc. The following are examples of the most common types of loans.
Learn more about student loans at KeyBank
Perkins Loan
The Perkins loan is funded by the federal government. This is a low-interest loan (5%) and is offered to students with financial need. Repayment begins after graduation or after the student leaves school. Application for the Perkins loan is done via the FAFSA. The federal government pays the interest while you are in school. There is a 9-month grace period after graduation.
Federal Subsidized Stafford Loan
recipient: undergraduate or graduate student
eligibility: school conducts need analysis to determine eligibility
loan amounts:
year 1 - $2,625
year 2 - $3,500
year 3, 4, 5 - $5,500
graduate school - $8,500
aggregate undergraduate school - $23,000
aggregate graduate school - $138,500
deferment: in school, unemployment, military, forbearance
interest rate: government pays interest while in school. Rate is 91 day T-Bill plus 2.5% during in school period; 91 T-Bill plus 3.1% during repayment period. Current rate is 7.66%; ceiling is 8.25%. Annually adjusted every July 1.
repayment terms: six-month grace period, beginning at graduation or when student leaves school or drops below half-time status. Minimum monthly payment of $50. Up to 10 years to repay.
fees: guarantee fee of 1%; origination fee of 3%.
Federal Unsubsidized Stafford Loan
recipient: dependent undergraduate student, independent undergraduate student, or graduate student.
eligibility: school conducts need analysis to determine eligibility; not based on need.
loan amounts:
year 1 - $6,625
year 2 - $ 7,500
year 3, 4, 5 - $10,500
graduate - $18,500
aggregate undergraduate school - $46,000
aggregate graduate school - $138,500
deferment: in school, unemployment, military, forbearance
interest rate: borrower is responsible for all interest, which begins to accrue after the first disbursement. Deferment options available. Rate is 91 day T-Bill plus 2.5% during in school period; 91 T-Bill plus 3.1% during repayment period. Current rate is 7.66%; ceiling is 8.25%. Annually adjusted every July 1.
repayment terms: six-month grace period, beginning at graduation or when student leaves school or drops below half-time status. Minimum monthly payment of $50. Up to 10 years to repay.
fees: guarantee fee of 1%; origination fee of 3%.
Federal Parent Loan for Undergraduate Students (PLUS)
recipient: parent of dependent undergraduate student
eligibility: loan may not exceed educational cost minus aid. Not based on need.
loan amounts: no cap or minimum. Cost of attendance minus other financial aid. Credit guidelines apply.
deferment: parents in school, unemployment
interest rate: borrower is responsible for all interest. Rate is 52 week T-Bill plus 3.1%. Current rate is 8.98%; ceiling is 9%. Annually adjusted every July 1.
repayment terms: repayment begins within 60 days after disbursement of loan proceeds. Minimum monthly payment of $50. Up to 10 years to repay.
fees: guarantee fee of 1%; origination fee of 3%.
Bank Loans
See the specific bank for details.
Applying for Financial Aid
Even if you are not sure about which school you will be attending or if you will need financial aid, IT IS WISE TO APPLY FOR FINANCIAL AID. By applying for financial aid, you are not obligated to accept the award that is offered to you. You may be awarded funds you had not been expecting. In some cases, financial packages assist students in choosing a school, though it is not always the sole criterion for making a decision.
You must meet the following criteria to be eligible for financial aid:
Enroll at least half-time in a college curriculum leading toward a degree or certificate.
Have financial need.
Have a GED or high school diploma.
Be a US citizen or eligible non-citizen.
Register with the Selective Service, if required.
Make satisfactory academic progress.
Do not owe a refund on a Federal grant or are in payment default on a Federal education loan.
Expected Family Contribution (EFC)
The Expected Family Contribution (EFC) is another term for the estimate that your family will have to pay. This amount is determined by the information provided on the FAFSA or the CSS/Financial Aid PROFILE. The EFC is the initial out of pocket payment expected of your family for one academic year. Once the EFC has been calculated, the government forwards this information to the schools you are considering.
The EFC is calculated based on the following:
parental income (includes taxable and non-taxable income from the year preceding the award year);
parental assets (includes the value of stocks, bonds, savings accounts, and business assets as of the date you signed the form);
student income (student adds all personal income and subtracts federal, state, and social security taxes);
student assets (student adds all assets).
Free Application for Federal Student Aid (FAFSA)
The Free Application for Federal Student Aid (FAFSA) is the most common application for financial aid. As stated in the title, this is an application prepared by the federal government and does not cost anything to complete. This document requires that you and your parents provide information about your family income. There are separate sections for you and your parents. The FAFSA is available for the following academic year beginning in late November or early December. That is, the FAFSA you will need for your freshman year in college will be available in the early winter of your senior year. However, BECAUSE INFORMATION ABOUT YOUR INCOME FOR THE ENTIRE CALENDAR YEAR IS NEEDED, YOU MAY NOT RETURN THE FAFSA UNTIL AFTER THE 1ST OF JANUARY. IF YOU MAIL THE FAFSA BEFORE THIS DATE, IT WILL BE RETURNED TO YOU UNPROCESSED. Also, it is not absolutely necessary that you and your parents have filed you taxes in order to complete the FAFSA; the FAFSA allows you to estimate your taxes using your W-2s; you may correct the information later if need be. Of course, it is wise that you do have your taxes filed as soon as possible. For most schools, the priority deadline for returning the FAFSA is FEBRUARY 15. Double check deadlines for each school. By filing the FAFSA, you are applying for federal and state monies, and usually most funds available at the institution to which you are applying.
Some basic questions asked on the FAFSA include:
Your parents' income for the previous tax year. This includes salary and wages, pensions, dividends, interest, Aid to Families with Dependent Children (AFDC), unemployment benefits, and Social Security benefits;
Your income for the previous tax year, including all of the sources of income listed above.
Tax returns for the previous tax year;
Family and personal assets: includes checking account balances, savings, stocks, bonds, real estate investments, business ownership, corporate farms, and trusts. Home and farm equity are not considered assets for federal and state aid. However, many independent colleges consider home and farm equity as assets in determining EFC; if so, you will be asked to complete the CSS/Financial Aid PROFILE;
Your parents' age and their need for a retirement income;
The number of children and other dependents in the family household;
The number of family members in college;
Your status as a dependent or independent student;
You should note that the signatures of you and your parents indicate that the information provided is accurate and true. Additionally, your signatures indicate that proof can be provided to back up statements provided on the FAFSA.
Terms used for FAFSA income information:
earned income: salary, wages, and tips. This figure is used to calculate some of the tax allowances. Be sure to include this figure and the adjusted gross income figure in the estimator form.
untaxed income: untaxed income and benefits, AFDC, child support, welfare, pensions, military subsistence allowances, and veterans benefits.
tax-deferred income: includes the amount contributed to IRA, 401k, and Keigh payments for the prior tax year. You are not required to include the total amount in these retirement funds, only the amount contributed during the prior tax year.
federal tax paid: includes income tax paid. Do not use the amount of tax withheld on your W-2, but the actual federal income tax paid. Do not include any FICA/Social Security tax paid, as this will be calculated automatically from the figures reported for earned income.
liquid assets: includes cash, savings accounts, and checking accounts.
net home equity: net value of the family home (i.e. - the current market value less the outstanding balance on the mortgage).
other assets: include other real estate equity (not your principle residence) and the net worth of any investments (stocks, bonds, mutual funds, CDs, etc.). Do not include the value of the family home nor the value of any retirement funds or pensions.
net worth of business or farm: do not include the value of the home if it is the primary family residence.
Materials needed to complete the FAFSA:
previous year's tax return (1040/1040A/1040EZ);
W-2 forms and any 1099s;
completed federal income tax returns with all relevant schedules;
records of any untaxed income such as welfare, social security, AFDC/ADC, veterans benefits;
current bank statements;
current mortgage information;
brokerage statements; records of stocks, bonds, and other investments;
records of income received and records of IRS deductible business expenses if parents are self-employed;
business financial statements and/or corporate tax returns if parents own a business;
any other investment records or statements;
records of child support paid to or received from a former spouse;
medical and dental expenses actually paid for or charged during the year;
student's social security number and driver's license number.
Tips on completing the FAFSA:
Have all family financial records on hand before starting.
Make sure the name(s) used on the FAFSA match the name(s) used on the social security card.
Make a copy of the form as a practice sheet.
Read all instructions carefully.
Use a #2 pencil or a pen with dark ink.
Complete only the sections you are required to complete.
Print neatly and carefully.
Do not cross out anything. If you make a mistake, erase completely.
Round off dollar figures to the nearest dollar.
Write only in the space provided.
Do not include attachments with the FAFSA; they will be thrown away. Any attachments should be sent directly to the school's financial aid office.
Fill in every blank unless instructed to do otherwise. Enter a "0" or an "X" to indicate that the question has been considered and no answer is appropriate. Otherwise, the Federal Central Processor (FCP) and the schools may think that the data has been mistakenly left out.
When writing dates, use numbers (i.e.- 5/11/98).
When completing the section regarding income, use the income information from the previous tax year. That is, since you will most likely be completing the FAFSA in January or February, you will be using income information from the previous calendar year. Make sure you file your taxes as soon as possible. If you have not yet filed your taxes upon completing the FAFSA, you may estimate the figures using your W-2s. The financial aid office will verify the information on the FAFSA with copies of your tax returns.
Be sure to check "yes" for Federal Pell grant consideration and for state agencies.
Complete the section indicating which schools you want to receive the information.
Make sure all signatures are on the forms.
Double-check all responses for accuracy.
Make a copy of the completed application for your records.
Send the original completed form in the envelope provided.
Do not enclose anything other than the application itself.
Other information:
If your parents are divorced, the parent with whom you are living must complete the FAFSA. If you live alternately with each parent, report information about the parent who gives most of your support. If the parent with whom you live has remarried, the income of the new spouse must be reported.
Your citizenship will be verified, so answer these questions carefully.
Questions regarding the school year pertain to that fall until the end of the next summer.
List all colleges and programs (up to six) that you want to receive your FAFSA information. You can add other schools when you receive your SAR.
If you are applying to more than one school, answer the questions about enrollment according to your first choice school.
If the signatures are missing, your application will be considered invalid and will not be processed.
Keep a copy of your FAFSA on file for future reference; each year, a pre-printed application should be sent to you. You will only have to enter the information which has changed over the course of the year.
When mailing the FAFSA, get a certificate of mailing from the post office as proof that you sent the forms by the deadline.
The Process
Most students will file for financial aid as a dependent student, listing information pertaining to both parents' and student's income. To file as an independent student, check with the financial aid office to see if you qualify. Typically, independent status is for those students who may be wards of the court or whose both parents are dead and do not have a legal guardian. You may also receive independent status if you have a legal dependent other than a spouse. If these descriptions do not apply to you, you probably do not qualify for independent status.
Inquire of the financial aid offices which forms are required. Typically, you will be required to complete the FAFSA. Some schools require the CSS/Financial Aid PROFILE in addition to the FAFSA. Also, schools typically have their own financial aid forms you will have to complete.
After submitting the FAFSA, it takes 4 to 6 weeks for processing. You will then receive your Student Aid Report (SAR) in the mail. The SAR is a summary of the information provided on the FAFSA. You are to correct any inaccuracies on the SAR and resubmit the SAR to the Federal Processor. The SAR also lists your EFC. The time that your receive the SAR is about the same time that the schools receive the information electronically; you need not send the SAR to the schools. To find out if your FAFSA has been processed or to request a duplicate of your SAR, call 1-319-337-5665.
College Scholarship Service (CSS)/Financial Aid PROFILE
The CSS/Financial Aid PROFILE is another kind of financial aid application. It asks for more extensive financial information than does the FAFSA. Not all schools require the CSS/Financial Aid PROFILE, so be sure you file only for those schools which require it.
The Financial Aid Package
The financial aid office compiles all the information about your financial status to create an award package. Such information includes:
cost of attending that college;
your financial need;
your EFC (based on FAFSA or PROFILE information);
private or local scholarships or grants you have received;
financial aid provided by state and federal governments (as determined by FAFSA).
Colleges can then add in any institutional grants, scholarships, or loans. Remember that a school is not obligated to cover all of your financial need. If all the financial need is not met, "gapping" occurs. If you have a gap, it is up to your family to seek out the resources to cover this amount.
If you wish, you may try to negotiate with the school for more aid. Some schools may or may not be willing to do this. Those that reconsider your package may have a special process for reconsideration in which you may have to complete specific paperwork. Again, the school is not obligated to cover all of your need.
When evaluating your package, consider the following:
Are scholarships for one year, or are they renewable?
Does the aid consist of more gift aid or self-help aid?
Does the budget the package states coincide well with the reality of attending that school?
Calculate your travel expenses.
How much debt will you and your family be able to live with while you are in school and after you have graduated?
Evaluate loan terms. Be sure to consider the loan amount, interest rates, payment schedules, early payment penalties, and the length of the loan.
Try to avoid taking a variety of small loans from different companies. This may be more costly than taking one large amount. Again, investigate the terms of the loans.
Find out if your award carries over into the next three years. Because some schools reserve gift aid for freshmen, you may receive more self-help aid in the coming years. Find out if your school structures packages in this manner.
Negotiating your award package may be done at some schools. Some schools have specific procedures for doing this. Schools may differ in their negotiations, such as giving preference to those with better academic records or those with higher financial need. Sometimes schools will take into consideration the award packages other schools may be offering you.
Special Circumstances
If your family has special circumstances, you may want to see if you can renegotiate your award with your school. Some special circumstances include the following:
two or more family members in college at the same time;
single parent family;
secondary school tuition (not considered by all schools).
AGAIN, DO NOT FORGET TO APPLY FOR FINANCIAL AID EVERY YEAR!!!
