TYPES OF FINANCIAL AID.

"Debts are like children - begot with pleasure, but brought forth with pain." - Moliere

Circumstances are always changing with financial aid, and we are in one of those times right now for sure. The information below is to introduce you to some forms of aid and help familiarize you with some terms you will surely encounter, as well.

Chances are, you or someone very close to you has already gone through a financial aid process with a college or the government. Understanding their experience is always helpful, but just be aware that each family is very different and financial aid options, especially at the federal level, do change over time, so it is very important to get updated information on that process and availability.  

The likelihood of receiving a full scholarship for athletics that will cover your tuition is pretty slim for about 95% of families, sorry to say. Most families do have to borrow, at least a little, to help pay for college tuition.

WHAT IS FINANCIAL AID?

“Financial Aid” are monies to assist students and families in helping to pay for college expenses. Funds come from the federal and state governments, colleges, universities, and private organizations. There are three general components that make up financial aid when a student is being awarded. Not every student will receive all three, as it will all depend on eligibility.

SCHOLARSHIPS AND GRANTS

Sometimes called gift aid: this is free money that does not need to be paid back.

LOANS

Borrowed funds must be paid back with interest.

WORK-STUDY

Allows students to work on campus (or approved off-campus) and earn money that can be used for incidentals or help in paying college costs. 

The federal government makes up the most significant single source of funding. There are also individual states that offer financing along with colleges and universities.

HOW THE AMOUNT OF AID IS DETERMINED

It starts by completing The Free Application for Federal Student Aid (FAFSA) application. The FAFSA application collects information from both the student and parents, including income and assets (in addition to other relevant info) using a process called the Needs Analysis that results in the Student Aid Index (SAI). Note: (This used to be the “Expected Family Contribution (EFC)”, and is now replaced with the SAI).

The SAI is an eligibility index number that a college’s or career school’s financial aid office uses to determine how much federal student aid you would receive if you attended the school. This number results from the information that you provide in your FAFSA form.

Most of the tax information used to calculate the SAI is transferred directly from the IRS into the FAFSA form. Some FAFSA applicants may need to manually provide tax information.

The SAI is not a dollar amount of aid eligibility or what your family is expected to provide. A negative SAI indicates the student has higher financial need.

Colleges use the formula to determine the student’s eligibility for need-based financial aid. The basic formula looks like this:

Cost of Attendance (COA) minus Student Aid Index (SAI) equals Financial Need

COA – SAI = Financial Need

Example: $16,000 – 12,000 = $4,000

About 250-300 schools, mostly private but a few state schools too, require, in addition to the FAFSA, the CSS Profile. The Profile collects information similar to that of the FAFSA, but in greater detail and is used by schools to determine how best to use their institutional funding. It is not used for federal or state eligibility.

WHY IS THIS ALL IMPORTANT TO KNOW

It can help a family plan ahead on what they may be expected to pay towards college costs. This is only the beginning, though. If a school does not meet all need, and few do, then the difference between what the need is, and the Financial Aid awarded is, (called Gapping) will also be part of what the family will need to pay.  

Example: $50,000 COA – $45,000 in aid = $5,000 gap

TYPES OF FINANCIAL AID FUNDS

FEDERAL GRANTS

A grant is a form of financial aid that doesn’t have to be repaid (unless, for example, you withdraw from school and owe a refund, or you receive a TEACH Grant and don’t complete your service obligation).

PELL GRANT

Awarded to undergraduate students based on financial need. The amount may change each year.

FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG)

The fund is sent directly to the school, which then determines the student's amount based on their awarding strategy.

TEACH GRANT PROGRAM (TEACH)

Provides grants of up to $4,000 a year to students who are completing or plan to complete course work needed to begin a career in teaching.

IRAQ & AFGHANISTAN SERVICE GRANT

If a parent or guardian died due to military service, the student may be eligible.

LOANS

Federal student loans offered by the U.S. Department of Education (ED) to help eligible students cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school.

DIRECT SUBSIDIZED LOAN

It IS based on need. No interest accrues while the student is in school.

DIRECT UNSUBSIDIZED LOAN 

Available to undergraduate and graduate students; there is no requirement to demonstrate financial need.

DIRECT PLUS LOAN 

Direct PLUS Loans are for eligible parents and graduate or professional students through schools participating in the Direct Loan Program.

Note: A Direct PLUS Loan is commonly referred to as a parent PLUS loan when made to a parent, and as a grad PLUS loan when made to a graduate or professional student.

WORK-STUDY

• It is based on need.

• The funds that are offered to the student will be the maximum amount they can earn during the academic year. 

• Work-study is not included on the student's bill. The student must work to receive the funds that have been awarded.

STATE GRANTS & SCHOLARSHIPS

Most state funding is need-based.

• Some states offer additional assistance to students in the form of state grants or scholarships.

• Funds are not always available, depending on the state's budget. 

• Some states require a separate application with a strict deadline date.

STATE LOANS

Some states offer loans to students and sometimes for parents with reasonably good terms. They are not always funded.

Note: STATE LOAN FORGIVENESS

Some states offer their own loan forgiveness programs. The student would receive a reduction on their loans after working so many years within specific fields such as nursing or teaching. 

Note: GOOD PRACTICE FOR ALL FAMILIES

Make it a habit to keep up with your state's financial aid website regularly. They can change what is available in funding even mid-year!

INSTITUTIONAL SCHOLARSHIPS often called MERIT AID

Most are not based on need and are generally selected during the Admission process. Some of the criteria may include:

• Academic (GPA, SAT/ACT scores)

• Athletic (other than D1 and D2)

• Recruitment

• Diversity

• Talent

Take time to search your target school's websites on the available types of scholarships.    

GRANTS

Based on need and the amounts are determined by the financial aid office.

• Amounts will vary depending on student’s need and the awarding strategy set by the financial aid office.

• It can change from year to year depending on the family’s finances.

• Colleges may reduce grant money as the loan amount for the student increases.

• The student should know the school's policy when receiving outside scholarships. Some schools may reduce grant money by the amount of the outside scholarship.

SCHOOL LOANS

Some colleges offer their own financing to help families meet their college costs. 

There are also other types of outside resources available, many of these will be in the form of scholarships.