July 12, 2006

Financial Aid 101

Posted in The Financial Aid Process at 2:35 PM by Joe From Boston


Let’s start this with a quick introduction to the world of Financial Aid. 

The Financial Aid Process for any given year begins with the FAFSA.  You need to submit it every year.  The FAFSA is CRITICAL.  You want to get this in as early as possible, because the school’s financial aid office uses the FAFSA to determine the EFC, or expected family contribution.  This is the amount the family is expected to pay to cover the cost of attendance.  The FAFSA will ultimately determine the need for assistance from the following types of federal student financial assistance: Federal Pell Grants, subsidized Stafford Loans (though the William D. Ford Federal Direct Loan [DL] Program or through the Federal Family Education Loan Program [FFEL]), and assistance from the “campus-based” programs—Federal Supplemental Educational Opportunity Grants (FSEOG), Federal Perkins Loans, and Federal Work-Study (FWS). 

So get that FAFSA in early!  Why early?  Schools have a limited amount of federal funding to allocate, and if you get yours in late, you might just get less of an award. 

Next comes an award letter from the school to the student, offering a combination of loans, grants, scholarships and work study opportunities.  If you are awarded a Stafford loan, you can now apply for it (yes it seems an odd order to do it in, but it’s run by the government, so we just nod and smile).   

If you still need to find more funding, PLUS Loans and Alternative Loans are available.  PLUS Loans are for parents or guardians to take out to fund their children’s higher education.  They are not need-based, but credit based, so you’ll need to pass a credit check to get this type of loan.  They have relatively low interest rates as they are federally guaranteed.  Alternative student loans are not federally-backed, and so have a higher interest rate because of the risk.  They are also credit-based.

And of course scholarships – apply early, apply often, apply even after you’re a freshman.  I’m living proof that scholarships can change your life – financially at least.  During my sophomore year I was awarded a full-ride scholarship for women in the sciences that allowed me to graduate debt free.  It’s not impossible; it just takes a bit of effort.

So that’s a quick view of what you need to do as a parent, and what you need to get your children to do.  (If they’re anything like I was, they’ll be lethargic and want you to do it all!)

In the next couple of posts, we’ll be taking a closer look at these steps so you’re comfortable with what’s coming up.  And feel free to submit any questions you might have in the comments on this blog, and I’ll try to answer them for you.

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2 Comments »

  1. Hi January,

    Take a look at StaffordLoan.com – it’s a great resource for information on Stafford Loans. The normal repayment period is 10 years, but you can consolidate it to make the payments over a longer period.

    Also, if you will be attending school full-time, you might be eligible for a forbearance, which essentially put your loan payments on hold for a period of time. You’ll want to check with your lender to see if you qualify.

  2. january said,

    Is it true that if you apply for the Stafford loan and you don’t have to pay back the loan until you are all done taking classes. I graduate in may but i will still be attending school for nursing, i’m thinking about applying for the loan next semester and i would like more info about it. Can you please get back to me ASAP about how long i have to pay the loan back. Thank you January Ransom


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