Financial Aid for Higher Education
Thursday, March 24th, 2011
Worrying how you will pay for your son or daughter’s higher education? If you didn’t save for their college education in a 529 plan or something similar, you may be scratching your head now wondering where the money will come from. But don’t despair if you put money away for retirement and not for college, you actually made a wise investment. After all, your children can get loans and scholarships-there are no scholarships for your retirement! So if you’ve got very little put aside for college and you know you will be relying on financial aid, there are a few things you need to know.
According to collegeboard.com, 45% of financial aid awarded to undergraduate students is in the form of loans. The rest is from grants, waivers, work-study and scholarships. Even if you are only looking for federal loans, you still need to fill out the FAFSA (Free Application for Federal Student Aid).
When you are starting to look at colleges make financial aid part of your college tour and ask to speak to someone about aid while you’re there. Set yourself apart and know the players at the financial aid office. Write down their names! That way when you have questions or want to follow up, you can get personalized attention.
The first thing you need to figure out (besides what schools interest your son or daughter) is the Expected Family Contribution (EFC). This will determine about how much you and your son or daughter are expected to pay for the first year of school. This is never set in stone.
If you are divorced, figuring out the EFC can be a little tricky. The government only uses the custodial parent’s income to determine need, while private institutions will generally look at both parents. In most cases, the parent who the child has lived with for the majority of the last year is the one whose income will be used. Even if the family court ordered the non-custodial parent to pay for college, this cannot be taken into account by the federal programs. However, child support paid to you must be included in your income when determining need.
Send in the FAFSA whether or not you think you’re income eligible. You need to fill out one FAFSA and pick a max of ten schools initially to receive the form and eligibility determination. Later you can add more, so put every school down that your child is thinking of applying to. Once you’ve submitted the FAFSA, you will receive a Student Aid Report (SAR) which will have a code called a Data Release Number (DRN). You will give that code to the schools you are applying to not originally listed and they can get your information electronically.
Some schools will have their own forms you will need to fill out for programs/scholarships sponsored by the school. In addition, check what your state’s department of education has to offer! In my state, Massachusetts, there is an entire section on the DOE website on grants, waivers and scholarships students can apply for if they are MA residents.
Most schools have a Feb/March Financial Aid deadline, so don’t delay. If you cannot state your income for 100% yet because you haven’t filed taxes, you may estimate your income and go back to it later once your income taxes are filed.
Different types of federal financial aid include loans, grants, and work studies.
Federal grants don’t have to be paid back so of course those are highly desirable. You have to be income eligible for most grants. The most popular is the Pell Grant, considered the foundation of most financial aid packages.
Stafford loans are loans take out by the student. By demonstrating financial need, you may be eligible for a subsidized direct loan. Otherwise, you can still apply for an unsubsidized loan. They don’t have to be paid back until you leave school or drop below half-time enrollment, and you get a six month grace period.
A PLUS loan is a loan taken out by the student’s parents. The student must be a dependent of the parent. The student must be enrolled in a school that accepts the direct loan program and must meet the criteria for being a dependent student. In addition, the parents cannot have any adverse credit history. Both the parents and student must be U.S. citizens or eligible non-citizens to apply. The repayment period for a PLUS loan begins within 60 days after the final disbursement of the loan and this loan will be the responsibility of the parent.
Federal work study programs allow the student to work part-time and earn money to offset the expense of their education. In most cases the work assignment will be on campus but occasionally there are jobs with contracted for-profits off campus.
Campus Based Aid-could be work study, FSEOG( Federal Supplemental Educational Opportunity Grant) or Federal Perkins Loan. Often schools that offer campus based aid have earlier deadlines than the DOE’s deadlines for the FAFSA.
Additionally there are scholarships available for students who demonstrate a financial need, athletic ability, community service, etc. You can search for scholarships your child may be eligible for at either collegeboard.com or scholarships.com. Your state’s department of education website may also be of help as will the high school guidance office. Some of these private scholarships are only for high school juniors and have deadlines totally different from the FAFSA. Pay attention to their individual deadlines!
Last but not least, there are many programs both federal and private for students past their freshman year of college. Be aware of those programs and resubmit a FAFSA for every year your son or daughter needs financial aid!
