So you’re ready to dive in and begin learning the fundamentals of applying for college financial aid. At Monumental Beginnings, one of the first tasks we ask parents and students to discuss is college affordability: what is the budget? And, we ask them to get started on figuring out their EFC, and get ready to fill out the FAFSA and maybe even the CSS. Of course, many times, we get blank looks in response!
To help you get started, here are the basic terms and definitions every student and parent needs to know:
This document outlines all financial aid that a student is offered (scholarships, grants and loans available). The award letter will also describe what the student must do to keep the scholarship and/or grant, and any deadlines for accepting the award. Sometimes the award letter accompanies the acceptance letter, and sometimes it is sent to the student separately.
This official is usually located in the college’s financial aid office, and manages all billing and payments.
Cost of Attendance
This is the total cost of attending college, before any financial aid, scholarships or loans are applied. This should include tuition, room and board, books and supplies, and an estimate for personal expenses. However, this does not include transportation or other miscellaneous expenses, including initial dorm setup, athletic tickets, etc.
Managed by the College Board, this is an additional financial aid form (in addition to the FAFSA) required by approximately 300 colleges and universities. Colleges that require this form will not offer financial aid or scholarships unless it is completed. The deadline date and web link for this form can be found on the college website.
This is the difference between the Cost of Attendance and your Expected Family Contribution (EFC).
Each college defines the number of credits required to be full time or part time. Most financial aid is offered to full-time students only.
Expected Family Contribution
Using information collected from the family and student, colleges use the EFC to determine how much financial aid is offered.
529 Savings Plan
These savings plans are offered by individual states (officially called Qualified Tuition Programs) that can help a family to save money for college. 529 plans generally offer tax benefits. Money from these accounts can be used for qualified educational expenses.
The FAFSA (Free Application for Federal Student Aid) is required for any student who wants to be considered for federal student grants, work-study programs and loans. Most colleges require this form also. Most states use the FAFSA to determine if students also qualify for state-provided financial aid. Additionally, some colleges require this form prior to granting scholarships and grants.
Financial Aid Counselor
This person assists students and their parents in the process of obtaining financial aid. They are the college’s expert on loans, scholarships and grants.
This is the cost difference between any need-based financial aid, college-awarded scholarships, grants and work-study, and the Cost of Attendance. This gap can be filled by loans and outside scholarships, but can sometimes be a larger amount than a student is able to fill.
Grants are a form of gift aid, and do not need to be repaid. They are usually granted based on demonstrated financial need. Grants can be awarded by federal, state, or college level.
Loans are money borrowed to pay for college expenses. The government or banks are the most common source of loans. Loans accrue interest, and depending on the type of loan, loan repayment requirements can vary. The term “subsidized” means that the government pays the interest on the loan while the student is in college. Two types of need-based subsidized loans are Federal Direct Subsidized Loan and the Perkins Loan (usually reserved for students with the highest need). There are borrowing limits on these loans. Non-need-based loans include Federal Direct Unsubsidized Loans, which add the accrued interest cost to the loan after graduation. The Federal Direct Parent PLUS loan offers the ability for parents to borrow money needed for the balance of college cost, less any financial aid received. Private loans, almost never subsidized, usually have higher interest rates and require a co-signer if the borrower is an undergraduate student.
Merit Aid is a type of scholarship awarded to students based on achievement, typically academic. Scholarship aid can also be awarded based on the arts, athletic, or other specific requirement.
Need-Based Financial Aid
This is money granted to students based on demonstrated need for financial assistance to attend college. Some colleges will meet the student’s entire financial need requirement; most colleges do not meet full need, and students will need to supplement with scholarships or loans.
These are private scholarships awarded to a student by a source other than the college. Sources could include employers, community organizations, corporations and non-profit groups. Sometimes these scholarships must be sent directly to the college financial aid office, and sometimes they are awarded directly to the student.
The college determines this date. The college sets this deadline for students to submit all financial aid paperwork in order to be eligible for maximum consideration.
These requirements vary by state, and are usually outlined on the college’s website financial aid page. Students meeting these requirements can qualify for in-state tuition and state financial aid awards.
The Student Aid Report (SAR) is sent to each family electronically after completion of the FAFSA. The SAR will provide each family with their EFC.
The term “subsidized” means that the government pays the interest on the loan while the student is in college. Two types of need-based subsidized loans are Federal Direct Subsidized Loan and the Perkins Loan. There are borrowing limits on these loans. Non-need-based loans include Federal Direct Unsubsidized Loans which add the interest cost to the loan after graduation. The Federal Direct Parent PLUS loan allows the parents to borrow money needed for the balance of college cost, less an financial aid received.
This program will be included in the federal Financial Aid offer, and provides the student with a part time job on campus. Student earnings can be sent directly to the Financial Aid office for application toward college expenses, or can be paid directly to the student. Students who have been awarded Work-Study typically get priority for on-campus jobs. Students are not required to work, however, even if Work Study has been awarded. Colleges can also offer their own work-study. Students who are not awarded Work Study, but who desire to work on campus can often find employment.