The StudentReady Guide to Financial Aid

The StudentReady Guide to Financial Aid is the place to go to learn about student loans, federal student aid such as grants, available scholarships and even getting tuition reimbursed by your employer.

Our Guide is broken into four sections:

Financial Aid Basics
Student Loans Versus Grants
Scholarships forSchool
Employer Tuition Reimbursement

Keep in mind that many students use a combination of all these types of financial aid in order to pay for school. Getting an education is an investment in your future, and it's important to make this investment wisely.

Financial Aid Basics

Financial aid for college is truly a maze for most students. There are many federal and state student aid programs, Stafford loans, private student loans, and endless scholarship qualifications. It’s enough to boggle the mind. Some students throw up their hands and charge tuition on a credit card. But there are much smarter ways to fund your education.

Fortunately, the government recognizes that an educated workforce is in the best interest of the country. As a result, there are many incentives in place to encourage people to obtain or continue their education. Some of these include: tax deductions or credits for tuition, student loans with easier qualifications and discounted interest rates, direct federal student aid such as Pell grants, and tax breaks for employers to help pay for school.

Fast Fact: Federal student aid helps 14 million postsecondary students with $84 billion in aid every year. Source: US Department of Education

The first step to take is to fill out the FAFSA form. This is the Free Application for Federal Student Aid and it can be found at www.fafsa.ed.gov. The form is long and complicated, but there are changes coming soon to simplify the process. Beware of companies charging fees to complete the FAFSA. This is a free service accessible to any student in the United States.

The FAFSA results will tell you what federal loans and grants you can get to pay for school. If you have the results sent to a college or university, this alerts the school that you are interested in receiving financial aid information. Make sure you are in contact with a financial aid administrator at the school. The administrator can help guide you through the financial aid process and work with your personal financial circumstances.

Student Loans Versus Grants

After you have completed the FAFSA, you will receive a Student Aid Report (SAR). The SAR shows what your Expected Family Contribution (EFC) will be. In other words, this is the amount you are responsible for paying in the upcoming academic year. But don’t worry – there are resources available to help you cover the EFC.

To determine what federal student aid you are eligible to receive, use the following formula:

Cost of Attendance at your school - Expected Family Contribution = Financial Aid Need

This financial aid need can be met with various federal student loans and grants. The main difference between a loan and a grant is that you are responsible for repaying the loan, while a grant is essentially “free money” that you generally do not have to repay.

Federal Grants

There are five main types of federal grants. The most widely used is the Pell Grant. But depending on what area of study you are pursuing and what your financial aid needs are, you may qualify for the other four types: Federal Supplemental Educational Opportunity Grant (FSEOG), Academic Competitiveness Grant (ACG), National Science and Mathematics Access to Retain Talent Grant (SMART) or Teacher Education Assistance for College and Higher Education Grant (TEACH).

The Pell Grant is available almost exclusively for undergraduates. The amount granted depends on your cost of attendance, expected family contribution, whether you are a full- or part-time student. For the 2008-2009 academic year, these awards ranged from $400 to $4,731. The funds will flow through the school and are either applied to the amount you owe or are paid directly to you.

Student Loans

Before you take out a student loan, keep in mind that you have a legal obligation to repay the loan. Even though you are generally not required to make payments on the loan while in school, these student loans will start coming due after you graduate. It is very difficult, if not impossible, to discharge your federal student loans in bankruptcy.

There are two broad categories of student loans: loans subsidized by the government (federal student loans) and those offered by financial institutions (private student loans).

Always max out your federal student loans before considering a private student loan.

There are four main types of federal student loans:

Perkins loans
Stafford Loans (subsidized and unsubsidized)
PLUS Loans
Consolidation Loans

Perkins loans are need-based and are available for both undergraduate and graduate students. You pay 5% interest and the repayment period is 10 years after graduation. Undergraduates can borrow up to $5,500 per year (maximum $27,500) while graduate students can borrow $8,000 per year (maximum $60,000).

Stafford loans are also available for both undergraduate and graduate students enrolled at least half time. They come in two flavors. Subsidized loans are need-based and the government pays the interest that accrues while you are in school. Unsubsidized loans are not need-based, have a slightly higher interest rate, and the student is responsible for paying interest that accrues during school.

The amount available for Stafford loans depends on your cost of attendance, whether you are dependent on your parents, and any other aid (including Pell Grants) you have received. Independent undergraduate students can borrow between $9,500 and $12,500 a year (maximum $57,500) and graduate students can borrow $20,500 a year (maximum $138,500). Of these amounts, usually a little less than half can be subsidized, while the rest is unsubsidized. You can repay these loans over a 10 to 25 year period depending on your repayment plan and the amount you owe.

PLUS loans are available for dependent undergraduate students and for graduate students. You can borrow up to the cost of attendance minus any other financial aid, meaning there is no set maximum amount you can borrow. Unlike the Perkins and Stafford, however, the PLUS does consider your (or your parents’) credit histories. If you have less than perfect credit, you may have to have a co-signer.

Consolidation loans are available after you graduate. Depending on the types of loans you currently have, you may be able to lower your interest rate and/or stretch out your repayment period.

Federal Work Study

Don’t forget that you may be eligible for a federal work-study job. The government provides a part-time job while you are in school, allowing you to earn money towards tuition, room and board. Similar to a grant, you do not have to repay work-study funds. Work-study jobs are available for undergraduate and graduate students on need basis and can provide you valuable experience in your area of study in addition to extra money.

Scholarships for School

Student loans and grants are not the only ways to pay for school. Often, your school of choice will have funds available to help out students.

After you complete the FAFSA and have the results sent to your schools of choice, make contact with a financial aid administrator at your schools. The financial aid administrator can help determine whether you qualify for scholarships through the school or perhaps through other organizations. You will receive a financial award letter which details what financial aid you will receive from the school in addition to any support from the federal government in the form of grants or loans.

In addition to federal student aid and scholarships from schools, there are many opportunities to earn money for school. Take a look at the following organizations:

Your state's higher education department. States also provide students with help for college.
Americorps. This organization provides aid for students before, during or after their education.
Byrd Program. This scholarship program is based on academic excellence.
Business and labor organizations. Do you, you spouse or your parents work for a company or union that provides scholarships to employees or their families?
Organizations and foundations. Charitable or fraternal organizations often provide help to students. These include alumni associates at your school of choice.
US Military. The post 9-11 GI Bill offers terrific benefits for soldiers and even their spouses and children.
FastWeb scholarship search. FastWeb helps you to find scholarships.

Beware of scholarship scams or student loans scams where companies charge you fees to find money for college. You can find all the information you need for free from your college’s financial aid department and the internet.

Some companies also lure you into giving personal information such as your name, address and Social Security number while “searching” for scholarships on your behalf. Such companies may use this information to steal your identity.

Employer Tuition Reimbursement

With companies cutting budgets you may think your employer would never kick in any help for your education. But companies realize that educated, knowledgeable employees are more valuable to the organization. Ask your company’s HR department whether tuition assistance is available. It may not cover the entire cost of your education, but it can help when combined with student loans and grants, scholarships, and other financial aid.

There are a few things to keep in mind when using employer funds for your education:

Some employers have grade or GPA requirements, meaning you need to maintain a certain overall Grade Point Average or achieve a minimum grade in a class in order for your tuition to be covered.
Companies may require you to stay employed with them for a certain period of time after you complete your degree. They may also restrict assistance to classes that directly correspond with your job duties. An IT administrator may not have her elective art history class covered, for example.
Many programs are set up as tuition “reimbursement,” meaning you don’t get repaid for the class until the end of the semester. Make sure you have the funds to cover your expenses until the check arrives.

Sources:

U.S. Department of Education, Federal Student Aid, Funding Education Beyond High School: The Guide to Federal Student Aid 2009-2010

www.fastweb.com/financial-aid/articles/709-employer-tuition-assistance-programs