03.24.10 | Federal loan package not enough? What now?

If you have recently been disappointed with your financial aid award letter, you might be left wondering how you can cover some of the costs of tuition. What if the federal Stafford loan simply isn’t enough?

Rest assured, you’re not alone. In the vast majority of cases, a Stafford loan will not cover the entire cost of attendance. If your federal aid is less than you hoped, you may seek out alternative options. Private student loans are a common supplement to federal loans as they are based on credit, not need. You can learn more at PrivateStudentLoans.com.

In some cases, there has been a change to your situation since you filled out your FAFSA.  If a parent has since become unemployed or suffered another financial setback, you may be able to request additional funds. You should speak with your school’s financial aid office as they will work to secure you additional federal loans. Be prepared to provide paperwork to support your case (pay stubs, etc.).

03.23.10 | Let’s Plot Out Your School Expenses

As a recent college graduate, if I can share one piece of advice with all of you that are just starting college, or currently working on your degree, it’s this: plan and budget where your financial aid is coming from.

There is nothing worse than being a month out from the start of your semester with a huge tuition bill on your kitchen table and no idea how you are going to cover the few thousand dollars left behind after federal loans and scholarships are taken out. (Believe me, I’ve gone through this more than once in small panics.) So, the best way to make sure you are organized and 100% ready to start your semester with a clean, low-stress slate is to plot it all out.
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03.08.10 | Pell Grants, in Plain English

Posted in FAFSA, Financial Aid by Evan Jacobs

The Pell Grant is an excellent award set up for financially needy students to help afford the cost of college. It is maintained by the federal government, and acts differently than other financial aid offerings.

How does a Pell Grant work?

Pell Grants are based entirely off of the information presented on a student’s Free Application for Federal Student Aid or FAFSA form. They are meant for low-income students, and do not need to be repaid unless the student drops out of their degree program. One additional criteria to qualify for a Pell Grant is that the student must be pursuing his or her first bachelors degree. This means that if you are going back to school for another bachelors or are taking classes casually, you will not qualify for a Pell Grant.

In addition, your school must participate in the Direct Loan or FFEL programs for you to qualify for a Pell Grant. Check with your school’s financial aid department to see if they are approved to receive Pell Grants for their students.

Pell Grant Awards

For the 2010-11 academic year (Fall 2010 to Spring 2011), the maximum you can receive through a Pell Grant award is set at $5,350. As I said before, your individual award is largely based on the information presented in your FAFSA, but also on the total cost of attendance reported by your school. To receive the most you can from the program, you ideally want to show low family income and high cost of attendance at your chosen college.

Because of these very strict requirements, the Pell Grant is typically only seen in the aid reports of very financially-needy students. If you are an independent, low-income student, the chances of receiving one of these awards is much better than if you were reporting the income of family members on your FAFSA as well.

This can be tricky for most students, as you are forced to include your parents’ income on your FAFSA until you are 24 years old. However, if you live apart from your family, don’t have a relationship with them, and support yourself, you can legally emancipate yourself to greatly boost how much need-based financial aid you receive (assuming you are low-income, yourself.) I personally would not recommend this, but if you are in a dire enough situation that you desperately need the financial aid, a legal emancipation will strip away your parents’ ability to report you on their taxes, and therefore lower your income for the purposes of filing your FAFSA and receiving more need-based aid.

03.02.10 | Why get a Federal Stafford Loan?

Posted in Financial Aid, Stafford Loan by Evan Jacobs

First off, if you haven’t filed your FAFSA yet… get on it! Many schools’ deadlines have already arrived for financial aid, and the rest are all due within the next month. Without the information contained in your Student Aid Report (SAR) submitted to your school, they can’t begin to put together your aid package.

OK — PSA aside, let’s talk a little about Stafford loans. If you’ve read my Stafford Loans, in Plain English blog (and I hope you have… it has good stuff in it), you know the basics.

Saving Money

To use an analogy, a Stafford loan is like a pair of designer jeans you happened upon in a discount store. They have a lot of value, and cost much less than if you bought them at their original store (or in the case of loans, applied for a private student loan instead.)

Stafford loans are the most desirable type of loans that you can take out for your education due to their low, fixed interest rates. In contrast, private student loans generally have higher, variable interest rates that fluctuate with the economy and can end up costing you ridiculous amounts of interest. So, if you need to take out a loan… try to make it a Stafford. It will save your money in the long run.

02.17.10 | Federal Work Study, in Plain English

Posted in FAFSA, Federal Work-Study by Evan Jacobs

Well, it’s that time of the year again; time to file your taxes, FAFSA, and other paperwork goodies to your respective school(s). I have received a lot of questions about how different student programs work, and decided to start this “… in Plain English” blog series to address them and simplify the entire experience for you, our readers.

Today, we are going to explore how the Federal Work Study program works, and why it probably is a great way for you to make some pocket money without getting in the way of your studies or classes.

First, what is it? Work study is a federal program that was established in 1964 as part of the Economic Opportunity Act. Basically, it was introduced so that college students have more part-time jobs available to them to offset poverty and afford basic necessities (and potentially repay some of their debt) during their time at school. In the years since, work study has become an excellent tool for getting job experience while in school and serves as one of the primary ways colleges fill what normally would be intern spots in their various departments.

How does it work? Work study eligibility is determined based on the information in your FAFSA. Depending on your level of financial need, you typically can receive anywhere up to roughly $2,000 for the academic year in available earnings. The way you then receive these funds is through working in one of the campus jobs offered by your school — the money is actually kept in an account in your name at your school, and disbursed to you through payroll as you work the hours.

So essentially, the government grants you X amount of dollars for the year, and you pick a position at your school to work to earn that money. It’s just like a normal part time job, except for the fact that there is a total limit on how much you can earn during the year. As far as the pay rate for each job, your financial aid department has a sliding scale that they use to figure out how many hours per week and dollars per hour you can earn based on your award.

Why should I do it? Simply put, it’s a guaranteed job (and money, as long as you work). You get to pick a position that you find interesting — check with your financial aid office for a list of open ones — and this gives you valuable experience, as well as a regular paycheck. One other cool thing is a lot of the work study jobs are somewhat low key, so you may be able to get some homework done in between tasks. Also, every work study job has different hours, and usually are flexible… so you can work as little or as much as you need to (within the guidelines of your award.)

Important Note: If you don’t use your work study grant, it is possible that you will not be awarded another one the following year. Work study is considered a need-based privilege, and if you do not claim it and work at least one semester per academic year, the government may not offer it to you again. This doesn’t always happen, but it is just something to be aware of.

ScholarshipPoints Redemption Code: P-ENGLISH1

02.11.10 | Demystifying Federal Student Loans

Posted in Financial Aid, Stafford Loan, Student Loans by Evan Jacobs

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If you’re like me, you probably were at least somewhat confused the first time you looked at your financial award letter. “Stafford Loans”, “Perkins Loans”, “PLUS Loans”, what does it all mean?! Well friend, I’m glad you asked!

Each type of loan has a special purpose, so I’d like to break it all down for you and we’ll start with with the most common one, the Stafford loan.

Stafford Loans

To get started with these puppies, there are two different kinds of Stafford loans: subsidized and unsubsidized. The difference between the two is all about the interest; subsidized loans have a lower fixed interest rate of 4.5% for the 2010-11 academic year (meaning you pay less money over the course of the loan) and actually don’t start accruing interest until your six month grace period after graduation is over.

Unsubsidized Stafford loans begin to build interest (currently at 6.8% fixed) immediately after disbursement, which means that they snowball like private student loans. The nice thing about Stafford loans though is if you can afford to, you have the option of paying off the interest as it accrues while you’re still in school without any penalties. The end result is you pay a lot less interest over the life of the loan, and save yourself a pile of money. If you can’t afford to pay the interest while you’re in school though, don’t worry too much… you’re still getting a bargain on the interest rate compared to most private student loans out in the market.

Perkins Loans

A Perkins loan is a special type of low-interest product (5% fixed, as of 2010) intended for students with exceptional financial need. Although your need for the loan is determined based on your FAFSA, your school actually is the entity that decides whether to give you the money or not. Every year, the Federal Government grants participating schools with a certain amount of funding meant for Perkins loans, and each school can choose to lend only those funds, or add some of their own to the pool for financial assistance to their students.

If you ever write an appeal notice to your financial aid department at school, this, along with any school-sponsored scholarships or grants, is likely what they would consider you for to increase your award. One thing to consider that is a little odd for this particular type of loan is that since the school is your lender, you actually will receive the repayment bill from them instead of the government. Due to this, there can be different billing cycles… for instance, it isn’t unheard of to only be billed for this type of loan once every four months instead of monthly.

PLUS Loans

The PLUS loan is the last type of lending that the government offers to students and families, and is meant to bridge the gap between your Stafford, Perkins awards, and your total cost of attendance. Unlike the other two, the PLUS loan requires a credit check, much like a private student loan. There is a quirk though, in that if the parent does not pass the credit check, a friend or relative can actually co-sign on the loan. The APR of this loan changes every July, but will never exceed 9.0%.

As a side note, all the loans above are available to both undergraduate AND graduate students. As always, the best types of financial aid you can get are scholarships and grants (since you don’t have to pay them back!), and there are tons of resources available to find them like StudentScholarshipSearch and ScholarshipPoints. However, the subsidized Stafford loan is definitely the best option you can get as far as student loans go, and will cost the least over the course of your repayment.

*Credit Images to “Cmiper” on Flickr

ScholarshipPoints Code: MYSTERYGONE

01.27.10 | Paying for College: The Financial Aid Puzzle

Posted in FAFSA, Private Student Loans by Kristin Morris

The cost of a college education is rising every year. This year the average cost of a private four-year school was $26,273, up 4.4% from last year, and the average cost of a public school was $7,020, up 6.5% from last year. For most families, paying for college is a struggle. If you feel like you do not have all the pieces of the financial aid puzzle, you are not alone.

On January 1st the 2010-2011 FAFSA (Free Application for Federal Student Aid) was released. The FAFSA is probably the most important part of the financial aid puzzle. If you are planning on attending college in the fall of 2010 you should be in the process of submitting this form. The FAFSA determines how much federal financial aid you are eligible to apply for. There are three basic types of federal student aid:

  • Grants: Grant money is financial aid that does not have to be repaid. Most grant money is based on financial need.
  • Work-study: Work-study money is earned through a job or near campus. Work-study money does not have to be repaid.
  • Loans: Loan money, including subsidized Stafford loans and unsubsidized Stafford loans, is awarded by the government and must be repaid with interest.

Federal financial aid can be a huge help when paying for college, but since most federal financial aid is awarded based on need, not everyone who files a FAFSA will be awarded sufficient aid to cover their education. So what happens when your federal Stafford loans and grants are not enough? Luckily, there are other pieces of the financial aid puzzle that can help you pay for college.

PLUS Loans are federal student loan options that are not based on financial need, but rather on credit. There are two types of PLUS loans; Parent PLUS loans and Graduate PLUS loans. If you are an undergraduate student, your parents can apply for a PLUS loan to help supplement the cost of your education. If you are a graduate student you can apply for a PLUS loan for yourself. With the federal PLUS loan you can borrow up to 100% of unmet financial need. PLUS loan money can also help you pay for educational costs not covered by your tuition including housing and supplies.

Some students choose to add private student loans to their financial aid puzzle. Private Student Loans are an alternative student loan option. Although you should always apply for federal financial aid before pursuing this option, private student loans have a few advantages. Private student loans are awarded based on credit rather than on need. You can use private student loans for any education related cost including textbooks, housing and transportation. If you are looking for a private student loan, the new private student loan comparison tool on PrivateStudentLoans.com can help you determine which lender and loan best meets your needs.

Because private student loans are based on credit, most students need a parent, family member, or close friend to cosign the loan. A cosigner is an individual who agrees to pay any debts if the primary account holder is unable to do so. This ensures to the lender that the loan will be paid back even if the student borrower does not have the funds to make payments.

The final, and quite possibly the best, piece of the puzzle is scholarships. Scholarships are favorable because unlike loans they do not have to be repaid. Hundreds of thousands of organizations around the country award scholarships to students based on their backgrounds, interests and accomplishments. StudentScholarshipSearch.com is a website that helps you find and apply for scholarships that you qualify for.

Every student’s financial aid puzzle is put together differently. Many students take advantage of all of these financial aid options while some students only need to use one or two. Some student might qualify for more financial aid while other students might be awarded more scholarship money. Whatever your financial situation is, remember that all of these options exist to help you complete your education.

ScholarshipPoints Bonus Code: FINAIDPUZZLE

10.02.09 | Federal vs. Non-Federal Work-Study

work_studyDid you know that you do not need to demonstrate financial need to qualify for a work study at school?  Both federal and non-federal work-study programs exist.

Federal work-study programs are based on demonstrated financial need.  An individual must meet certain eligibility requirements and complete a FAFSA.  On your FAFSA you will want to make sure you mark “yes” to the question asking if you are interested in student employment.  If you are eligible your FWS award will be listed on your awards letter from the school.  If you did not qualify for any reason but are still interested you may be able to scoop up a non-federal work-study job.

The Non-Federal Work Study is not based on financial need which means any student is eligible.  You should inquire with your school about any available opportunities on campus.  It is generally advisable to seek employment on campus before seeking any off-campus job as on-campus employers tend to be more understanding to your class schedule and school commitments.

If you are still short on funds after grants, scholarships, or federal loans like the Stafford loan you may also want to consider a private student loan.  With interest rates at historic lows there has never been a better time to take out a private student loan.

- Complete Your FAFSA

- Apply for a Private Student Loan

09.29.09 | New Student Aid Reports for 2010-2011 FAFSA Season

Posted in FAFSA, Financial Aid by Kristin Morris

In all of the debate about changes to financial aid, lots of small stuff is getting overlooked, such as proposed changes to the Student Aid Report, the report that families and students get after successfully completing the FAFSA. The SAR in the past has been a hideously ugly, incredibly complex affair to attempt to decode. Happily, the Department of Education has been simplifying how the SAR looks and how it presents information to you. Here’s a preview of the new SAR compared to the old one.

Old

Student Aid Report (Old)

See how completely unclear your federal financial aid eligibility is? You’d be hard pressed to know what you’re eligible for. The number you’re actually looking for is in the upper right hand corner, the EFC.

New

Student Aid Report (New)

This is much, much easier to read for everyone. In the second section, the federal student aid eligibility, we can see plain language detailing what your EFC is, plus what that means for scholarships, grants, and loans in the text.

This is a huge improvement and should help reduce some of the anxiety students and families feel about the financial aid process.

09.14.09 | Professional judgement override on future earnings and income

Posted in FAFSA, Financial Aid, News by Kristin Morris

In May, Education Secretary Arne Duncan alerted financial aid administrators that they should make students, parents, and families more aware of options for increased financial aid due to loss of job and income using the professional judgement override system. For consumers, asking for a professional judgement override on future earnings and income, along with proper documentation (tax returns denoting previous income, termination notice, and unemployment benefits paperwork) will allow families to ask for reconsideration of financial aid.

In recent professional judgements, additional help is being given by financial aid administrators by implementing guidance from the Department of Education that says unemployment benefits should also be discounted in financial aid appeals. This means that for families where unemployment benefits are the only source of sustenance income, financial aid will not be eating into your unemployment insurance.

If you’ve faced job losses recently, make sure you contact your school’s financial aid office to potentially appeal for more financial aid, and when you complete your 2010-2011 FAFSA, be sure you do NOT include unemployment benefits as additional income on your FAFSA.