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Financial Aid Basics
Information courtesy of AES (www.AESmentor.org)
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Financial aid is monetary assistance that is available to students and their families to help offset the cost difference between a family’s Expected Family Contribution and the total cost of attendance to a post-secondary educational institution.
Generally, four major types of student financial aid are available: scholarships, grants, loans, and work-study programs.
1. Scholarships: Scholarships are considered gift aid which does not have to be repaid, and are often awarded for merit in academics, athletics, or a particular field of study. Scholarships may also be awarded based on ethnic background, religious affiliation, and special interests.
Typically there are three types of scholarships available:
Private Scholarships - awarded by social organizations, churches, and special interest groups.
Institutional Scholarships - awarded by post-secondary institutions based on academic achievement, athletics, or special talent.
Public/Government - awarded based on academic achievement.
2. Grants: Grants are monetary awards that do not have to be paid back. Grants are given to students based on financial need.
Typically there are three types of grants available:
The Federal Pell Grant - aid that is awarded to undergraduates who have not earned a bachelor’s or professional degree.
Federal Supplemental Education Opportunity Grant (FSEOG) - awarded by the post-secondary institution to undergraduates with exceptional financial need.
State-Specific Grants - state grants are usually awarded to eligible residents who demonstrate substantial financial need and attend public or private institutions of higher education in that particular state. The award amount varies, depending on the specific requirements set by the governing agency. Usually, the award amount cannot exceed the tuition and fee charges at institutions selected by the recipient, nor can they exceed the recipient’s demonstrated financial need.
3. Student Loans: Student loans are long-term, low-interest loans made to a student by private lending institutions, such as banks, savings and loan associations, and credit unions, or directly from the federal government. All potential borrowers must first complete a FAFSA.
Typically there are three federal loan programs:
Federal Family Education Loan (FFEL): There are two types of loans that can be borrowed under the FFEL program.
- The FFEL Stafford - is given through an approved lender that participates in the FFEL program. (This type of loan can be subsidized* or unsubsidized.**)
- The FFEL PLUS (Parent Loan for Undergraduate Students) - is given to parents with good credit histories to pay for the education of each dependent undergraduate student enrolled at least half time.
William D. Ford Federal Direct Loan: There are two types of loans that can be borrowed under this program.
- The Direct Stafford - this type of loan can be subsidized or unsubsidized, and is given directly by the U.S. government, who acts as the lender.***
- The Direct PLUS - like the FFEL PLUS, it is given to parents with good credit histories to pay for the education of each dependent undergraduate student enrolled at least half time.
The Federal Perkins Loan Program: Provides long-term, low-interest loans to students with exceptional financial need. The loans are made through a school’s financial aid office. The school acts as the lender, and the loan is made with government funds.
4. Work-Study: Work-study provides students with employment opportunities both on and off campus to help pay for school costs. Participation in a work-study program is based on the student’s financial need.
Typically there are two types of work-study programs available:
The Federal Work-Study Program - provides jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay educational expenses. This program encourages community service work and work related to a course of study.
The Institutional Work-Study Program - the institutional work-study program provides students with employment opportunities either on or off campus.
While participating in a work-study program, you can gain actual career-related, on-the-job work experience and earn funds to assist in meeting today’s higher education costs. Students in a work-study program will generally work from ten to 15 hours per week during the academic year and up to 40 hours per week during the summer.
Now that you have a basic understanding of financial aid options, consult the post-secondary institution’s financial aid officer or one of the other resources listed to find out how to create a financial aid package that meets your needs.
* The federal government pays the interest on this loan while the student is in school. Financial need is the basis to qualify for this type of loan.
** The student will be charged interest from the time the loan is disbursed until it is paid in full.
*** The school you are attending must participate in the Direct Loan program.
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