Basics of Financial Aid | College Counselor

Financial aid is a term used to describe money that is awarded to help a student pay for college and the necessities related to college. Financial aid consists of grants, scholarships, loans, and work-study programs said J.D. our expert college counselor.

How do you get financial aid? In order to be eligible for either “need-based” or “merit-based” financial aid, you must fill out financial aid forms. Usually these forms are filed on or as close to Jan. 1st of your child’s senior year as possible. There are two financial aid forms you need to be familiar with: 1) The FAFSA form, and 2) the CSS Financial Aid Profile form. All colleges require the FAFSA to be completed. Many schools will also require a more detailed view of your income and assets by having you complete the CSS Profile form. In addition, many schools will have you complete their own institutional Financial Aid Forms as well.

Your financial aid will usually come in an awards letter or package directly from the colleges, college counselor.

The financial aid process is based upon the following calculation:

COA (Cost of Attendance)
-SAI (Student Aid Index
“Need”/ Eligibility

Financial “need” is calculated by taking the Cost of Attendance (tuition, fees, books, room and board, living expenses, transportation costs, etc.) and subtracting your Expected Family Contribution. The SAI is a very complex calculation. It is calculated by taking the parent’s income and assets, the child’s income and assets, the age of the parents, how many siblings in the family, as well as a variety of other factors.

Remember that the COA is not just tuition. If a school does not include all relevant costs in their award letter, it is imperative to immediately bring this to the attention of the Financial Aid officer (FAO) at the college. An increase in the COA will cause an increase in the eligibility for financial aid.

Expert seasoned college counselor, like AZCollegePlanning.com can help estimate your SAI.

For example, let’s say the COA at a particular college is $34,000, and the SAI is $14,000. The family would have a “need” or eligibility for $20,000 in financial aid.

COA (Cost of Attendance)
-SAI (Student Aid Index
“Need”/ Eligibility

Just because a family has a “need” or eligibility of $20,000 doesn’t mean the family is going to get $20,000 in financial aid. Not every school is in the position to give you 100% of your “need”. Some schools are only in the position to give you 60% of your “need” and other schools are in the position to give you 82%, 95% or even in the ideal situation 100%. It is important to know this information before you apply to the schools. You don’t want to find out when you receive the award letters in March and April of your child’s senior year that the schools your child applied to were never in the position to offer you the financial aid you needed in the first place. By that time it’s too late!

How & where does my aid come from?

How do schools meet your “need”?

In addition to knowing how much “need” each school will meet, Arizona college counselor, it is equally important to know, before applying, what percentages of “need” based financial aid will be from gift aid (free money, i.e. grants and scholarships) and self-help aid (loans, work-study). Again, not every school will give you the same type of award package. Some schools will meet 100% of your “need” in grants and scholarships, and some will meet 100% of it in loans and work-study. You need to know which schools will meet more of that “need” in free money rather than loans you’ll need to repay. For the most part, it will definitely be a combination of grants, scholarships, loans, and work-study.

What sources of financial aid are available?

The majority of financial aid comes from four primary sources:

Federal Government
State Government
Campus-based programs
Private Scholarships

Federal Government:

There are three major Federally-based programs-1) Pell Grants, 2) Subsidized and Unsubsidized Stafford Loans, 3) Parent PLUS LOANS

1) Pell Grants: The Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded only to undergraduate students with extreme financial need. Scottsdale college counselor, Awards range from $400-$4,000. It will depend not only on your financial need but also on the cost to attend school and your status as a full-time or part-time student.

2) Subsidized: and Unsubsidized Stafford Loans:

These loans as well as the PLUS loans are available through the Federal Family Education Loan (FFEL- Funds come from a bank, credit union, or other lender that participates in the program) and William D. Ford Federal Direct Loan (Direct Loan- Funds come from the Federal government) Programs. The terms and conditions of both loans are similar (Currently President Obama is proposing the federal government issue all student loans and eliminate FFEL bank loans.)

a) Subsidized: This loan is based upon “need”. The student does not have to begin paying this back until six months after graduation from college. The interest does not accrue while the student is in college, meaning the interest is in effect, paid by the government. Ideally do not take out loans, if you can manage with the help from Arizona college counselorcom
b) Unsubsidized: This loan is available to families regardless of “need”. The only difference is the government will not subsidize the interest payments, and the interest payments will begin to accrue immediately.

*To receive a Stafford Loan, the student must fill out a loan application from a lender, and send it to the college for certification by the college’s financial aid office.

Maximum amount for the Stafford Loan are limited to $3500 for the student’s freshman year in college, $4500 for the student’s sophomore year, $5,500 for the student junior and senior years in college.

Interest rates for Federal Stafford loans are fixed and adjusted annually.

3) Parent PLUS/SLS Loan: PLUS stands for “Parent’s Loan for Undergraduate Students”

These loans are in the parent’s name and are not based upon “need”, but a credit approval is required.

Theoretically, a parent could borrow the entire Cost of Attendance, minus any other financial aid received, if they needed to. Interest does accrue on this loan and the parent needs to begin paying this loan back 60 days after taking it out.

The PLUS loan is capped at 8.5% and amortized over 10 years (or you have ten years to pay it back). This may not be the best option to pay for college, but it is still an option.

State Government:

Each state differs in its own special programs. These can include grants, scholarships, tuition assistance, and loans. Many programs are designed to assist students pursuing careers in the health and teaching professions.

Campus-Based Programs:

Campus-based programs are funds that colleges and universities receive from the Federal Government and from private endowments. Generally, a specific amount of money is given to a college each year. Once that money is awarded, there are no more funds available until next year. This is why it is imperative to file the financial aid forms not only on time but also correctly, since financial aid is awarded on a first come first serve basis! If the forms are not filled out correctly, the forms will get rejected and sent back to you to be corrected. That may cost you 4-6 weeks in delays, and thousands of dollars in lost financial aid.

There are four main sources of campus-based aid: 1) SEOG grants 2) Work-study 3) Perkins Loan and Endowments.

1) Supplemental Educational Opportunity Grants (SEOG): These are “need” based grants awarded to students with extreme financial need. Priority is given to students who receive the Pell Grants.

There is now guarantee that all eligible students will receive SEOG Grants. Grants range between $100-$4,000.

2) Federal Work-Study: This award is based upon “need”. The student is offered a specific amount of money for the year. The student is then expected to work on campus part-time for the Federal, minimum wage until the student has earned the total amount awarded. At that point, the student work commitment is over. If the student is offered work-study, they should take it because its money they will not have to pay back.

3) Federal Perkins Loan: These are low interest subsidized loans that are offered by the colleges and subsidized by the Federal government. The interest rate is 5% and no payments have to be made until the student is out of school for 6 months and the Federal government subsidizes the interest.

An undergraduate student can receive a maximum $4000/yr. with a total limit of $20,000. A graduate student can receive $6,000/yr. with total limit of $40,000 (totals include all previous Perkins Loans).

4) Endowments: Endowments are funds that are given to schools from private sources: alumni, corporations, and other foundations.

Private schools have a lot more of these types of funds available. State colleges have to rely almost entirely on Federal and State funds.

Private Scholarships:

Millions of dollars are given away each year to deserving students by private organizations. Finding these scholarships and applying for them can be a frustrating, but rewarding process.

The best place to start looking for scholarships is in your high school guidance office. Once you have a handle on what is available locally, then move onto the free scholarship search services available on the Internet. It is recommended NOT to pay for scholarship searches.

Be persistent! Use more than one service. Don’t take the application process lightly. Be sure to meet deadlines and to complete applications thoroughly and accurately. Follow application instructions to the letter. You cannot be complacent when it comes to asking for other people’s money.

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