Financial Aid 101

By Mrs. Ford

When you and your student look at the cost of college, you may experience sticker shock. But before you let the cost keep you from considering college, keep in mind that your student will receive some type of financial aid - if you apply for it!

What is financial aid?
Financial aid can include money that you don't repay, such as scholarships, grants, and work-study (on-campus jobs). It can also include student loans that your student will have to repay, but not until after he or she graduates from college.

MYTH: There isn’t a lot of financial aid available, and what is available only goes to a few of the very best students.
REALITY: Not true! During the 2002-03 academic year, more than $105 billion dollars in financial aid was awarded. The vast majority of this money was doled out by the federal government through grant, loan and work-study programs, while colleges’ own grants and scholarships accounted for almost 20 percent of all financial aid. States helped too by contributing more than $5.5 billion to the pot. That’s a lot of money for a lot of students. In fact, more than 70 percent of students nationally receive some kind of financial aid.

Scholarships are considered gift aid, because they do not have to be paid back. Scholarships are often based on academic achievement, athletic ability or special talent, such as skill in art, music, dance or writing. Scholarships may also be based on the student’s choice of major as many businesses and state programs offer scholarships to support students interested in specific areas of study. Local scholarships are also available through labor unions and public service organizations like the Lions Club, Rotary Club or NAACP chapters.

Grants are also gift aid and typically come in three forms; state- and federal-sponsored grant programs and institution-sponsored grant programs. (For the 2010-11 award year (July 1, 2010 to June 30, 2011), the maximum scheduled Pell Grant award is $5,550 for undergraduate students enrolled on a full-time basis.) State- and federal-sponsored grants are usually based on financial need, as demonstrated on the FAFSA (Free Application for Federal Student Aid). Institution-sponsored grants may be based on either financial need or merit. Students should check with the colleges they're interested in attending for information on institutional grants.

Work-study awards provide students with on-campus or off-campus employment to help pay college costs, while gaining career-related, hands-on work experience.

Student loans are a type of financial aid that must be repaid, with interest. There are federal student loans that are issued or guaranteed by the U.S. Department of Education and private loans, also referred to as alternative loans.

MYTH: Students today have so much loan debt that it doesn't make sense to pay a lot to go to college.
REALITY: Most students who have huge loan debt usually have either done a poor job of finding a college where their family’s financial aid works well, or they made a conscious decision to take on that kind of loan debt so they can attend a particular college. (Remember, the average loan debt of undergraduate students today is roughly $20,000 – that’s less than the cost of most new cars!) The goal for most families is to find in advance schools that will be financially reasonable for them, usually by using a published financial aid estimator to understand where they stand under the federal formula for financial aid.

Federal Perkins Loans and subsidized Stafford Loans are need-based government-subsidized loans. Students who borrow under these programs do not pay interest on the loans until after they leave school. (The fixed interest rate on Federal Subsidized Stafford Loans for 2010-2011 is 3.4 %.) Unsubsidized Stafford Loans are awarded without regard for need; students are responsible for paying the accrued interest on unsubsidized loans as soon as the funds are disbursed.

A Parent PLUS Loan is a federally-guaranteed loan for parents who want to help pay for their child's education. Parents can borrow up to the cost of attendance, minus any financial aid awarded to the student.

Private student loans typically have higher interest rates, more fees and less flexible repayment options than the federal student loan programs. Loan terms and limits on private student loans vary substantially by lender. Students and their families should consider private loans only if they need additional funds after obtaining aid through scholarships, grants, work-study and federal loan programs.

How do you get financial aid?
When your student is a second semester senior in high school, you and your student will need to complete the FAFSA indicating your family's income and assets. Based on that information, your student's college will determine the type of financial aid he or she is eligible to receive. To get an idea of your FAFSA results now, complete the College Funding Estimator at educationquest.org

What are other ways to make college affordable for your student?

College Savings Plans: Start a savings plan. Even if you save as little as $25 a month, it will add up by the time college arrives. Encourage your student to save much of his or her earnings from part-time jobs or from money given as gifts.
Invest in the College Savings Plan of Nebraska. This "529 Plan" offers tax benefits for parents who invest money toward their child's education.

Consider a Certificate of Deposit. The interest rate for a Certificate of Deposit (COD) is usually higher than a savings account. Shop for the best rate and terms.

Community College Transfer Program: Students striving for a four-year degree may want to consider starting at a less expensive community college for basic courses and then transfer to a four-year college.

Live at Home: Room and board at a four-year college runs about $6,000 a year. If you encourage your student to live at home, that money can go toward tuition.

The Military: All branches of the military offer educational benefits for college. Talk to a recruiter for all the details.

MYTH: The College with the lowest price will be the most affordable.
REALITY: Not necessarily! Some of the colleges with a high “sticker price” have raised significant amounts of money for scholarships from their graduates and friends. As a result, they have more money to give to students in the form of scholarships, which reduces the “sticker price.” After taking financial aid into consideration, a seemingly more expensive college may be more affordable than a college with a lower list price. Tip: Find out what kinds of scholarship options are available at the colleges you are considering.

Use the College Funding Planner at educationquest.org to estimate future college costs. Financial aid carries with it responsibilities your college-bound student will have to manage throughout their college career and beyond. You and your student should take the time to learn about their financial aid options before signing anything on the dotted line.

You can learn more about financial aid in the ‘Paying’ section of http://www.educationplanner.com. Other valuable sites on college financing are: http://www.educationquest.org, http://www.knowhow2go.org/, http://www.collegeboard.com/ and http://www.collegefinancingguide.com/ . You can also check out the information I have in my high school office.

A Financial Aid Workshop is coming to CVHS on Tuesday, November 8, 2011 at 4:30 p.m. in the High School Distance Learning Room. An expert from the EducationQuest Foundation will be discussing how to fill out the Free Application for Federal Student Aid (FAFSA). Many of the post secondary institutions use this as a means for scholarship awards as well as for financial assistance. The FAFSA needs to be filled out as soon as you get back your 2011 income tax return. A FAFSA Completion Day will be announced at a later date.

Many interesting and valuable informational items pass through my office, and I believe it is important for you to be aware of these. There will be occasional mailings from this office to you containing literature that may directly affect you and/or your child. This information may also be given to your child, either verbally or in exactly the same format that you will receive. This is generally placed in the top of their locker. However, sometimes this information seems to get misplaced in the hustle and bustle of school activities. I also write articles for the Chappell Register, the Sun Telegraph and the Storm Watch. If you have any questions concerning your child's Post-secondary plans, feel free to contact me at 874-3310 or stop by the Guidance Office in the High School.