The Complete Menu of Federal Financial Aid

Financial aid can basically be broken down into four different categories: grants, scholarships, work-study programs, and student loans. Grants and scholarships are the best, and make up a relatively small part of the funds available to you. Work-study programs provide undergraduate students the opportunity to earn money by working a part-time job while they’re in college. There are also a number of low-interest government education loans to consider applying for, and these loans make up the majority of financial aid.

EDUCATION GRANTS

Education grants are sums of money awarded to students based on their financial need. The money you receive from a grant is truly a gift, meaning it does not have to be repaid. Pell grants are the most common education grant awarded. They are available only to undergraduate students and the maximum amount you can receive for the 2013-2014 school year is $5,645 per year. For the 2014-2015 school year the maximum amount you can receive will be raised to $5,730. Federal Supplemental Education Opportunity Grants (FSEOG) are university-based federal government grants that are based on financial necessity and provide amounts from $100 up to $4,000 per year.
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SCHOLARSHIPS

If you have an exceptional academic record, or are extremely talented in a specific extracurricular activity such as a sport, music, art, poetry, drama, debate, chess, public speaking, etc. you may want to consider applying for scholarships. Scholarships are awarded to students based on outside-the-classroom skills and have nothing to do with how much money the student’s family has. This means even if your family is very well off financially you can still receive free money to go to school through scholarships. The idea behind these programs is that exceptional skill deserves recognition inside and outside the classroom, and regardless of income. There are thousands of scholarships awarded every year by thousands of private, non-profit organizations, such as the Bill Gates Foundation, however scholarships only make up about 5% of the total financial aid given out each year.

ATHLETIC SCHOLARSHIPS

Often times colleges want specific players to play for their team and they make this happen by offering scholarships to athletes with exceptional talent. Unfortunately these scholarships are quite rare, and very hard to get – harder than many high school coaches allow student athletes and their parents to believe. Scholarships are well publicized, so people always hear about them, but the truth is very few people get them. That’s not to say you shouldn’t go for an athletic scholarship if you have the skills, it just means you should be realistic about how likely it is, and certainly shouldn’t rely on it as your primary means of financing your education.

MERIT SCHOLARSHIPS

Scholarships are usually given to well-rounded students with numerous skills, but if you have a specific talent, such as playing the guitar, you may be able to find a college that will pay for a part or all of your education by awarding you with what’s called a merit-based scholarship. These scholarships award students based on exceptional skills as well as other personal qualifications which vary for each scholarship. There are still more athletic scholarships given out each year in comparison to merit scholarships but the number is slowly increasing. The truth of the matter is it’s hard to get any kind of scholarship, and colleges consider multiple variables when they consider you for a scholarship such as your grade point average (GPA), areas you may excel in such as music or sports, and whether or not you have demonstrated leadership qualities, or other qualities deserving of attention.

LOW-INTEREST LOANS

Federal student loans are the most common way students pay for college. The loans do have to be repaid, and there is interest, but the terms are better than most other loans you can get at a bank. Repayment for a student loan doesn’t usually start until after you’ve graduated from college. Also, the interest rates are very low, and the loans aren’t based on your credit history.

FEDERAL DIRECT LOAN PROGRAM

Most colleges nowadays participate in the Federal Direct Loan Program. These are considered “direct” because the schools rather than banks act as the lending institution and the money is provided by the federal government directly. The process is faster and simpler than the traditional Federal Family Education Loan Program (FFELP) and therefore some students prefer these Federal Direct Loans.

FAMILY EDUCATION LOANS

The lion share of federal government student loans come from the Federal Family Education Loan Program (FFELP). Unlike the Federal Direct Loan Program where the college is the lender, in the FFELP private lenders such as banks and credit unions provide, manage, and profit, by funding these loans. However the federal government uses tax dollars to guarantee the loans, which keeps the interest rates low because the loans are basically carrying zero risk – if the borrower ends up being unable to repay the loan the government will end up repaying the loan for them. (When this happens the borrower’s credit record is still damaged).

STAFFORD LOANS

Both subsidized and unsubsidized Stafford Loans are available through the loan programs mentioned above, the FFELP and Federal Direct Loan Program. A subsidized Stafford loan means that the government will pay the interest that accrues on the loan until the student (the borrower) graduates. An unsubsidized Stafford loan means the student is responsible for paying the interest for the life of the loan, including before graduation. Your eligibility for a subsidized Stafford loan in based on your financial need. The amount of money you can borrow depends on whether or not you are a dependent, or independent student. If you are a dependent student you can borrow up to $5,500 each year. Independent students can borrow up to $10,500.

PARENT LOANS

Also available through the FFELP and Federal Direct Loan Program are PLUS loans, which stands for Parent Loans for Undergraduate Students. Basically your parents can borrow up to the total amount of your education costs, less the amount of any financial aid you have received. Unlike other student loans, PLUS loans require a credit check and approval is not guaranteed. The lender, either the government for direct loans, or the bank for FFELP loans, must be willing to lend your parents the money based on their credit rating and ability to repay the loan.

PERKINS LOANS

If you are an undergraduate student or graduate student that demonstrates great financial need you can take advantage of a Perkins Loan, which is a campus-based loan where the school functions as the lender. A portion of the funds come from the college and the remainder comes from the federal government. The maximum annual loan amounts are $4,000 for undergrads and $6,000 for graduate students.

WORK-STUDY PROGRAMS

Work-study programs are basically part-time jobs available to students, but the money you’re being paid for working comes from the federal government. The typical time commitment is 15 to 20 hours per week. The jobs always pay minimum wage or higher. Sometimes the job will be related to your field of study, and sometimes it will be completely unrelated. For example you might be able to get a job driving a golf cart around campus to deliver the school newspaper. In order to qualify for a work-study program job you’ll have to be enrolled at least part time in an undergraduate or graduate program, and you will have to demonstrate financial need. The jobs available are usually on campus, but not always – sometimes they are off-campus jobs available through community service programs. Work-study programs are great because it allows you to earn money on campus, which is convenient, and unlike a loan the money will never have to be repaid. It’s possible that your college won’t allow freshman to participate in work-study programs so you’ll have to check with your school’s financial aid officer about what’s available.

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