Episode 11: defining financial aid
I took a solo flight for this episode. Mostly because someone recommended I combine my interviews with monologue episodes, so I can provide content in a variety of formats. This episode breaks down and defines the main types of financial aid available to students.
It is not uncommon for students to struggle with knowing the different types of financial aid, and how the aid will…strategicscholar.libsyn.com
Show Notes:
Financial aid can be separated into two catergories
- Financial aid you do not have to pay back
- Financial aid you do have to pay back
Financial aid you do not have to pay back:
Scholarships: Obviously scholarships are my favorite type of financial aid. There are four types of scholarships: lottery scholarships, experience-focused scholarships, topic scholarships, and creative content. Scholarships will sometimes come with requirements, such as a specific GPA or volunteer hours. So, there are requirements outside of just applying in some cases, but generally you will never be required to pay back a scholarship.
The four types of scholarships include Lottery Scholarships, Experience-focused Scholarships, Topic Scholarships and…strategicscholar.libsyn.com
Federal Pell Grant:You always have to fill out a FASFA to qualify. The maximum grant award for the 2015–2016 school year was $5,575. Pell Grants are awarded based on a standard formula develop by the U.S. Congress and it changes annually. The U.S. Department of Education reports that the fundamental elements in the standard formula are the student’s income (and assets if the student is independent), the parents’ income and assets (if the student is dependent), the family’s household size, and the number of family members (excluding parents) attending postsecondary institutions.
A Federal Pell Grant, unlike a loan, does not have to be repaid. Federal Pell Grants usually are awarded only to…studentaid.ed.gov
Financial Supplemental Educational Opportunity Grant:This grant is administered by the university you are attending and not all universities participate in this program. You can receive between $100 and $4,000 a year, depending on your financial need, when you apply, the amount of other aid you get, and the availability of funds at your school. These funds are limited so the earlier you submit your FASFA the better.
State Grants:There are various state grants that vary depending on where you reside. In Oklahoma, there are two major state grants the OTEG (Oklahoma Tuition Equalization Grant) and the OTAG (Oklahoma Tuition Aid Grant). The OTEG is awarded to students who’s parents income is less than $50,000, and it is capped at an award of $2,000 per year. The OTAG is another grant that awards between $1,000 and $1,300 annually. What makes the OTAG unique is it is not restricted to U.S. Citizens.
Oklahoma State Regents for Higher Education | Administrators, Faculty and Staff | Financial Aid Resources for…www.okhighered.org
Oklahoma State Regents for Higher Education | Administrators, Faculty and Staff | Financial Aid Resources for…www.okhighered.org
Work-Study Jobs:This type of financial aid provides part-time employment while you are in college. Generally, you will want to work in a area that can help your career. You are paid based on the amount of aid available at your school and your need determined by the FASFA. Technically you can’t make less than the federal minimum wage so your hours on the job will reflect that requirement.
Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them…studentaid.ed.gov
Financial aid you do have to pay back:
Stafford Loans:This loan option is divided into two different categories (subsidized and unsubsidized). There are some key differences between these two types of loans. The interest on subsidized loans is paid during deferment periods, such as when you are in school, and during grace periods, such as the six months grace period after you graduate. In contrast, the Unsubsidized Stafford Loan will gain interest even when you are not required to make payments on the loan during deferment or grace periods. Another difference is subsidized loans are need based and unsubsidized loans are not need-based. The interest on these two loans also vary. Currently, the subsidized loan interest in 4.29 percent, unsubsidized loans are 5.84 percent.
Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher…studentaid.ed.gov
Federal Perkins Loan Program:This is another need-based loan, but not all universities participate in the program. You will have to ask your financial aid office if your university participates. Not very many students qualify for this type of loan, but there are some advantages to the loan if you do qualify. Probably the most beneficial aspect of this loan is the low-fixed interest rate, meaning no matter how well the markets are doing, you will not start paying more in interest, unlike a stafford loan which can increase up to 8.5 percent. But if the market tanks your interest rate will not decrease. Currently, the Federal Perkins Loan interest rate is 5 percent, which given all the options is really not bad. Also, this loan is awarded on a first come first serve basis so get out there quickly if you are hoping for this type of financing.
Loans made through the Federal Perkins Loan Program, often called Perkins Loans, are low- interest federal student…studentaid.ed.gov
Federal Plus Loan:This loan is for parents of students who are enrolled part time or full time who have not defaulted on any other types of federal aid. The parents have to pass a credit check, unlike students who take out federal loans, and students have to be younger than 24-years-old, and not have any dependents of their own. The maximum a student and their parents can borrow is the cost of attendance minus the financial assistance already received. Currently, the interest rate is about 6.84 percent and the interest begins immediately meaning regardless of whether the loan is in deferment or in a grace period. Also, the loan comes with a nifty loan fee of 4.272 percent interest but the fee changes annually so keep an eye on it.
The U.S. Department of Education makes Direct PLUS Loans to eligible borrowers through schools participating in the…studentaid.ed.gov
Private Loans: It is unfortunate when families have to reach for private loans, because the loans can be a little less flexible in terms of interest rates and forgiveness options depending on the student and the co-signers credit worthiness. Essentially, with a private loan you are operating outside of the protections that are built into federal loans.
Expected Family Contribution (EFC): The easiest way to describe your EFC is the minimum amount of money your family is expected to contribute during one year of college. This number can be unrealistic for many families because the calculation does not include family debt. So, it doesn’t matter if you have a mortgage, if your parents have their own student debt or even medical bills. This is a tough number to digest for many individuals.
Expected Family Contribution (EFC) Calculator Advertisement This form is based, in part, upon published EFC formulas…www.finaid.org
Action Items:
First and most importantly, I highly recommend you look at your student debt, especially if you do not already know exactly the amount of dollars in your loan accounts. That knowledge is scary and easier to ignore, but the knowledge will also give you the power to take control of the situation now rather than later.
Write out three action steps on how you plan to start paying for your college debt now and in the future.
If you are just starting the college process. Design a plan before your get your financial aid award letter from your university of choice. Write out exactly how you intend to pay for school. Does that include scholarships, loans, grants? It will probably include a combination, but remember the goal always to reduce debt and increase funding through scholarships and grants.