Understanding Your Financial Aid Package & Different Types of Student Loans
Guest Post by Noadia Steinmetz-Silber
So you've worked so hard to get into the school of your dreams, but now you have one last barrier - how to pay for school. This post will shed some light on how financial aid works and how to navigate between the different options.
How is my financial aid determined?
The financial aid office at your college will determine how much financial aid you are eligible for. This will depend largely on four things: your cost of attendance (COA), your Expected Family Contribution (EFC), your year in school, and your enrollment status. In order to calculate your financial need, the institution will subtract your expected family contribution from your cost of attendance. Further, any eligibility for non-need based aid will be calculated using your COA and subtracting all the financial aid awarded thus far.
COA is not simply tuition and fees; it may also include living expenses, the cost of supplies, transportation, loan fees, and other school-related expenses, costs for dependent care, costs related to a disability and study-abroad costs.
EFC is calculated through the information which you fill out on your FAFSA form, such as income, assets and benefits, family size and the number of family members who will be attending a college or university at the same time. The official government student aid website has an EFC formula guide that can help you understand exactly how your EFC is calculated.
What are the different aspects of the financial aid package?
Grants & Scholarships: Financial aid that does not have to be repaid (with exceptions*).
Federal Grants: read about them in detail here.
Federal Pell grants: These grants are issued by the government, and the maximum amount granted for the 2019-2020 year is $6,195
Federal Supplemental Educational Opportunity Grant: This grant is school-based, and not every school participates in this program. This grant will go as high as $4,000.
Teacher Education Assistance for College and Higher Education (TEACH) Grants: This grant is for students enrolled in programs designed to prepare them to teach in a high-need field at the elementary or secondary-school level.
Iraq and Afghanistan Service Grants: This grant is for students whose parent or guardian was a member of the U.S. armed forces and died as a result of performing military service in Iraq or Afghanistan after the events of 9/11.
Private Grants: These can come from your school or any other non-government organization.
Scholarships: There are so many scholarships you can apply for! Just beware of scholarship scams.
*The small print of scholarships and grants (or "Possible exceptions): You withdraw early from a certain program, your enrollment status changes and you are no longer eligible, your financial needs change due to outside scholarships or grants, you do not meet the requirements of the grant (for example, the TEACH grant).
Loans: Financial aid that does have to be repaid, with interest.
Federal Loans - Direct Subsidized Loans vs. Direct Unsubsidized Loans
Direct Subsidized Loans - the eligibility criteria for these loans is undergraduate students with demonstrated financial need. In the case of subsidized loans, the U.S. Department of Education pays your interest while you are in school for at least half-time, for the first six months after you leave school, and for a deferment period.
Direct Unsubsidized Loans - these loans are relevant to any undergraduate or graduate students, and you do not need to demonstrate financial need. However, you'll be paying the interest for these loans at all times, even while in school.
On this website, you can find information regarding the maximum limits for subsidized and unsubsidized loans. These will be different depending on whether you are a dependent or independent student. There is also other general information about loans that might be helpful to read through.
Federal Loans - Direct PLUS Loans: These loans are available to graduate or professional students or to parents of dependent students. Financial need does not need to be demonstrated; rather, loans are given based on a non-negative credit check (i.e. you haven't defaulted on your loans recently, etc.).
Private Loans: These can be made by banks, credit unions, your school, or state-based and state-affiliated organizations. These tend to be more expensive than federal student loans. Read more about the differences between federal and student loans here.
You might receive a Federal Work-Study award as part of your financial aid package. Federal Work-Study provides part-time jobs for students with financial need which allows you to earn money to put towards your education. How much you can earn through this program depends on when you apply, your level of financial need, and on your school’s funding level. You can work and earn as much as your award states.
I have all my financial aid packages. How do I decide which one works best for me?
1. Your package is not necessarily set in stone
You can contact your school and ask them to review your financial information again in order to reassess your package.
2. How do I compare packages?
When comparing different financial aid packages, do not just look at the total amount of money each school is giving you. Make sure you take into account the loans available— you may want a school that offers higher or lower loans— and the work-study. Also, take into account other expenses such as transportation to different schools (for example, one may require flights to and from your home) and related costs in the area (food, housing etc.).
3. Don't bury yourself in debt
It's not too late to change your mind. When considering going to a certain college, make sure you fully understand the cost of completing your degree before starting. If a certain school is too expensive or doesn't provide generous scholarships, consider applying for a more affordable school. Going to an expensive school isn't a guaranteed recipe for future financial success.