With the cost of college education constantly rising, it is very difficult for anyone to attend a university without getting some sort of financial aid.
What is available?
The Federal government provides any or all of the following financial aid programs to undergraduate* college students:
Grants: Money that you do not have to pay back.
Loans: Money borrowed that you must repay with interest. Student loans usually have low interest rates that cannot be higher than a certain number.
Work-Study Programs: A student holds a job and his/her pay goes directly toward paying for tuition or other school expenses, such as books, etc.
* Undergraduate students are those studying to attain their bachelor’s degree.
How do I get financial aid?
Once you know what financial aid is available at your particular college or university, you must complete a Free Application for Federal Student Aid (FAFSA) to determine if you are eligible for financial aid. You can fill out a FAFSA for free at the official FAFSA website, www.fafsa.ed.gov. Beware of websites that will charge you up to $80 to fill out a FAFSA. Filling out a FAFSA should never cost you anything.
In order to receive aid from Federal Student Aid programs you must meet the following criteria:
• Be a citizen or eligible non-citizen of the United States with a valid Social Security number.
• Have a high school diploma or a General Education Development (GED) certificate or pass an approved “ability to benefit” test.
• Enroll in an eligible program as a regular student seeking a degree or certificate.
• Register or have registered for Selective Service, if you are a male between the ages of 18-25.*
• Have a result of “eligible” or “partially eligible” on the Drug Conviction question (question 31) of the FAFSA form.
* An applicant can check “Yes” on Box #29 of the FAFSA form, and the Department of Education will furnish Selective Service with the registration information.
The amount of money that you are eligible for also depends on your dependency status. If you are considered dependent, you must report your parent’s income and assets as well as your own, and therefore may receive less money because there will be a higher Expected Family Contribution Number. If you are an independent, you must report only your income and assets (and those of your spouse, if you are married), and this may allow you to qualify for more money. In order to be considered independent, you must meet at least one of the following criteria:
• Be at least 24 years of age.• Be a veteran of the U.S. Armed Forces.
• Be married.
• Be enrolled in a graduate or professional education program.
• Have children that are your legal dependants.
• Be an orphan or ward of the court or were until age 18.
If you do not meet any of the above criteria, but feel that your extraordinary circumstances should allow you to qualify for independent status, speak with a financial aid advisor at your school. He or she can change your status if your case is truly worthwhile.
Grants
Grants are given based on need. To determine your eligibility, the United States Department of Education uses a formula to calculate your Expected Family Contribution. This number is calculated by taking into account your family’s income and other financial obligations. If you are an independent, only your income will be considered (and your spouse’s if you are married). If your eligibility changes during the academic year, you may lose the grant. You do not ever have to pay grants back.
Loans
While borrowing money to pay for a college education can be seen as a good investment, it should not be taken lightly. Student loan payments can put people in financial hot water if not managed properly.There are two main types of student loans:
1. Subsidized: this is a loan for which you will not be charged interest until you begin the repayment of the loan. You will also be exempt from interest charges during an authorized period of deferment, such as returning to school for a graduate degree. Subsidized loans are given based on financial need.
2. Unsubsidized: You will be charged interest on this loan from the moment the loan is given to you until it is paid in full. It is not awarded on the basis of need.
Although law dictates that student loan interest rates can never be higher than 8.25%, you must still be careful not to let the interest accumulate. If you do not pay interest charges as they accrue, they will be capitalized, which means that the interest will be added to the principal amount of your loan and additional interest charges will be based upon the new total amount. If your interest is capitalized, it will increase the amount of money you will have to repay. If instead you pay the interest as it accumulates, you will repay less in the long run. Please refer to Chart 1 for an example of how interest charges can capitalize.
When do I pay?
Most student loans provide a 6-month grace period after you graduate, leave school, or drop below half-time enrollment before you must start paying back your loan. If you have a subsidized loan, you will not be charged interest during this grace period. If by any chance, you cannot pay your student loan, you should contact your lender to find out about deferments, forbearances, and discharges.
A deferment allows you to postpone payments on your loan for a limited time and under special circumstances. You must keep making payments to your lender until your deferment is approved. If you have a subsidized loan, you will not be charge interest during a deferment. If you have an unsubsidized loan, you will be charged interest.
A forbearance allows you to temporarily postpone payments on your loan if you are unable to pay but do not qualify for a deferment. With forbearance, payments can be postponed or reduced. Be careful, as you will be charged interest during this time, no matter what type of loan you have.
A discharge eliminates your obligation to pay back the loan. It is only given under extreme circumstances. Student loans are not usually discharged by bankruptcy.
Federal Work-Study Program
A Federal work-study program allows students with financial need to work in order to pay for their education. The work-study program has a specific list of available jobs, and you will be paid at least the minimum wage, depending on the job that you are doing. You cannot, however, earn more money than your total Federal Work-Study award. There are also restrictions on how many hours a week you can work based on your class schedule and academic progress.
Any or all of these financial aid alternatives may be available to you to help pay for your education. Remember, spending on education may be the most important investment you will ever make. Go ahead and invest in yourself!
DMCC is a 501 (c)3 is a charitable organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with their debt. Education is provided free of charge to consumers as well as personal counseling to identify the best options for the repayment of any unsecured debt. To speak to a certified credit counselor, call 1-954-418-1466, email contact@dmcconline.org.
DMCC is located at 700 West Hillsboro Blvd., Building 1, Suite 105, Deerfield Beach, FL 33441.
