Posts Tagged ‘loans’
In your collegiate quest for financial aid, you will find that there are several different loans and grants you can receive after filling out the FAFSA (Free Application for Federal Student Aid). If you are in dire financial need, you may be eligible for a Perkins Loan. How is this particular loan different from other student loans? Let’s break it down.
Who: Perkins Loans are available to full-time and part-time graduate and undergraduate students. Usually recipients of Perkins Loans have a greater need for financial assistance than recipients of Stafford Loans.
What: Perkins Loans are fixed rate loans based on student need. The fixed interest rate on these loans is 5%. Perkins Loans are subsidized loans, which means the student does not pay interest while enrolled in school.
Unlike Stafford Loans, students have a grace period of 9 months after graduation or withdrawal to begin repayment. After repayment begins, the student has 10 years to pay back the entire loan to their college or university. Note: Perkins Loan recipients repay their loan directly to their school.
Where: There are about 1,700 schools that have access to Perkins funds. Some colleges and universities can offer more aid to students than others, so check with each institution to see what their limits may be. (Keep in mind that if you transfer to another school, your funding may change.)
How: To receive a Perkins Loan, students must fill out the FAFSA.
With Perkins Loans, the student’s school combines federal funding with its own funds to pay the student directly – either in the form of a check or by depositing money into a student account – twice per academic year. The school must notify the student in writing when this deposit occurs.
If you aren’t sure whether or not you qualify for a Perkins Loan, fill out the FAFSA and an Expected Family Contribution (EFC) will be calculated for you. This measures the amount you and/or your family will be able to provide towards your secondary education. Depending on this number, federal aid will be awarded to you. When in doubt, discuss your options with your academic adviser and check Cappex for more information on scholarships and financial aid packages!
After you submit your FAFSA (Free Application for Federal Student Aid), you may become eligible for one of several financial aid options. The Stafford Loan is the most common type of government aid for students. So, what is it and how does it work? Let’s break it down:
Who: Stafford Loans are available to undergraduate or graduate students who are enrolled in school at least part-time. While it doesn’t matter if your credit is good or bad, you just can’t be in default on a previous loan.
What: A Stafford Loan is a fixed rate federal loan. Fixed rate means that the interest rate on your loan does not change. These are the most common student loans and some of the least expensive ways to pay for school. Based on your need as calculated by the FAFSA, you will be awarded either a subsidized or an unsubsidized loan.
- Subsidized = the government pays your loan interest when you are enrolled in school. As of July 1, 2012, subsidized Stafford Loans have a low fixed interest rate of 3.4% and are not available for graduate students.
- Unsubsidized = you pay your loan interest. Interest starts building up at a fixed 6.8% as soon as your school receives funds. Even though you don’t have to pay the interest while you are in school, it will grow and then be added to the total loan amount when you are done with school. Then you’ll start paying interest on that interest. So, its in your best interest to pay as you go!
Where: Most colleges and universities accept Stafford Loans. Check with your academic adviser if you are uncertain.
When: Each college and university has a different deadline for financial aid submissions or notifications. Check with yours to make sure you don’t miss it.
How: To be approved for federal financial aid, you must fill out the FAFSA. The amount of money you are allowed to borrow each year is limited and may change; you need to renew your FAFSA every year and re-apply for a Stafford Loan. Funds are deposited directly into your student account twice per year, usually in the fall and winter semesters.
After you graduate – or are no longer a part-time or full-time student – you have a 6 month span of time called a grace period. During this time you do not need to make any payments on your loan, but you have the option to do so. After that grace period, you’ll need to start your monthly payments. You have 10 years to pay back your loans and any interest accumulated.
Finally, you will have to participate in a Stafford Loan Exit Counseling Session. Basically, you’ll need to prove that you have either completed school or are no longer in school. You’ll receive information on how to pay back your loans at this session.
What is FAFSA?
FAFSA is the Free Application for Federal Student Aid. It is a form that you can submit each year to assess your eligibility for financial aid. When you fill out a FAFSA, you are basically submitting yourself for consideration to receive Pell Grants, Stafford Loans, Perkins Loans, or a Federal Work-Study Program.
FAFSA evaluates your Expected Family Contribution (EFC) using a series of about 130 questions. The questions pertain to your dependency status, your and your parents’ income, and your assets. Your EFC measures your ability to pay for your education. The lower your EFC, the greater your chances might be for receiving financial aid. EFC scores range from 0 to 99,999; as of July 1, 2012 you automatically receive an EFC of 0 if your family’s income is no higher than $23,000 per year.
What do I need to fill out a FAFSA?
- Social Security Number
- Driver’s license or state ID
- W-2 Forms (If you don’t have these forms yet, estimate with your pay stubs and file a correction later.)
- Previous year’s Federal Income Tax Return
- Your parent’s previous year’s Federal Income Tax Return (If you are a dependent.)
- Your untaxed income records
- Current bank statements
- Alien registration or permanent residence card (If you are not a U.S. citizen.)
- FAFSA PIN (This PIN , or personal identification number, will serve as your electronic signature on your FAFSA. It will let you log in to apply for financial aid and access your past aid records. If you are filing as a dependent, your parents will need their own PIN. Visit the Federal Student Aid PIN site to set up PINs.)
All of the financial information you put into your FAFSA needs to be from the previous year. For example, if you are applying for the 2013 academic school year, you need to supply all of your financial information from 2012 on your FAFSA.
FAFSA does not ask about your race, ethnicity, sexual orientation, religious affiliation or any disabilities. All you need is financial info and records.
Keep in mind that federal aid via the FAFSA is awarded on a first come, first serve basis. Applications are accepted beginning on January 1st for the upcoming school year. So, if you know you will need to fill out a FAFSA for the 2013 school year, get in gear now! Ask your parents now for their financial information so they have time to gather their paperwork and create a PIN.
Who can submit a FAFSA?
Prospective and current college or graduate students. As of July 1, 2012 you must have a high school diploma or an approved substitute like a GED or home-school education to complete a FAFSA.
How can I submit a FAFSA?
- Online via the U.S. Department of Education website. This is the recommended route because you can easily update information and submit renewals.
- Printing a PDF of the FAFSA and mailing it in.
Financial aid and the FAFSA can be confusing when there are terms flying right and left. Take your time and make sure you fill out your FAFSA correctly. If you start now and take a look at the form, you’ll be ready to apply come January 1st. But don’t wait too long! Be proactive and you’ll thank yourself later.
Visit Cappex for learn more about financial aid for college!
Sure, writing college essays, asking for teacher recommendations, getting the grades, and everything else that goes into your college applications is a pain. But at least it’s a pain point you can precisely target and attack by submitting your applications before the deadlines.
Financial aid, on the other hand, is a much more challenging beast to tame. Getting and understanding your financial aid award is so gosh darn confusing. And it’s not even your fault! It’s the way colleges have traditionally illustrated a student’s financial aid award that’s the problem (one of them at least).
The College Solution‘s Lynn O’Shaughnessy explains that award letters are misleading. They often make parents think that their student received a big scholarship to help pay for college when in fact, the award letter is padded with loans. When it comes time to figure out how much out of pocket a family will have to pay for college by subtracting the awarded aid, students’ families don’t realize that some of that aid includes loans that will accrue interest and push up costs in the longer run.
Yes. This is a bummer. But if you’re in the know, you can make a better decision on where you should enroll if cost is a big factor in your choice. Read in between the lines. Compare your college financial aid awards and make sure you know which includes loans and not just all scholarships and grants.
Don’t not fret (too much). This issue has not gone unnoticed by the Consumer Financial Protection Bureau and the Department of Education, which announced a plan to simplify the aid letters so that families can assess a school’s true cost and make comparisons more easily and knowledgeably. In fact, they want YOUR feedback on the draft of the form.
You can give your feedback here: http://tinyurl.com/3ve57mt
Here is the draft of the proposed financial aid letter. Notice that it provides the total cost of attendance, which is often an evasive subject, the loans are separate from the scholarships and grants, and monthly loan payments following graduation are included.
Would knowing what kind of monthly payments graduation help you make a more informed choice on which college you should enroll in? Leave a comment below on what you think about this issue!
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