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WIKI ANALYSIS
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This article is a part of Wikinvest's Personal Finance section and Guide to Investing. Please contribute or edit to improve it. |
Student financial aid comes in the form of loans, grants, and scholarships, which all assist a student in paying for a school expenses such as tuition, room and board, books and supplies, etc. Most financial aid is based on financial need as determined by information submitted in the the Free Application for Federal Student Aid (FAFSA) form.
Applying for Financial Aid
Students must fill out and submit the Free Application for Federal Student Aid form, commonly known as FAFSA, for each year they are applying for need-based financial aid. The FAFSA uses a series of questions about the student and student's parents finances to determine the family's expected family contribution to the student's financial costs. These questions include things like the family's size, income, value of assets, etc.
The results of the FAFSA, the Student Aid Report (SAR) are sent to to colleges and universities selected by the applicant, and with this information, the college or university determines the amount of aid given to a student.
Federal Aid
Loans
Student loans come in several forms, but they all tend to be subsidized and offer better rates than general purpose loans.
- Perkins Loans - Perkins loans are low interest loans given to both graduate and undergraduate students. The loan is made by the federal government and then paid by your school. Students must pay back the school beginning nine months after graduation. Undergraduates can borrow up to $4,000 per year up to $20,000 and graduate students can borrow up to $6,000 per year with a maximum amount of $40,000.[1]
- Stafford Loans - Stafford Loans are federal student loans available to nearly any student, regardless of need, in order to supplement other types of student financial aid. Stafford loans are offered under the Federal Family Education Loan (FFEL) Program or William D. Ford Federal Direct Loan program, and schools typically choose one program or the other. The FFEL program requires you to find a preferred lender -- typically a list is available from the school -- whereas the federal government is the lender for the Direct Loan program. Stafford loans come both as subsidized and unsubsidized loans, depending on student need.
- PLUS Loans - Parents whose students are still registered as dependents on their tax forms can apply for PLUS Loans. PLUS Loans are are similar to Stafford Loans for parents with both FFEL Program and Direct Loan program options. The yearly limit on a PLUS Loan is equal to the student's cost of attendance minus any other awarded financial aid.
Grants
Student grants, unlike loans, do not have to be repaid.
- Pell Grants - Pell Grants award a maximum of $4,731 per year and depends on program funding.[2] The amount offered to a student depends on the cost of their school, status as a full-time student, and financial need. Your school can apply Pell Grant funding to cover your tuition costs and make them part of your financial aid package.
- Academic Competitiveness Grant - The Academic Competitiveness Grant was created to serve students entering their first year of college in 2006-2007. The grant provides $750 and $1,300 for the first and second years, respectively, of education and are awarded to existing Pell Grant recipients.[3]
- TEACH Grant - The TEACH Grant provides grants of up to $4,000 per year for students who plan to teach in either public or private elementary schools for low-income families upon graduation.[4]
- National SMART Grant - The National Science & Mathematics Access to Retain Talent Grant, also known as the National SMART Grant, is offered to third and fourth year undergraduates eligible for Pell Grants who are majoring in engineering, science, or foreign languages deemed critical to national security. The award provides $4,000 for each of the final two years of undegraduate study.[5]
- Federal Supplemental Educational Opportunity Grant (FSEOG) - The FSEOG grant is for undergraduates with exception financial need and the lowest expected family contributions. Recipients of this award can receive between $100 and $4,000 a year.[6]
Work Study
Unlike federal loan or grant programs, the federal work study program provides funds that students can earn through part-time employment. Students can find part-time employment with work study-eligible employers. The federal government, in turn, pays anywhere from 50-70% of the students' wages depending on the type of employment -- public service-type jobs are more heavily subsidized than private ones.
Private Loans
A smaller percentage of students choose to take out private loans to pay for college. In 2003-2004, 5.1% of students took out private loans to pay for public, four-year universities compared to 42.8% of students that took out federal student loans.[7] Similarly, 11.5% of students took out private loans at private, four-year universities compared to 54.4% of students who took out federal student loans.[7]
That said, private student loan volume has been growing more rapidly than federal student loan volume with 25% annual growth from private loans and 8% annual growth in loan volume from federal loans.[8] A list of applicable private lenders can be found on the FinAid.org page for Private Loans.
Scholarships
Institutional Grants are dependent upon the college or university. These are typically merit awards given on the basis of some form of outstanding skilled achievement. Sometimes, these awards are given without any consideration of family finances.
Cost of College
Tuition and Fees
From 2001 to 2006, tuition and fees at risen by 57% at 4 year colleges -- 40% even after adjusting for inflation.[7] From 1990 to 2005, the average price of a four-year public university more than doubled to $13,425 while the average price for a four-year private university similarly doubled to $36,510.[9]
Average Debt
The average graduating senior from the class of 2006 had student loan debt of $19,646.[10] Students attending universities in New England and the Midwest graduate with the highest levels of debt.
References
- ↑ Perkins Loan page on StaffordLoans.com
- ↑ Pell Grant page on Student Aid.gov
- ↑ Academic Competitiveness Grant page on Student Aid.gov
- ↑ TEACH Grant page on Student Aid.gov
- ↑ National SMART Grant on Student Aid.gov
- ↑ FSEOG page on Student Aid.gov
- ↑ 7.0 7.1 7.2 Debt Facts and Sources page 4 (PDF)
- ↑ Private Student Loans page on FinAid
- ↑ U.S. Census Back to School 2007-2008
- ↑ Student Debt and the Class of 2006 (PDF)
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