ABC's
of Financial Aid
The cost of higher education
and the process of applying for financial aid have major effects on your life
including: your choices in college or university, your expected financial
contribution toward tuition, the methods students employ to pay for school, and
your credit rating after graduation. Here is some useful information to guide
you through the process of applying for financial aid and to prepare you for
what happens after you graduate.
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 Who is Eligible?
The US Department of
Education along with many states and schools uses information about you
collected on the Federal Application for Federal Student Aid (FAFSA) to
determine eligibility for financial aid. The Department of Education's
website lists the following examples of requirements to receive aid from
Federal Student Aid programs:
- Be a citizen or eligible
noncitizen 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;
-
Have registered for Selective Service,
if you are a male between the ages of 18-25; and
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Have a result of Eligible or Partially Eligible on the Drug Conviction question
(Question 35). Any conviction for using or selling illegal drugs prior to
applying for financial aid or after the reception of financial aid, may affect
your eligibility for aid.
Note: When applying for
financial aid, your answers on the FAFSA will be used to determine if you are
dependant or independent. Most students are dependent, which means that the
income of your parents will be considered when determining your expected
financial contribution to the cost of school. This means that even if you
completely support your self and you parents cannot contribute to the cost of
your education, for financial aid purposes your parents are expected to pay
part of the bill.
For federal financial aid
purposes, you are considered independent if you can answer Yes to
one of these questions:
- Were you born before
January 1, 1980?
-
During the school year 2003-2004, will you be working on a master's or
doctorate program (such as an MA, MBA, MD,JD, Ph.D., Ed.D, etc.)?
-
Are you married?
-
Do you have children who receive more than half of their support from
you?
-
Do you have dependents other than your children or spouse?
-
Are you an orphan, or were you (until age 18) a ward/dependent of the
court?
-
Are you a veteran?
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Free Application for Federal Student AID
(FAFSA)
Applying for financial aid
begins with filling out the Free Application for Federal Student Aid (FAFSA). Federal and State governments
as well as individual schools, determine student's financial aid needs and
expected contributions based on the results of the FAFSA
To fill out the FAFSA you
will need the following documents:
- Your Social Security
Number (can be found on Social Security card)
- Your driver's license
(if any) .
- Your W-2 Forms and other
records of money earned
- Your (and your spouse's,
if you are married) 2002 Federal Income Tax Return - IRS Form 1040, 1040A,
1040EZ, 1040Telefile, foreign tax return, or tax return for Puerto Rico, Guam,
American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federated
States of Micronesia
- Your parent's 2002
Federal Income Tax Return (if you are a dependent student)
- Your 2002 untaxed income
records - Social Security, Temporary Assistance to Needy Families, welfare, or
veteran's benefits records
- Your 2002 bank
statements
- Your 2002 business and
investment mortgage information, business and farm records, stock, bond, and
other investment records
- Your alien registration
card (if you are not a U.S. citizen)
Deadlines
Students are encouraged to
submit financial applications early. If you are beginning school in the fall or
continuing school, the FAFSA may be submitted as early as January 2 in the same
year that you will attend class. So, high school seniors who will start college
in the fall semester of 2004 and current college students who will continue to
take classes in the fall, can send in their FAFSA beginning January 2, 2004.
There are three deadlines that students need to be aware of when filing for
financial aid.
- School deadlines vary by
institution, so be sure to visit the financial aid office's website at your
school or telephone them and find out when you need to submit information.
- Some states require
forms in addition to the FAFSA, so check with the financial aid administrator
at your school. Individual State filing deadlines
can be found at the US Department of Education's FAFSA website.
- The federal filing
deadline for the 2003-2004 School Year (July 1st, 2003 - June 30th, 2004) is
midnight central daylight time, June 30, 2004. If your financial situation
changes, corrections to the FAFSA must be submitted by midnight Central
Daylight time, August 16, 2004.
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Types of
Financial Aid
Financial aid is either need
or merit based and comes in five basic forms:
- Work Study - Part time
employment at the University or College you attend. Work Study is awarded to
the student, but they are required to find a position and earn the money. This
is not a hand out, just an opportunity to work.
- Scholarships - Free
money or funds awarded to you to pay for higher education. Criteria, such as
academics, sports ability, talents, affiliations with various groups, or career
plans are used to award scholarships. There are a number of resources that are
useful for you when searching for scholarships including FinAid.
- Loans - Money for school
that has to be paid back. Education loans carry significant responsibilities.
You must apply for your own loans and manage the amount that you borrow. Also,
you are responsible for repaying the full value of their student loans plus any
accrued interest after graduation. While there are a myriad of individual loans
available to pay for school, Sallie Mae (a semi-governmental agency)
manages the three standard loans that student's and their families use: the
Stafford Loan, the PLUS Loan, and the
Perkins Loan.
- Grants -Money awards
that do not have to be repaid. There are a ton of private grants awarded to
defray the cost of school for students each year. Each grant has it's own
requirements that may include anything from grade point average, to degree
being pursued, to income. In addition to private grants, the federal government
offers the Pell Grant
and the
Federal Supplemental Educational Opportunity Grant.
- Fellowships - A form of
aid awarded by schools that is typically given to graduate students but in some
cases to undergraduates to help support their education. Some fellowships
include tuition waivers or payments to universities in lieu of tuition. Most
fellowships include a stipend to cover reasonable living expenses. Students
should contact their academic department to inquire about
fellowships.
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After
Graduation
Graduating from college
brings many opportunities and challenges including finding a job, moving, and
if necessary managing your student loans. Most loans provide a grace period
after graduation. The purpose of this grace period is to allow you time to find
a job and settle into post-school life. Your loan provider will send you a
repayment schedule that details the amount owed, when payments are due, and
where payments should be sent. Money saving programs and loan consolidations
are often offered to students upon graduation as well.
Students are warned to avoid
delinquency and default at all costs. Late payments are reported to all credit bureaus
and will negatively affect the your ability to get credit cards, buy a
car, and even buy a house.
Note: It typically takes
seven years for a bad credit item to be removed from a credit report.
If you miss nine months of
payments you are considered in default on your loans. Results of default
include: garnishment of wages, possible legal action by the lender, loss of
future eligibility for financial aid, loss of forbearance and deferment
options, higher costs due to increased interest, and negative credit
reports.
Paying for college is
typically the first major debt of your life. But, on average college graduates
earn seventy percent more than non-graduates. So, while we recommend you give
serious thought to debt management, keep in mind that your student loans are
financing your future earning and promotion opportunities.
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Other Resources
This is just a brief
overview. For more information on Financial Aid, check out these
resources: Read these
publications online:
Websites*:
* Names of resources and
organizations included in this online article are provided as examples only,
and their inclusion does not mean that they are endorsed by the Savvy Consumer
Information Center or any Government agency. Also, if a particular
resource or organization is not mentioned, this does not mean or imply that it
is unsatisfactory.
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For more information on other popular consumer issues check out our
Consumer Focus
Archive.
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