Financial Aid [Part 1]

So you’ve received your college acceptances, chosen your school, and submitted your Statement of Intent to Register. Now it’s time for Target and Walmart runs for everything you need to create the perfect dorm room, right? Not quite! With all the excitement of planning for your first year as a college student, it’s important to consider an aspect that’s not so exciting…financing your education.

For families whose income may already be stretched thin, the increasing costs of attending colleges can be worrisome. The good news is, most families receive some form of financial aid to help them cover tuition and related costs. Today, we discuss the different types of financial aid.

What types of financial aid are available?

In general we can divide financial aid into two categories: free aid (does not have to be paid back) and loans (must be paid back over time, often over the course of many years after the student has graduated).

Free Aid (Does NOT have to be paid back)

  1. Grants — money provided to colleges by states, corporations and other private institutions, and the U.S. government, earmarked to help cover students’ cost of attendance. Grants fall into two categories: need-based, dispersed to students who have demonstrated significant financial hardship in paying for college, and merit-based, awarded to students with notable personal and academic accomplishments.

    1. Some grants target specific segments of the population such as Veterans and National Guard members, foster care youth, under-represented groups, students who choose certain careers, and students with disabilities.
    2. The federal government is a major source of grants, including:
  2. Internal College Scholarships (merit-based and need-based) — Colleges often award funds to applicants with exceptional academic, artistic, or athletic talent as an incentive for attending. Scholarships can cover any portion of college tuition up to the entire cost. Many colleges automatically consider applicants for scholarship aid, while others require separate essays or supplemental materials, and/or have earlier submission deadlines. If you are planning to apply for scholarship aid, be sure to review each college’s requirements carefully.

  3. External College Scholarships (merit-based and need-based) — In addition to internal college scholarship aid, numerous scholarships are available through various outside organizations promoting college accessibility for students interested in particular fields of study, who are members of underrepresented groups, who live in certain areas of the country, or who demonstrate financial need. These can be found using free online databases like Fastweb, which compare your profile with an extensive list of scholarships and notify you of those for which you are eligible. Some simply ask for basic demographic information, while others are more extensive and may require essays or additional documentation. Again, read the criteria carefully!

  4. Federal Work-Study (need-based) — The Federal Work Study program provides paid, part-time jobs for college students. Students can apply their earnings towards tuition and related costs such as books, board, and more. Although most work study jobs are on campus, wages are paid by the federal government, rather than the school. Work-Study aid is technically not free, since the student must apply for one of these positions and put in the hours of work in order to receive it. However, we include it in the “free” category since the money itself does not have to be paid back.

Loans (MUST be paid back)

Loans fall into multiple categories — federal vs. private, and subsidized vs. unsubsidized.

Federal Loans

  1. Direct Subsidized Loans do NOT begin accruing interest — or rather, the government pays this interest on behalf of the student — while the student is working towards their degree, or during the 6 month deferment (grace) period after graduation. Once deferment ends, interest begins accruing, for which the student is now responsible. Subsidized loans are need-based, and are issued according to the cost of attendance and the amount of financial aid already awarded.

  2. Direct Unsubsidized Loans — although students are not required to begin making payments until the deferment period has ended, this type of loan begins accruing interest as soon as it is taken out. Direct Unsubsidized Loans are not awarded based on income, and students may continue to receive them even after they are no longer eligible to receive Direct Subsidized Loans.

  3. Direct PLUS Loans (undergraduates only) — this type of loan is issued to parents of undergraduate students. In order to qualify, parents must have a satisfactory credit history, while students must be enrolled at least half time and be in good academic standing. It is important to note that unlike direct subsidized and direct unsubsidized loans, parents assume the responsibility for repaying this type of loan.

Private Educational Loans

If cost is still a concern after reviewing your financial aid package (including grants, scholarships, federal work study, and federal and state loans), you might consider turning to a private lender. You have the freedom to select your lender, and the agreement you draw up will be unique to that lender’s stipulations. Be sure to do your research when choosing a lender, since you will be entering into a long-term relationship with that institution. These are typically not a frontline source of financial aid — try to exhaust your other options first.

College Admission Consulting Group, ‘Admission Masters’
[LA, Irvine, Brea in California, Seoul in Korea]

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