You and your student have submitted the FAFSA to the various colleges and universities your student wishes to attend. These institutions have received and processed your student’s FAFSA information. The award letters have been generated and sent. You have received said award letters and there are generous amounts of all kinds of financial aid. The buck doesn’t stop there. You need to know what kind of financial aid your student has been offered and what other steps you and your student need to take in order to receive the financial aid.
Part Three: 4 Types of Financial Aid
The third part of our four part series on understanding your award letter is the four types of financial aid and how to apply. In our previous blog post, we discussed cost of attendance and how schools use this fixed amount to determine your student’s financial aid eligibility. We also explained why you should use direct cost and not the cost of attendance when calculating how much it will actually cost to attend college.
Here is a brief overview of the types of aid your student may see on their award letters and the steps to take in order to secure the financial aid offered.
In the financial aid office scholarships offered by the school are known as institutional aid. Each school offers a variety of scholarships. The most widely known scholarships are academic and athletic. However some schools have scholarships based on talent (band, art, dance, music). There are even schools that offer scholarships if you attend a campus visit.
How to Apply: Check out the admissions and financial aid web pages of the schools your child is interested in attending. See what scholarships each school has to offer and if your child qualifies, review how to apply for the scholarships, and please pay attention to the deadlines. If your child is interested in athletic scholarships we recommend you check out The Recruiting Code.
There are other scholarships that are called private or outside scholarships. These scholarships are provided by private sources such as foundations, businesses, and civic organizations. There are a ton of outside scholarships available. Here is some advice for applying for outside scholarships.
How to Apply: Check out our recommended websites page for a list of scholarship platforms we use when we are creating scholarship lists for our clients. Use this advice before applying for any outside scholarships.
There are essentially two types of grants, federal and state. The most common federal grants are Pell, FSEOG, and TEACH. The Pell Grant is given to undergraduates based on financial need and enrollment status. FSEOG is given to those with the greatest need at the discretion of the university. The TEACH Grant is given to those who agree to teach at a low income school for a certain period of time. If the obligation is not met, the grant becomes an unsubsidized loan.
State grants are based on the state your student resides in and if your student plans to attend a school in the state you currently reside. The amount of aid available and the process for applying for the grant varies from state to state. Some states only require your child to file the FAFSA while other states have a separate application.
Student Loans consist of direct loans and private loans. There are three types of federal direct loans. Subsidized, Unsubsidized, PLUS Loan. The subsidized and unsubsidized loans are borrowed by your student. The subsidized loan is based on financial need and the federal government pays interest that accumulates while your student is in school. The unsubsidized loan is offered to almost everyone. The interest on this type of loan accumulates from the date of the disbursement throughout the life of the loan. The PLUS Loan is available to parents of dependent students. It typically has a lower interest rate and more flexible repayment plan than other types of loans.
The other type of loan that is borrowed to pay for college is the private or alternative loan. This kind of loan is a nonfederal loan provided by a lender such as a bank or credit union. It is very important to shop around. Be sure and check interest rates, origination fees, and repayment options.
How to Apply: For federal direct loans your student will need to file the FAFSA. Complete a master promissory note and entrance counseling. For the PLUS loan the FAFSA still needs to be filed however you, the parent, will complete a loan application and master promissory note. To apply for a private loan you will need to see what is required from the organization in which you are applying.
4. Federal Work Study
Work Study is the best! The federal work study program provides part-time employment while enrolled in school to help pay education expenses. Typically federal work study can be applied directly toward your student bill, or you can ask for it to be paid directly to your student for other school expenses. Federal Work Study is not a guaranteed amount. The amount is based on the number of hours your child works and the pay rate of the job.
How to Apply: File the FAFSA. Indicate on the FAFSA that you are interested in Federal Work Study. Once you have been awarded federal work study, ask your financial aid counselor what the process is for receiving a federal work study job. Some schools have a application and interview process.
Let Us Give You Some Advice
Now that you know the four types of financial aid, here is some advice about what aid you should accept first.
1. The amounts of aid listed on the award letter are not guaranteed, and there are other steps that may need to be taken in order to receive these awards.
2. You do not have to accept all the financial aid on your student’s award letter.
3. We recommend your student accept scholarships, grants (Who doesn’t want free money!), and federal work study first.
4. If you plan to borrow student loans, always accept the subsidize loan before the unsubsidized loan.
5. When borrowing student loans, you do not have to accept the full amount listed on your award letter.
Obviously if you have received an award letter, then most likely you have completed the FAFSA. If you have not begun the financial aid process, the best thing you can do is file the FAFSA! The information provided on the FAFSA is sent to the schools listed on the FAFSA. When the schools receive your child’s FAFSA information the financial aid office will determine your student’s aid eligibility and send your child an award letter. An award letter is an offer of financial aid. On the award letter you will see some or all the types of aid listed above.
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