Information for Students About Financial Aid

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Financial Aid

From talking to many students and student groups, to watching and participating in rallies, it’s clear to me that higher education is unaffordable to too many highly qualified students. As students and their families go deeper in debt to pay for these rising costs, many feel overwhelmed. The Federal government provides a range of financial aid that can make a significant difference in helping students complete their education, and pursue their academic goals.

U.S. Federal Assistance

The definitive source for information on Federal financial aid is the STUDENT GUIDE: FINANCIAL AID FROM THE U.S. DEPARTMENT OF EDUCATION. (studentaid.ed.gov/students/publications/student_guide/2004_2005/english/index.htm) The complete guide is available online, and it contains detailed information about every type of financial aid available from the federal government, for both undergraduate and graduate study.

To receive aid from these federal student aid programs, you must complete a Free Application for Federal Student Aid (FAFSA). The information you report on the FAFSA is used to calculate an "Expected Family Contribution" (EFC) according to a formula set by Congress. Your school will use your EFC to determine what federal, state, and institutional aid you are eligible to receive.

For more information on how (and why) to complete the FAFSA application, visit the “Completing the FAFSA” website (www.ed.gov/prog_info/SFA/FAFSA). The application itself can be completed online at www.fafsa.ed.gov.

For more specific information about the main types of aid that are available, including links to relevant portions of the Guide, please see below.

Federal Pell Grants

Aid Available: Pell Grants are need based and do not have to be repaid. The maximum award for the 2001-2002 award year is $3,750 and for the 2002-2003 award year is $4,000.

The Fine Print: Available to undergraduate students only. The amount of aid available to you depends on Expected Family Contribution (EFC) as well as your cost of attendance, whether you're a full-time or part-time student, and whether you attend school for a full academic year or less.

For More Information:
studentaid.ed.gov/students/publications/student_guide/2004_2005/english/types.htm

Federal Stafford Loans - Subsidized & Unsubsidized

Aid Available: Stafford Loans are loans which must be repaid. First-year undergraduates are eligible for loans up to $2,625. Amounts increase to as much as $5,500 annually after two years of study.

The Fine Print: Stafford loans are available to graduate and undergraduate students. You must be enrolled in an eligible program of study at least half time and must also meet other general eligibility requirements. If your school participates in the Federal Direct Student Loan Program, your Stafford Loan will be made through the school. (For other schools, the Stafford Loan will be made through a private lender such as VSAC or a bank or credit union.)

If you qualify (based on need) for a subsidized Stafford loan, the government will pay the interest on your loan in school, during the 6- month "grace period" after leaving school and during any deferment periods. If your family income makes you ineligible for a subsidized loan, you can still receive an unsubsidized Stafford Loan. In that case, you are responsible for paying all of the interest that accrues on the loan, including your time in school. In either case, the interest rate is variable, but never exceeds 8.25%

Some lenders offer special discounts, so it is a good idea to check several resources.

For More Information:
studentaid.ed.gov/students/publications/student_guide/2004_2005/english/types-stafford.htm

Consolidation Loans

Aid Available: A Consolidation Loan allows the borrower to consolidate several types of federal student loans with various repayment schedules into one loan. You can even consolidate just one loan into a Direct Consolidation Loan to get benefits such as flexible repayment options.

The Fine Print: You can get a Direct Consolidation Loan during your grace period, once you have entered repayment, or during periods of deferment or forbearance. You must consolidate at least one Direct Loan or FFEL Loan. If you don't have a Direct Loan, but you have a FFEL Loan, you must first contact a FFEL lender who makes FFEL Consolidation Loans to ask about obtaining a FFEL Consolidation Loan. If you are still in school, you may apply for a Direct Consolidation Loan for any Direct Loans or FFEL Loans if you are attending at least half time and have at least one Direct Loan or FFEL Program loan in an in-school period.

For More Information: studentaid.ed.gov/students/publications/student_guide/2004_2005/english/types-consolidation.htm

Federal PLUS Loans

Aid Available: These are unsubsidized loans made to parents that must be repaid. The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to--but no more than--$2,000.

The Fine Print: PLUS Loans are made either through the school (Direct Loans) or through a private lender. (If you are independent or your parents cannot get a PLUS loan, you are eligible to borrow additional Stafford funds.) To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. If they don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan. The interest rate is variable, but never exceeds 9%.

For More Information:
studentaid.ed.gov/students/publications/student_guide/2004_2005/english/types-plusloans.htm

Tax Credits - Hope Tax Credit, Lifetime Learning Tax Credit & Loan Interest Deductions

Aid Available: These income tax credits reduce your or your family’s federal taxes. They are based on your college tuition and fee charges, minus grants scholarships, and other tax-free educational assistance. The Hope tax credit can be claimed during the first two years of college, up to a maximum of $1,500. The Lifetime Learning tax credit is available for any level of postsecondary study, up to a current maximum of $1,000. Loan Interest deductions are available on 100% of interest paid on loans for tuition, books, room, board, and transportation. This includes up to $1500 for 1999, $2000 for 2000 and $2500 thereafter.

The Fine Print: If your parents claim you on their income tax return, they would be eligible to take the credit on their taxes. If you are not claimed as a dependent on anyone else’s tax return, you would be eligible to claim the credit. The credits are not available to single filers with adjusted gross incomes greater than $50,000 or joint filers with adjusted gross incomes greater than $100,000. Also note that only one type of credit (Hope or Lifetime Learning) may be claimed for the student in any given year. Loan Interest deductions are available even to people who claim the standard deduction.

For More Information:
General information about the federal Student Financial Assistance Programs, including help in completing the required Free Application for Federal Student Aid (FAFSA) (www.fafsa.ed.gov), is available at 1-800-4-FED-AID (1-800-433-3243).

Links to additional sites with information about Financial Aid

Wired Scholar-Paying for College
http://www.wiredscholar.com/paying/content/index.jsp

Student Loan Net
http://www.studentloan.net

Federal Trade Commission: Scholarship Scams
http://www.ftc.gov/bcp/conline/edcams/scholarship/index.html

Financial Aid Information Page
http://www.finaid.org

IRS Publication 970: Tax Benefits for Higher Education
http://www.irs.gov/pub/irs-pdf/p970.pdf

Peterson's Education Center
http://www.petersons.com

Sallie Mae: Student Loan Marketing Association (SLMA)
http://www.salliemae.com

Scholarship Resource Network
http://www.srnexpress.com

US Department of Education - Office of Postsecondary Education
http://www.ed.gov/finaid.html

Federal Educational Benefits for Veterans
http://www.gibill.va.gov