FEDERAL AND STATE COLLEGE FINANCIAL AID PROGRAMS

Key Points

• Federal Programs
• Pell Grants
• Federal Stafford Loans for Students
• Rising College Costs
• Federal PLUS Loans for Parents of Undergraduates
• Supplemental Education Opportunity Grant
• College Work-Study Program
• The Perkins Loan
• Other Financial Aid Sources
• State Programs
• Private Education Loans
• Points to Remember

The cost of financing a child's college education can be daunting to many families. Although most colleges agree that the family should be the primary support vehicle, financial assistance does exist. In addition to private sources such as trade unions, fraternal or service organizations, professional associations and religious groups, numerous state and federal aid programs exist. A thorough investigation of all assistance programs is a fundamental part of financing a college education.

Under many present aid programs, a parent does not have to be in a low-income bracket to receive financial assistance. Most need-based programs take into account family living expenses, the number of children in the family, and how many children are in college.

Federal Programs

The federal government administers six major financial assistance programs. Three of these programs are direct assistance programs; that is, the assistance goes directly to the student. The other three programs are administered through the college that the student attends; that is, funds are sent directly to the college, which in turn dispenses the money to the student in accordance with federal guidelines.

Pell Grants

The Pell Grant (formerly the Basic Educational Opportunity Grant Program) was named for Senator Claiborne Pell, who sponsored the legislation that established the program. A Pell Grant is based solely on financial need. The amount of the award is based on student need (within certain limits) and on how much money Congress appropriates to the program each year.

It's important to apply for a Pell Grant even if you think you won't qualify, since many college and state aid programs require it. Just check the proper box on the financial aid application.

Stafford Student Loans

The Federal Stafford Loan is a federally subsidized loan program that allows the student to borrow from private lenders and the government at low interest rates. Even families with high incomes are eligible for the Federal Stafford Loan program. The loan is insured either by the federal government or a state agency.

Banks and other lending institutions voluntarily take part in the loan program. Repayment of principal and interest is deferred until six months after a student graduates or leaves school, and repayment is made over a 5- to 10-year period depending upon the amount owed.

An undergraduate may borrow up to certain limits each school year under the Federal Stafford Loan program. Depending on your level of financial need, both "subsidized" and "unsubsidized" Stafford Loans are available.  With the Subsidized Stafford Loan, the government pays all the interest that accrues prior to repayment and during periods of deferment.  Your financial aid office will determine your eligibility for these loan types.  

Rising College Costs

Source: The College Board.

Assumes four percent annual increase and current one year cost of four year public ($9,008) and four year private ($23,578). 

Federal PLUS Loans for Parents of Undergraduates

With the Federal PLUS Loan, parents can borrow up to their child's total cost of education minus other financial aid awarded to the student.  This total cost can include tuition, books, food, housing, transportation, and more.  There are no income or asset requirements and pre-approval can be received in minutes depending on the lender.

Supplemental Education Opportunity Grant

A Supplemental Education Opportunity Grant (SEOG) is a grant to a student with demonstrated financial need. The money is sent, however, by the federal government directly to the colleges, which determine the award amount and dispense the money to the students. (These are in addition to Pell Grants.)

The Department of Education allocates a specific amount of money to each participating college. Once distributed, there are no additional sums. Applications are made through the academic institution's office of financial aid. Early application is strongly recommended.

College Work-Study Program

The College Work-Study Program is a program administered by each participating college to provide employment for students who demonstrate financial need. The federal government grants funds to colleges for this purpose. Students normally obtain employment under this program as part of an overall financial aid package. They generally work 12 to 15 hours per week during school sessions, and up to 40 hours a week during vacation periods. Examples of college employment include library clerks, faculty aides, maintenance workers, and cafeteria workers. The awards are determined by the colleges, and once a student has earned the full award amount, employment is terminated for that academic year.

Application is made to the college financial aid office. Eligibility is based solely on financial need. Students must be enrolled at least half-time in an accredited college and maintain good academic standing while employed. These earnings will not reduce the student's financial aid eligibility. However, funds are limited, so apply early for financial aid and work-study.

The Perkins Loan

Perkins Loans (formerly National Direct Student Loans) are administered by colleges that also act as lenders. Eligibility is based on the student's calculated need. Although the interest rate is low, funds are limited and students should submit the financial aid application early. A student will pay no interest while still in school. There is a nine-month grace period after leaving college. Repayment is stretched out over 10 years.

Other Financial Aid Sources

ROTC — Uncle Sam hands out millions of dollars each year to members of the Reserve Officers Training Corps. Recipients must serve up to eight years in the military.

National Merit Scholarships — Each year, 6,500 top students win awards of between $250 and $2,000. Recipients are chosen from among the highest scorers on the PSAT exams.

Westinghouse Science Talent Search — Each year, 1,500 entrants submit research projects in science, mathematics, or engineering. The top 10 contestants each get between $10,000 and $40,000 and 30 runners-up get $1,000 each.

Your child's high school guidance office can provide information on these and other sources of scholarships.

Source: The College Board. 

State Programs

State governments also offer a variety of assistance programs. But most state assistance is available only to state residents attending schools within that state. Some states do make exceptions and permit state residents to attend out-of-state schools. A few states allow nonresidents to receive assistance while attending a school within the state, or have reciprocity arrangements with other states.

Many states have special programs for teachers and National Guard enlistees. Others offer work-study programs and special academic supplements.

Application procedures vary from state to state. While most states allow the student to use one of the same need analysis application forms used by the federal programs, some states do require separate application forms that must be completed for state programs. Students may find out about state programs and requirements through their high school guidance counselor, college financial aid office, or a state agency.

It is important to begin early and thoroughly investigate all potential sources of financial aid. Your child's college placement office can be a good starting point for information on financial aid sources.

Private Education Loans

Many lenders offer privately guaranteed education loans to help cover the costs that are beyond the reach of federal aid programs.

Points to Remember

1. It is important to investigate all sources of financial aid to help with the high costs of college.
2. Federal, state, private loan, and scholarship programs are available.
3. Financial aid can be awarded on the basis of need, which does not require a family to be in a lower income bracket.
4. Many government loan programs provide that no interest is due until a student is no longer in school.
5. It is important to begin researching financial aid sources early in the application process.
   

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