Federal Financial Aid
Earlier in the year we published an edition on federal financial aid but since the application start date changed in 2016 to October 1, I wanted to republish the post again to bring attention to all students and parents that they can now (October 1, 2017) began the process of completing a federal financial aid application for any student who will be entering any type of post-secondary educational program for the 2018-2019 school year. That federal financial aid application form is called a FAFSA (Free Application for Federal Student Aid)
Regardless of the financial situation a student may come from, if they are planning to attend a post-secondary educational institution beyond high school they should also consider completing the FAFSA. This is the form that will allow them to be considered for any financial aid they qualify for that is provided by the federal government. Many colleges and universities as well as various states agencies will also require that a student submit a FAFSA before being considered for school based and state provided scholarships and financial aid.
Students who will be attending college during the school period of July 1, 2018 to June 30, 2019 can began the process of submitting the FAFSA application as of October 1, 2017. With the change in the application start date to October 1, parents and students will be using income and tax information from their previous year tax return. Therefore, with the application start date of October 1, 2017, parents and students will use the federal income tax data from 2016 tax return. Students can complete their FAFSA online by going to fafsa.ed.gov.
Following is information on all the different financial aid types provided by the federal government. To be considered for any of them will require that a student complete a FAFSA.
Please Note: additional information is also available at websites such as studentaid.ed.gov or fafsa.ed.gov.
The aid you can receive from the federal government can come in the form of a grant, loan or work-study. Receiving most of your federal financial aid in the form of a grant is by far the most desirable method because any award you receive via a grant is money that you do not have to pay back. With a loan, however, you will be required to pay the money back with interest.
Let’s explore what is available!
Federal Grants
There are approximately 4 grants that are available through the U.S. Department of Education. Those grants are the Pell Grant, Federal Supplemental Educational Opportunity ( FSEOG) Grant, Teacher Education Assistance for College and Higher Education (TEACH) Grant, and the Iraq and Afghanistan Service (IASG) Grant.
Pell Grant
The Pell Grant is awarded to a student who has not yet received a bachelor’s or professional degree and whose Expected Family Contribution (EFC) meet certain federal eligibility guidelines.
(Please note: The Expected Family Contribution (EFC) indicator lets you know the amount your family is expected to contribute toward your educational cost).
In addition, students who are in a post-baccalaureate teaching certification program may also qualify for the Pell Grant. A Pell Grant can be received by a student for no more than 12 semester periods (approximately 6 years)
If you are imprisoned or if you are under an involuntary commitment after completing a prison sentence for a sexual offense, you will not be eligible for the Pell Grant.
Currently, maximum award amount of the Pell Grant for the 2017-2018 school year is $5,920. The amount an individual receives, however, will depend on:
- financial need
- cost of attendance at their chosen school
- whether they are a part-time or full-time student
- whether they plan to attend school for the full academic year.
Once you are awarded the Pell Grant, the school’s financial aid office may choose to apply the grant to your tuition cost, pay the money to you directly via check , or use a combination of these two methods. A school must, however, notify the student of the amount they will be paid and the method of payment. If the school will be paying the student by check, then they must also tell the student when the check will be available and where they are to pick it up.
Federal Supplemental Educational Opportunity Grant (FSEOG)
The FSEOG is awarded to undergraduate students who will be receiving the Pell Grant but have also been identified as a student with exceptional financial need (e.g. students with the lowest Expected Family Contribution). Grants can range from $100 to $4,000 per year depending on the extent of a student’s financial need.
Not all schools participate in the FSEOG. There are currently only about 4,000 participating colleges and universities nationwide. A student will need to check with their chosen school’s financial aid office to determine if they do participate.
Colleges and universities are only awarded a certain amount of money each year from the federal government to fund the FSEOG, so once a school depletes their allotted amount for the year then no additional funds will be available. Schools award the FSEOG on a first-come first-serve bases.
If you are a recipient of the FSEOG, the school may provide your award money to you by crediting your school’s account, paying you directly by check, or by combining these two methods. The school must pay the student at least once per term or twice per year (if they do not use semester, trimester, or quarter terms).
Teacher Education Assistance for College and Higher Education (TEACH) Grant
The TEACH grant was created in 2007 through the College Cost Reduction and Access Act. It’s purpose is to provide funding to students who plan to become teachers. Not all colleges and universities participate in the TEACH grant program, so students will have to check with their school’s financial aid office to verify if they do participate and which of their programs qualify for the TEACH grant.
As with all federally funded grants, student will need to complete and submit a FAFSA form to be considered. Students who are eligible for the grant are:
- undergraduate students
- graduate students
- students enrolled in a post-baccalaureate teacher certification program
- current and former teachers who are seeking additional education.
Individuals, who are awarded the TEACH grant and are full-time students, may receive up to $4,000 per year for a maximum of $16,000 for undergraduate school and $8,000 for graduate school.
**Please Note**: As of the 2017-2018 school year, any TEACH grant first disbursed on or after October 1, 2017 but before October 1, 2018, will be reduced by 6.6% ($264) resulting in a maximum award of $3,736/year.
Anyone who receives and accept the TEACH grant will be required to sign an Agreement to Serve Contract. Within this contract the student is agreeing that they will be a highly qualified teacher who will teach a high need subject in an elementary or secondary school that serves students from low-income families. They are also agreeing to teach in a low-income school for at least 4 years. The high need subject areas include: math, science, reading, special education, foreign language, bilingual education, and English language acquisition.
If a student receives the grant but then choose not to teach or fails to meet the requirements of the Agreement to Serve Contract, then the TEACH grant will be converted into a Federal Direct Unsubsidized Loan. If that happens, a student will be granted a 6-month grace period upon leaving school before repayment of the loan began. Interest will be charged on the loan from the date the TEACH grant was disbursed to the student.
Iraq and Afghanistan Service Grant (IASG)
This grant is awarded to students whose parent or guardian was a member of the U.S. Armed Forces and died as a result of performing military service in Iraq or Afghanistan following the events of 911. Other qualifying criteria a student must meet for the award are as follows:
- must not be eligible for the Federal Pell Grant on the bases of the Expected Family Contribution but can meet the other eligibility requirements for the Pell Grant
- must not possess a bachelor’s degree and must be enrolled in college at least part-time
- must be under the age of 24 or enrolled in college at the time of the parent or guardian’s death.
As with all federal aid, a student must complete and submit the FAFSA in order to be considered for this award. There is a section on the FAFSA where a student will indicate that they are a dependent of a member of the U. S. Armed Forces who died in the Iraq an Afghanistan operation.
The award amount that a student can receive can be up to the maximum Pell Grant amount for the year, however, it will not exceed the student’s cost of attendance at a school. The award will also be prorated for students who are enrolled part-time.
The school will provide the award to students via the same methods they would a Pell Grant. A student must be notified in writing by the school as to the amount of money they have been awarded and how and when they will be paid.
LOANS
The federal government also provides a number of options that allow students to borrow money via low interest loans to fund their educational pursuits. Unlike grants, any monies you receive via a loan will have to be repaid. With that in mind, students and parents need to use caution regarding the amount of loan money they accept in order to guard against substantial debt once a student graduates. Remember that as you get your award letters, it is up to you to accept or reject loan money you have been awarded. Following are the federal loan programs students are able to take advantage.
Direct Subsidized Loan
This loan is made by the U.S. Department of Education and distributed to students through the college or university. It is available only to undergraduate students who have a demonstrated financial need as evident by the information provided on their FAFSA.
With this loan, the federal government is responsible for paying the interest on the loan while a student is enrolled in school at least part-time. They also pay the interest during the grace period (typically 6 months) after a student is no longer attending school and also during the periods in which a student is granted an authorized deferment of the loan. Once a student graduates and the grace period ends, then they assume the responsible of paying the loan amount and the interest. The federal government will determine the interest rate for the Direct Subsidized Loan for the 2018-2019 sometime around July 1, 2018. The current interest rate is 4.45%.
The maximum amounts you may be able to borrow for each school year are as follows: $3,500 for your first year; $4,500 for your second year; and, $5,500 for years 3, 4, and 5.
The school will let you know if you are a recipient of the Direct Subsidized Loan. Once you accept, the school will most likely disburse the money to you by applying it to your school cost (tuition, fees, room & board, etc.). Any amount remaining in your account may be sent to you directly via a check, cash or deposited into your bank account for you to use toward books, supplies, etc.
Upon graduation or once you are no longer enrolled in school, at least part-time, you will be granted a 6 month grace period before you will be required to began repayment of the loan. You will have 10 years to repay the loan, during which time you can take advantage of a number of repayment options.
Direct Unsubsidized Loan
This federal loan program is available to undergraduate and graduate students. Students do not have to demonstrate a financial need , therefore, regardless of your financial situation you can qualify for the Direct Unsubsidized Loan.
Unlike the Subsidized Loan, where the federal government pays the interest while a student is in school, the actual borrower of the Unsubsidized Loan is responsible for paying the interest. This interest will start accumulating as soon as the money is disbursed to the student and will continue to accumulate until the loan is paid off. A student is not required to pay this loan while still in school, but the interest will still accumulate and be added to the balance of the loan. That is why, some students chose to at least pay the interest each month while in school to avoid an increased loan balance upon graduation. The interest rates for an Unsubsidized Loan for the 2018-2019 school year will be determined sometime arounf July 1, 2018. The current interest rate stands at 4.45% for undergraduate students and 6.0% for graduate students.
The amount you may be able to borrow under the Direct Unsubsidized Loan will depend on whether or not you are receiving a subsidized loan and also whether you are a dependent or independent student. As a dependent undergraduate student receiving the maximum subsidized loan, you may be eligible to borrow up to $2,000 additional in unsubsidized loan. As an independent undergraduate receiving the maximum in subsidized loans, you may be eligible to borrow up to $6,000 additional in unsubsidized loan. Graduate students may be eligible to borrow up to $20,500 per year.
Upon graduation or no longer enrolled at least part-time , you will have a 6 month grace period before you have to start repayment of the loan. You will have approximately 10 years to repay the loan.
Perkins Loan
The Perkins Loan is a need-based loan that is made to undergraduate and graduate students who have exceptional financial need. The money for the loan is mainly provided by the federal government, but the actual college or university is the lender of the loan. Not all schools participate in the Perkins Loan, so students will need to check with the financial aid office of the school they will be attending to determine if that school participates.
Perkins Loans are awarded based on information from a student’s FAFSA. The awards are made on a first-come first-serve bases. Once funds are depleted for a year then no additional funds will be available.
Under the Perkins Loan, students can borrow up to a maximum of $5,500 per year for undergraduate and $8,000 per year for graduate or professional school. The loan carries a flat interest rate of 5%, however, that interest does not accumulate while a student is in school at least part-time. The interest will began once the repayment period starts and will remain at 5%.
Once a student graduates or is no longer enrolled in school at least part-time, they will then be granted a 9 month grace period before repayment. Repayment of the loan is extended over a 10 year period.
Students can also qualify for cancellation of payment of the amount they have received under the Perkins Loan, by working in certain occupations upon graduation. Those occupations include: nursing, Peace Corp volunteer, public defense attorney, law enforcement, teaching in low income elementary and secondary schools, and teaching in high need areas (i.e. bilingual education, math, science, English acquisition). Cancellation of the loan is done on a graduating scale of 15% for year 1, 15% for year 2, 20% for year 3, 20% for year 4, and 30% for year 5.
Direct Plus Loan
The Federal Direct Plus Loan is a loan that is available to graduate/professional students and to parents of undergraduate students for the purpose of helping the student pay their educational cost. The loan is granted by the U.S. Department of Education and administered through the school a student is attending.
In order to be considered for the Plus Loan, a graduate/professional student must first complete and submit a FAFSA. An undergraduate student must also complete the FAFSA in order for a parent to apply for the loan. A student will need to check with the financial aid office of the school they plan to attend to determine if they participate in the Direct Plus Loan program. The school can also let them know what additional paperwork needs to be submitted for consideration of the loan.
There is no limit on the amount that one can borrow via a Direct Plus Loan, except that the amount has to be based on a student’s Cost of Attendance (COA) minus any other financial aid the student might be receiving.
The Plus Loan differ from the Subsidized, Unsubsidized, and Perkins Loans in that a borrower will have to undergo a credit check (this applies to graduate/professional students and undergraduate parents). An applicant may be denied the loan if they are found to have an “adverse credit history”. An “adverse credit history” include:
- one or more debts with a total combined outstanding balance greater than $2,085 that are 90 days or more delinquent on repayment or has been placed in collection or being charged off during the 2 years preceding the date of the credit check
- you have a federal student aid debt that has been subject to bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, placed in collection, or charged off during the 2 years preceding the credit check.
If you are found to have an “adverse credit history”you may still be considered for a Plus Loan with the following two methods:
- obtaining a creditworthy endorser (co-signer)
- documenting, to the U.S. Department of Education’s satisfaction, the extenuating circumstances that caused the adverse credit situation.
In the event a parent is denied the Plus Loan, the undergraduate student can then contact their school’s financial aid office to apply for a Direct Unsubsidized Loan in their name.
The interest rate for a Plus Loan currently runs around 7.0% and is fixed until the loan is completely paid off. The interest rate for the 2018-2019 year will be determined around July 1, 2018. The interest will accumulate each year after the loan is disbursed to the student, and will be added to the balance until the loan is paid off.
Graduate/professional students are not required to began repayment of the loan while they are still enrolled in school at least part-time. Once the student does graduate or is no longer enrolled at least part-time, they will have a 6 month grace period before having to began repayment of the loan. There are also a number of repayment options available to them as well which can extend their repayment period from 10 to 25 years.
The repayment period for a parent borrower can began as early as 60 days after the last disbursement of the loan to the undergraduate student. Parents may have the option to defer repayment while a student is enrolled in school at least part-time and also for 6 additional months after the student graduates or is no longer enrolled at least part-time. (**Important Note: A Plus Loan that is made by a parent can never be transferred to the student’s name and will remain the responsibility of the parent to repay.)
Federal Work Study
This portion of the federal financial aid program provides eligible undergraduate and graduate students with part-time jobs either on campus or through community organizations for the purpose of helping them pay their educational cost. A student must complete and submit the FAFSA in order to be considered for participation in the program.
The federal government funds the work study program through participating colleges and universities. The actual college or university is responsible for administering the program and deciding on which student will be granted Federal Work Study (which they usually do on a first-come first-serve basis). Student are granted participation based on financial need. Currently, approximately 3.400 colleges and universities nationwide participate in the Federal Work Study program. You will need to check with the school you will be attending to determine if they do participate.
Undergraduate students in the work study program are paid by the hour, while graduate students may be paid on an hourly or salary bases. The amount you can earn is at least the federal minimum wage. Income you earn through work study will be paid to you directly by the school unless you instruct them to deposit directly to your bank account or apply it to you school bill.
Please keep in mind that in addition to any federal financial aid you receive, there is also monies available through:
- state government
- college and university scholarship sources
- private scholarship sources.
You will need to be diligent in researching and taking advantage of all possible means of funding available to you.
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