There is no way around it: college is expensive. For most families, the cost of college is the most important factor when making an initial college list as well as the final decision. In order to determine if a school is affordable, families need to take need-based aid (in this case Federal Student Aid) and merit-based aid, such as athletic and academic scholarships into account.
Federal Student Aid (Need-Based Aid)
Need-based aid emanates primarily from Federal Student Aid which is money that the federal government grants students to help pay for college or other educational expenses. There are three types of Federal Student Aid that are offered: grants, loans, and work study funds. A grant is financial aid that is given and does not need to be repaid. A loan is financial aid that is borrowed and needs to be repaid. A work study job is a job that will pay at least a minimum wage salary that goes toward the cost of the education.
In order to qualify and obtain one of these three Federal Student Aid types, students must submit a FAFSA form (Free Application for Federal Student Aid) found on the FAFSA website. The FAFSA form will ask for you to create an ID and account which then goes into detailed questions on aspects such as your Social Security number, background, family income, dependence, tax records, W2, investment funds, etc. After completing the form, you will receive a Student Aid Report (SAR) soon after confirming the information you provided is correct. The FAFSA, which can be filed any time after October 1 (as of 2018), is the form that your family must complete to find out if you qualify for need-based financial aid. Once you complete the form, you can send it to the college(s) to which you are applying. If accepted to the college or university, you will receive a letter in the mail letting you know how much need-based aid, if any, your family qualifies for.
Unfortunately, most families are too well-off financially to receive a significant amount of need-based aid, but not wealthy enough to write an annual check to pay for college. If you and your family fall into this category, fill out the FAFSA anyway. Even if you do not receive any need-based money, you may qualify for federal student loans that usually carry lower interest rates than you will find elsewhere.
The three types of Federal Student Aid namely, grants, loans and work student funds are all different and worth looking at separately.
Federal Student Grants
Grants are offered by private entities, corporations, states and the Federal Government. The latter offers the most grants and is the first place that aspiring college students should look when looking for college funding. Federal Grants fall into two categories, need-based and merit-based grants. Need-based grants are awarded to students who are in a difficult position financially, while merit-based grants are awarded for exceptional educational performance or other personal achievements. Federal grants are very similar to scholarships in that they don’t need to be repaid. This makes federal student grants a very attractive financial option if possible. Federal grants may also be awarded to students who fall within certain groups including:
- Veterans and National Guard members
- Foster care youth
- Under-represented groups
- Students who choose certain careers
- Students with disabilities
The popular programs below disperse free grants for college bound students:
- SMART Grant
- Pell Grant
- Federal Supplemental Educational Opportunity Grant (FSEOG)
- Academic Competitiveness Grant
Federal Grants can be applied for as mentioned above, on the FAFSA website through the Application For Federal Student Aid. Another type of financial assistance that is easier to qualify for consists of Federal Student Loans.
Federal Student Loans
Federal student loans often end up being the best method of affording college for many students. Unlike private loans these Federal Student Loans do not require any credit history or co-signor. These loans also offer a wider variety of repayment options and often better repayment terms and interest rates than do private loans. Undergraduates can take out two types of Federal Student Loans: subsidized and unsubsidized loans. The criteria for qualifying for each type is different, with subsidized loans requiring you to meet certain financial criteria. Subsidized loans ease the burden of paying loan interest, while unsubsidized loans do not. However, subsidized loans are usually restricted to smaller amounts and only available to undergraduates (not graduate students). Below are some basic and general details about Federal Student Loans (for both types).
- Loan terms – usually 10 to 25 years
- Grace period – 6 months (to start repaying the loan after graduating)
- Application fee – 1.066%
- Prepayment penalty – none
- Late fees – yes
- Interest rates remain the same through the life of the loan: 5.05% for direct subsidized loans and direct unsubsidized loans for undergraduate students; 6.6% for direct unsubsidized loans for graduate or professional students
- Must be enrolled half-time or more.
- Applications for Federal Student Loans are completed on the FAFSA website.
The final Federal Student Aid type is the Work-Study program.
Federal Work-Study is a way for students to pay for college with part-time work on or off campus. Work-Study funds are not applied directly to your tuition but are given to you in the form of a paycheck. It is important to realize that approval for Federal Work-Study doesn’t guarantee you will get a job. Some schools help you to find a job, but often you have to find, apply and interview for a position yourself in order to earn the money. It is also important to note that Federal Work-Study may have varying pay and varying hours depending on your situation, and that these terms may change each year. This program allows you to get valuable work experience and not accrue student-loan debt, but is often more variable from year to year and normally acts as a subsidy which reduces the cost of college, rather than covering it.
For a more in-depth look at need-based financial aid, visit the FAFSA website or contact Athlete College Advisors for additional consulting, resources and information.