The Comprehensive Guide to Financial Aid
Updated By Janessa Armstrong on November 18, 2020
The price tag for college can often be a turn-off for many prospective students. It can be hard to justify spending so much money when there are more immediate things to handle in the present: rent, car payments, food, bills—the list can feel endless. However, college is an investment that opens up more career opportunities and could change your lifestyle. It takes time and effort, but a degree is worth it.
Luckily, you don’t have to spend all of your savings to enroll in college. Many colleges offer financial aid to students who qualify, and there are many different types of aid you can apply for. To arm you with better information, we’ve made this comprehensive guide to financial aid so you can make your college degree a little more affordable.
Getting Started: Choose Your College(s)
Selecting your college is the first place to start when applying for financial aid. Each college has its own requirements for financial aid and different amounts they will award to students, so it’s best to research what those requirements are before you enroll. In addition, certain degree programs can come with their own scholarships that you can apply for, such as business scholarships for business students. Find which colleges have the degree programs you want and reach out to them and let them know you’re interested.
Regardless of which college you select, the next step to receiving financial aid is filling out the Free Application for Federal Student Aid (FAFSA). The FAFSA application will help determine if you qualify for additional student loans from the U.S Department of Education. The FAFSA analyzes your financial history to determine what kinds of grants and loans you can qualify for. If you are a dependent student, you may also need to provide you parents’ financial information. Using the information provided on the FAFSA application, the U.S. Department of Education calculates your Expected Family Contribution (EFC). Your EFC is an index number that college financial aid staff use to determine how much financial aid you would receive if you were to attend their school. Most grant dollars are based on your EFC.
If you haven’t filled out a FAFSA yet, be sure to complete this form. You only stand to benefit by doing so.
Grants vs. Scholarships vs. Loans
You may have seen grants, scholarships, and loans being used interchangeably. While they all fall under the umbrella of financial aid, there are differences between each. Before you apply for a student loan, try to obtain as much financial aid that doesn’t have to be repaid.
A grant is a type of financial aid that you don’t have to pay back. Grants can be awarded by the state or federal government. Grants are typically awarded to those who have financial need, which is why the FAFSA is a good first step toward getting financial aid. Much like scholarships, grants have certain requirements you’ll need to meet in order to keep receiving money. There are times where may have to repay part of your grant, such as if you withdraw from your program, your enrollment status changes (full-time student to part-time), you receive scholarships or grants outside of federal aid, as well as certain other situations. Every school will have different criteria that will determine your eligibility for grants, so be sure you meet those requirements.
Types of Grants
Federal Pell Grants
Federal Pell Grants (Pell Grants) are usually awarded only to undergraduate students who have not earned a Bachelor’s, graduate, or professional degree. The amount and your eligibility for a Pell grant will also depend on many factors such as:
- Your EFC
- The cost of attendance
- Whether you are a full- or part-time student
- If you plan to attend school for a full academic year or less
In addition, maintaining Pell Grants requires you to be enrolled in an undergraduate course of study, and you will need to fill out the FAFSA application each year during the application period. Once you have earned a baccalaureate degree (your first Bachelor’s degree) or have completed 12 terms (roughly six years), you will no longer be eligible to receive money from a Pell Grant.
Federal Supplemental Education Opportunity Grants (FSEOG)
Federal Supplemental Education Opportunity Grants (FSEOG) assist low-income undergraduate students who need additional financial aid to pay for college. Unlike a Pell Grant, however, FSEOG are somewhat limited. Once a participating school has awarded all FSEOG funds to students, no more awards can be made that year. If you might need this grant, it’s best to apply as early as possible.
Your school must disburse, or pay out, the funds for FSEOG equally between payment periods of an academic year, whether that is a semester, trimester, or quarter.
To maintain an FSEO grant, you will need to be enrolled as an undergraduate student, and you may not have previously earned a Bachelor’s degree.
National Science and Mathematics Access to Retain Talent (SMART) Grant
National Science and Mathematics Access to Retain Talent (SMART) grants are available to students in their third and fourth years of college and are intended to encourage students to pursue majors that are in high demand across the global economy. These majors include science, mathematics, technology, engineering, and foreign languages.
To be eligible for this grant, students must be eligible for a Pell Grant and be enrolled at least half-time as a student.
Iraq and Afghanistan Service Grants
For military members and their families, an Iraq and Afghanistan Service grant is available to student whose parent or guardian died as a result of military service after September 11, 2001, in Iraq or Afghanistan. As this is a federal grant, many of the rules to maintain this grant are the same as a Pell Grant.
Teacher Education Assistance for College and Higher Education (TEACH) Grant
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a different type of grant. The TEACH grant is awarded to those who are looking to begin a career in education and looking to teach in high-need fields or at a school or service agency that serves students from low-income families. In addition, those who are awarded the TEACH grant must teach for four complete academic years within eight years after completing (or the end of their enrollment) the course of study for which they received the grant. Not every college participates in the TEACH program, so if education is a potential career choice, reach out to the school’s financial aid office to learn if they participate.
Scholarships are typically awarded based on merit—students who do well academically, as well as those who may be athletically gifted. Many organizations, in addition to colleges and universities, offer scholarships. There are other scholarships that are awarded based on need as well.
It’s in your best interest to apply early and often to as many scholarships as possible, even if you don’t think you will get it. There are some scholarships that are awarded based on luck—but only if you have applied. Make sure you do your research on scholarships as some might be scams.
To make sure you’re getting accurate information, do research on who or what is awarding the scholarship and use the following free resources:
- The financial aid office at a college or career school
- A high school counselor
- The U.S. Department of Labor’s free scholarship search tool
- Federal agencies and state grant agencies
- Your library’s reference section
- Ethnicity-based organizations
- Foundations, religious or community organizations, local businesses, or civic groups
- Your employer or your parents’ employer
Start your research now, as many deadlines come as early as a year before you begin college. In addition, some scholarships require an essay, art piece, or other form of media, and that will take time to do. Don’t feel discouraged if you weren’t a straight-A student in high school, though. Some scholarships can be earned while you are in college, so don’t hesitate to apply!
Like the other forms of financial aid, there are some requirements to keep certain scholarships. Some require an average GPA per semester, or enrollment in a certain type or number of classes. Other scholarships last for only a certain amount of time. If you do not keep up on the requirements, you will lose the scholarship. Also, any academic misbehaviors (cheating, plagiarizing, misconduct, etc.) can cost you a scholarship and keep you from earning your degree. Know the requirements for the scholarships, and know what scholarships your school accepts.
Student loans are the financial aid you will eventually need to pay back once you are no longer enrolled at least half-time. Loans may be the type of financial aid you’re most familiar with as they are frequently talked about. You can receive Direct Federal Student Loans (DFSL), or a private student loan. There are many differences between the two and many different facets to understand. Let’s start with federal loans.
Direct Federal Student Loans (DFSL)
Some of the many benefits of getting a federal loans include fixed interest rates, income-driven repayment plans, as well as not requiring a credit check, and the loans aren’t due until you stop attending at least half-time. There are three main types of federal loans:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans (for graduate and professional students, as well as parents of dependent students)
Direct Subsidized Loans (DSL)
A Direct Subsidized Loan is for undergraduate students with financial need. Your school will determine how much you can borrow and the amount may not exceed your financial need. One feature of DSL is that the U.S. Department of Education will pay the interest on the loan while you’re in school at least half-time, for the first six months after you leave school (known as a grace period), and during a period of deferment (postponing your loan payments).
Direct Unsubsidized Loans (DUL)
Direct Unsubsidized Loans differ in that you don’t need to demonstrate the need for financial aid, and DUL are available to both graduate and undergraduate students. However, you will be responsible for paying the interest during all periods. If you choose not to pay interest while you’re in school at least half-time, during grace periods, deferment or forbearance periods, your interest will accumulate and be added to the principal amount of your loan.
Direct PLUS Loans (DPL)
A Direct PLUS Loan is primarily for graduate or professional students and parents of dependent students to cover the cost of their more expensive schooling. While you typically apply online for this loan, some schools have different processes, so it’s always good to check what your college requires. To qualify for this loan, you’ll need to be enrolled at least half-time as a student in a program leading to a graduate or professional degree, not have an adverse credit history (a credit check will be run, and there are options available if your credit score isn’t healthy), as well as meet the general requirements for financial aid. You don’t have to make payments on this loan until six months after you graduate, leave school, or drop below half-time enrollment. Interest will accumulate on this loan; you can choose to pay the accrued interest or allow it to be added onto your loan balance.
Loan Forgiveness or Deferment
In certain circumstances, you may find yourself unable to pay the current cost of your loan. If you’re in a short-term financial bind, you might qualify for a deferment or forbearance. A deferment is where you are postponing loan payments and interest generally doesn’t accumulate. Forbearance is where your loan payments are temporarily suspended or reduced. Always let your loan servicer know if you are going through financial troubles. They may be able to help you choose a better-fitting repayment plan.
Another important thing regarding federal loans is loan forgiveness. In certain situations, you are no longer required to repay your loan. Sometimes, certain careers and jobs allow for loan forgiveness or cancellation. Other situations, such as your school closing, or becoming totally or permanently disabled, can enable you to have your loans discharged.
While these situations can occur, it’s more likely you’ll remain responsible for repaying your loans.
Private Student Loans
Private student loans are loans offered by banks and financial institutions rather than the federal government. To be eligible for one, your credit score—along with any cosigner’s credit score—are evaluated along with other information on your application. You’ll borrow what you need for the entire school year, and you’ll only need to apply once per year.
Private student loans require a little more homework as you’ll want a reputable lender, as well as one that your school will accept loans from. You’ll also want to make sure your loans are right for your education. Look at interest rates; whether those rates are fixed or variable, if there are any benefits to help lower your interest rates, if there are any programs that help with more manageable payments, and any other features that help give you the most information to help you decide.
If you’re using private student loans, you can refinance them to have lower monthly payments. For example, if you started out with a lower credit score but now you’ve gotten into a stable career and have a longer credit history, you can refinance your private loans and reduce the cost of your monthly payments. You may need to go to another lender to get this, so be sure to do your research if you’re planning on refinancing your loans.
CARES Act and Student Loans
With the COVID-19 pandemic, many have lost jobs and reliable sources of income. The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed on March 27, 2020, which helps provide some relief for federal student loans. The bill allows borrowers to suspend payments for six months and waives all interest fees. This means that if you stopped paying loans in March, it would be at the same rate and cost six months later in September. The CARES Act provides relief only for federal student loans.
For private student loans, we recommend reaching out to your loan servicer and letting them know how you have been impacted by the crisis. Ask for any assistance programs available and ask questions about them. Arm yourself with information. If the assistance program is a good fit for you, enroll in it, and once things have stabilized for you, consider refinancing your private student loans.
Hopefully, this guide to financial aid has helped ease your worries about the starting costs of college and provided you with some hope that you can do it. It may require a lot of time, effort, and paperwork, but being able to save on college costs will be worth it in the long run. Don’t get discouraged because of the cost of a degree.
At Independence University, we offer a support team that’s with you every step of the way through your college journey. This includes financial advisors who will help you find the financial aid you may qualify for. If you’re ready to start a career-focused degree, click here to get started.