Posts Tagged ‘understanding financial aid’
You’ve probably heard a lot of talk about “financial aid” and “student loans.” Your counselor is on your back about filling out a FAFSA, your parents are asking about interest rates, and all the fancy paperwork with charts and numbers about loans and grants and whatnot makes no sense to you.
It’s no surprise that you aren’t familiar with a lot of the terms being thrown around. As a high school student, you probably don’t have any loans yet. You likely don’t have a credit card. You may not even have a checking account or bills to pay. To save you from having to smile and nod through conversations about paying for college, here is a cheat sheet of the most common financial aid terms you need to know.
Academic year: The school year, usually two semesters (Fall and Spring) or three trimesters.
Cost of attendance (COA): The total amount it will cost to attend a school.
CSS PROFILE: An online application for non-federal student financial aid.
Dependency status: Whether a FAFSA applicant is classified as dependent or independent.
FAFSA: An acronym that stands for Free Application for Federal Student Aid. Think of it as a long job application you and your parents will fill out together, only instead of applying for a job, you’re applying to borrow money from the government to pay for school.
Financial aid: Loans, scholarships, grants, or work study programs that help students pay for education-related expenses.
Financial aid package: The total amount of scholarships, loans, grants, and work-study offered to a student.
Gapping: When a school’s financial aid award does not meet a student’s financial need. Also known as unmet need.
Gift aid: Financial aid that does not require repayment, like grants and scholarships.
Loan: Money you borrow and will pay back, usually with interest.
Net price: The total cost of attendance (COA) minus any gift aid. Also known as out-of-pocket cost.
Out-of-pocket cost: The total cost of attendance (COA) minus any gift aid. Also known as net price.
Professional judgment: The ability of a college’s financial aid office to alter FAFSA data or override a student’s dependency status.
Room and board: The fees associated with living on campus. These typically cover student housing costs and meal plans.
Scholarship: Money for college that doesn’t need to be paid back. Scholarships can br granted by a college or outside organization for academic accomplishments, athletic skill, leadership ability, or other stated qualities.
Self-help aid: Financial aid that must be repaid, like loans, or otherwise earned, like work-study.
Student employment: Holding a job while attending school.
Tuition and fees: The cost of instruction at your college.
Unmet need: When a school’s financial aid award does not meet a student’s financial need. Also known as gapping.
Verification: A process that requires a college to collect financial information from students to ensure FAFSA data is accurate.
Work-study program: An initiative that helps students earn financial funding through part-time work.
Need to know more about paying for college? Check out our glossary of student loan terms you need to know.
Sure, writing college essays, asking for teacher recommendations, getting the grades, and everything else that goes into your college applications is a pain. But at least it’s a pain point you can precisely target and attack by submitting your applications before the deadlines.
Financial aid, on the other hand, is a much more challenging beast to tame. Getting and understanding your financial aid award is so gosh darn confusing. And it’s not even your fault! It’s the way colleges have traditionally illustrated a student’s financial aid award that’s the problem (one of them at least).
The College Solution‘s Lynn O’Shaughnessy explains that award letters are misleading. They often make parents think that their student received a big scholarship to help pay for college when in fact, the award letter is padded with loans. When it comes time to figure out how much out of pocket a family will have to pay for college by subtracting the awarded aid, students’ families don’t realize that some of that aid includes loans that will accrue interest and push up costs in the longer run.
Yes. This is a bummer. But if you’re in the know, you can make a better decision on where you should enroll if cost is a big factor in your choice. Read in between the lines. Compare your college financial aid awards and make sure you know which includes loans and not just all scholarships and grants.
Don’t not fret (too much). This issue has not gone unnoticed by the Consumer Financial Protection Bureau and the Department of Education, which announced a plan to simplify the aid letters so that families can assess a school’s true cost and make comparisons more easily and knowledgeably. In fact, they want YOUR feedback on the draft of the form.
You can give your feedback here: http://tinyurl.com/3ve57mt
Here is the draft of the proposed financial aid letter. Notice that it provides the total cost of attendance, which is often an evasive subject, the loans are separate from the scholarships and grants, and monthly loan payments following graduation are included.
Would knowing what kind of monthly payments graduation help you make a more informed choice on which college you should enroll in? Leave a comment below on what you think about this issue!
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