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College Planning: Deciphering Your Financial Aid Package
Understanding Financial Aid
Financial aid offers have been mailed to students who will be attending college in the fall. Understanding the terms of your financial aid package can help you decide which resources to take advantage of and whether to accept the financial aid provided through the university or tap into other accounts you may have set aside for education.
First, some definitions. Then, some food for thought.
- Subsidized loans are for undergraduate students with financial need. This need is determined by the cost of schooling, family financial contributions and other financial aid the student receives, such as scholarships and grants. The important thing to note about a subsidized loan is that this type of loan does not accrue interest while the student is attending school at least part-time. Interest also does not accrue if the loan is in a deferment period. Repayment of a subsidized loan begins 6 months after you graduate or your enrollment drops below half-time status. Repayment is required even if the student does not complete school and graduate.
- Unsubsidized loans are available to both undergraduate and graduate students, but are not based on financial need. Other financial aid and schooling costs factor into a student’s eligibility. What is important to note with this type of loan is that interest accrues once the loan has been disbursed and continues to do so while the individual is attending school as well as during deferment and grace periods. Again, repayment waits until 6 months after graduation, withdrawal from school, or enrollment drops below half-time status.
- Work- study is also determined by student need and provides an opportunity to work part-time while attending school and earning money. This money is paid out just like any other job and can be used to pay tuition or rent or just to ease some of the day-to-day expenses students incur during the semester. The reason many employers on campus offer preference to work study candidates is that the position is subsidized by the university so the employer pays only a small portion of the student’s wage.
- A federal Pell Grant is disbursed to students based on eligibility and do not need to be paid back. Grants are almost always offered based on financial need.
- A Ford Federal Direct Parent (PLUS) loan is a loan offered to the parent of a dependent undergraduate student. All of the other loan options mentioned above are awarded to the student. The PLUS loan is an option for a parent instead. PLUS loans tend to have higher interest rates and interest begins accruing immediately.
Considerations for Accepting Financial Aid
It’s important to note that you do not have to accept the loans offered in your financial aid package. Our experts offer their own perspectives on the benefits of different approaches.
With high school graduations quickly approaching, this can be a stressful time of year for families as they figure out how they are going to pay for higher education. As a recent college graduate who has seen this component of college from different angles, both traditional and non-traditional, let me help you begin to understand what everything means. There are so many pieces to determining student need and what options exist.
Financial assistance is determined from your FAFSA, or the Free Application for Federal Student Aid. Your financial aid offer was based on the financial need demonstrated in your FAFSA.
Now that you’ve received your financial aid package and the options are “on the table,” it may be difficult to understand what it all means. Having a general understanding of the terms above will help you make the best decision short-term for funding college now and long-term for after graduation, as well.
Interestingly, your financial aid package may be different for every school the student is accepted to. The individual colleges determine offers based not only on your need, but also on the resources and funding they have available.
Take it from a more recent college graduate who attended school as both a traditional and non-traditional student: there are many financial aid options. Every student has a different background and need, so it is important to understand what works for you. Each year the student is presented with a new financial aid package, which allows them to decide what will be the most beneficial for that school year. Use this time to assess your true need so that everyone can achieve their goals. Here are a few things to consider:
- Who will be contributing to the student’s educational expenses?
- What options does the student have?
- Will the student be working during school?
- Plan for living expenses during the year in addition to tuition and housing.
I’ve been through this process many times and as much as you try to plan, every year is different. Be realistic with needs and wants. While some options seem great now and can provide extra comforts, think if this will benefit the student in the long run. Looking back on my financial aid experience, I wish someone would have outlined what the options were and what everything meant. If you can learn anything from me, remember these three things:
- Know and understand your options.
- Do what’s best for the student.
- Plan for the future.