College Planning: Deciphering Your Financial Aid Package
Understanding Financial Aid
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
- 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.
- Know and understand your options.
- Do what’s best for the student.
- Plan for the future.