“Types of College Financial Aid – What is Available? What is Reliable?”
It is not hard to find information about the constantly increasing costs of higher education in this country. The news reports on it, neighbors with college-age children complain about it, and parents of high school students worry about it. The simple fact is that the days of easily-affordable highly education are pretty firmly in the rearview mirror for most people, and costs are not going down.
Because we are professionals who deal with all of the details of higher education preparation, from academics and application to (especially) college funding, we understand precisely how these costs affect the vast majority of the population. We are also, due to our experience and knowledge about these processes, able to offers families some insights into the workings of college application and managing the related costs after admission.
For families to understand the best ways to prepare for and successfully tackle the college years, it is vital that they know exactly what options are available to them. Of course, we keep our fingers on the pulse of this process at all times, but we find that the families who best navigate these waters are those who have taken the time to understand the possibilities and make informed decisions as to the best way forward in their circumstances.
If college or university education is important – and we are completely convinced that it is – then understanding the best ways to manage the financial side of the higher education years is absolutely vital… and that is true, no matter how much or how little a family earns. Starting earlier is always better, if course, but it is most important to get started at all, and not wait until the last minute.
Because of this fact, in this month’s newsletter we will focus squarely on the main types of financial aid that are available to students. Some of them are more readily available than others, based on individual, family, and/or financial circumstances. Some of them are – in our professional estimation – much more desirable or even more sensible than others. But regardless, it is important for families of college bound students to know exactly what is available out there to help with the ever-increasing costs of higher education. For a complete breakdown of which options make the most sense for your student and your family situation – remember, college financial aid is NOT a one-size-fits-all proposition! – please feel free to contact us at your convenience.
Sources of Financial Aid
So, looking forward to the day when your child is ready for college, it is good to determine exactly where some of those sources of funding are coming from. There are essentially four sources of aid from which funds are dispersed for college. These sources include:
- The federal government
- The state government
- Post-secondary institutions – (meaning the colleges or universities themselves)
- Private organizations
Money that comes from the federal government comes in the form of loans, work-study programs, and grants – we will discuss more about these later. If a family is interested in these types of programs’ then it is absolutely necessary to fill out a FAFSA or Free Application for Federal Student Aid. It should come as little surprise that the federal government is the largest distributor of financial aid overall.
Funds that come from individual state governments can also come in the form of loans, grants, scholarships, work-study programs, and other forms of assistance for tuition. The financial aid counselor at each college or university will be able to clearly inform families about the different offerings from within their state, and this is especially true if they are considering sending their child to an in-state college or university. State residents tend to pay less in tuition and may also be eligible for other forms of special aid.
Aid that comes from institutions themselves comes from the funds that colleges and universities set aside specifically to provide to students. Some schools will have a very large endowment for this aid, and others will not. This type of aid can come in the form of grants, scholarships, and work-study aid, etc. Each institution will have specific requirements as to who is eligible for which type of aid, and how much can be awarded. Researching each institution for possible types of offerings is the best option to discover exactly what might be available for your child. Your college funding advisor will have access to much of this information and can assist in making these sorts of estimations.
Private organizations also can offer funds to students by way of scholarships, private aid, etc. These organizations can include corporations, religious communities, professional clubs, and so on. More information about what may be available in your area can be researched in conjunction with your local college funding advisor, as well as through organizations with which the family is directly affiliated.
Types of Financial Aid
Now that we’ve identified the different sources of aid, we can now look at details regarding the different types of aid that are available. There are basically four types of aid available, as mentioned above:
- Government Loans (these come in two types)
- Private loans
Let’s look now at the different types of options available.
Grants are funds that are provided but do not need to be paid back. Grants can be offered by the federal government as well as by your state government. You may also find that many colleges and universities offer grant programs, as well. These grants will fall into different categories. They may be based on merit, need, or may even be specific to a student. Grants that are specific to the student might include grants that are awarded to those who are from minority group, a student with a disability, a student who is a military veteran (or dependent), and so forth.
Some of the grants that are currently awarded by the federal government include:
- Pell Grants
- TEACH (Teacher Education Assistance for College and Higher Education) Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
- Iraq and Afghanistan Service Grants (for military veterans)
Scholarships, much like grants, also do not require that you pay the funds back. These types of aid are usually offered by single organizations or private institutions and are given based on a number of different factors. These factors can include high academic record, sports ability, affiliation with a specific religious organization, ethnicity, in addition to others. Scholarships often require that the applicant complete an application, try out, audition, or even write an essay to be considered.
Loans are (unfortunately, in our view) often the most commonly used form of aid when going to college. Loans are distributed both by the government and through private organizations. Remember, however, that loans – unlike the aforementioned scholarships and grants – DO require repayment. This repayment also comes with interest. There are two different types of loans to consider: subsidized and unsubsidized.
- Subsidized loans are granted to students under more favorable conditions than unsubsidized loans. For example, the Department of Education is required to pay the interest while a student is in college and will continue to do so for 6 months after s/he graduates.
- Unsubsidized loans can be distributed to students regardless of their level of need. The downside of this loan is that the student is responsible for the interest for the entire duration of the loan. That means that the interest that is accruing during the college years will need to be repaid by the student after graduation.
- There are additional loans available, as well, namely PLUS loans and Perkins Loans.
Private loans can also be offered through private banks or financial institutions. These types of loans might be utilized by those who have not received enough aid through subsidized and unsubsidized loans… or by those who have a shortfall in financing due to insufficient planning. While they can help cover costs that will not be covered by the other types of aid that’s been offered, they tend to be expensive. Private loans are also generally available to those who have a good credit score. One of the downsides is that the interest rates for private loans are often higher than what is offered by the federal government. For this reason, a private loan should be considered a last resort.
As we mentioned above, there is no single best option for arranging college funding. We make sure to work closely with both the parents and students to find the best possible solutions that will fit with a family’s financial situation as well as the future goals and aspirations of rising college students.
Until next month,