Types of financial aid
Grants
In the United States,Education loans
An education loan is a loan taken out by the student (or parent) in order to pay for educational expenses. Unlike scholarships and grants, this money must be repaid with interest. Educational loan options include federal student loans, federal parent loans, private loans, and consolidation loans.Federal student loan programs
Federal student loans are loans directly to the student; the student is responsible for repayment of the loan. These loans typically have low interest rates and do not require a credit check or any other sort of collateral. Student loans provide a wide variety of deferment plans, as well as extended repayment terms, making it easier for students to select payment methods that reflect their financial situation. There are federal loan programs that consider financial need.= Direct subsidized loans
= Direct subsidized loans are the most sought, as they have few requirements other than enrollment and demonstration of financial need. However, the amount you may borrow is determined by your school and may not exceed your financial need, which is based on the EFC from your FAFSA. You are not required to begin repaying these loans for as long as you are in school at least as a part-time student. They also offer a six-month grace period, meaning you do not begin repaying them until six months after you leave school. These loans also offer a deferment period in some cases.= Direct unsubsidized loans
= Direct Unsubsidized Loans are available to all undergraduate and graduate students, with no requirement to demonstrate financial need. Your school will determine how much you are allowed to borrow based on your cost of attendance and adjust for any other financial aid you are receiving. However, you are responsible for paying the interest on these loans even during school. If you choose not to pay interest while enrolled, your interest will accrue and be added to the principal amount of your loan.= Parent loans
= Federal parent loans are a federally funded loan option if the student is dependent on his or her parents. Parent loans allow parents to take out student loans, the repayment of which will be their responsibility. The parents use these loans to pay for educational expenses on behalf of the student. For undergraduate students there is the parent loan for undergraduate students or PLUS Loan. This loan allows parents to borrow up to the total cost of attendance, minus any other financial aid the student receives. Eligibility will be determined upon review of the parent's credit history.Private loans
Private student loans are offered by private lenders (financial institutions). These loans typically have much higher interest rates, have fewer repayment/deferment options, cannot be discharged throughConsolidation loans
Consolidation loans combine two or more student and/or parent loans into one loan. They are an option for those who find themselves struggling with multiple student loan payments. Consolidation loans are available for most federal loan types, and some private lenders offer private consolidation loans for private education loans.Work-study
TheScholarships
While the terms ''grant'' and ''scholarship'' are frequently used interchangeably, there is a difference. Scholarships may have a financial need component but rely on other criteria as well. Some private need-based awards are confusingly called scholarships, and require the results of a FAFSA (the family's EFC). However, scholarships are often merit-based, while grants tend to be need-based. Scholarships, similar toFinancial aid application process
The student's financial "need"
In the college financial aid process in the United States, a student's "need" is a figure which colleges use when calculating how much financial aid to offer a student. It is determined by taking the college's Cost of Attendance, which current rules require each college to specify. Then from it is subtracted the student's Expected Family Contribution, based on the student's income and assets, and calculated by the U.S. Department of Education under rules set by Congress and processed using the FAFSA system. For unmarried students under 24, Congress mandates that parental income and assets be included. The resulting figure is the student's "need". Colleges attempt to provide students with enough financial aid to meet all student need, but in most cases are unable to do so completely. The result is "unmet need". Under federal law, if there are special circumstances such as loss of a job or large medical expenses, college financial aid offices have considerable liberty to lower a student's calculated need, thus resulting in a larger aid award.Application process for need-based aid
To qualify for need-based aid a student must have a significant amount of financial need, which is determined by the federal government based on the FAFSA. Using the information submitted on the FAFSA, the U.S. Department of Education calculates a figure called the Expected Family Contribution (EFC). If the EFC is less than the cost of attending a college, the student has financial need (as the term is used in the U.S. financial aid system). Students can file an appeal with their college financial aid office in order to seek additional financial aid, though the information about the process is not always clear or available online. SwiftStudent, a free service, provides template letters for college students. Some well-to-do colleges have need-based aid of their own to distribute, in addition to federal and state aid (if any). These colleges require, in addition to the FAFSA, theNeed-based aid
Need-based financial aid is awarded on the basis of the financial need of the student. The "need" of each student is a figure determined separately for each student. The Free Application for Federal Student Aid application (FAFSA) is generally used for determining federal, state, and institutional need-based aid eligibility. At private institutions, a supplemental application may be necessary for institutional need-based aid. A recent trend shows that what is purely need-based aid is not entirely clear. According to the National Postsecondary Aid Survey (NPSAS), SAT scores affect the size of institutional need-based financial aid. If a student has a high SAT score and a low family income, they will receive larger institutional need-based grants than a student with a low family income that has low SAT scores. In 1996, public higher education institutions gave students with high SAT scores and a low family income $1,255 in need-based grants. However, only $565 in need-based grants were given to students with low SAT scores who had low family incomes. The lower a student's SAT score, the smaller the amount of need-based grants a student received no matter what their family income level was. The same trend holds true for higher education private institutions. In 1996, private institutions gave students with high SAT scores and a low family income $7,123 versus $2,382 for students with low SAT scores and a low family income. Thus, “institutional need-based awards are less sensitive to need and more sensitive to ‘academic merit’ than the principles of needs analysis would lead us to expect.” It has been found that increasing an SAT score in the range of 100-200 points can result in hundreds of dollars more in institutional grants and on average substantially more if one is attending a private institution. While providing financial information to the government is a reasonable expectation to calculate a student’s financial need, it does not necessarily follow that colleges should have access to this information. Providing that information to schools may be problematic because schools learn about students’ other sources of funding and may adjust their financial aid packages accordingly. There is anNon-need-based financial aid
Non-need-based loans are available for students and families who cannot afford to pay the entire cost of college. These loans are directed toward those individuals and families who did not qualify for need-based loans due to the amount of their personal assets. There is usually a higher interest rate associated with non-need based loans. Because these loans are not need-based, the U.S. government does not pay the interest for the student while enrolled in school; they are often referred to as unsubsidized loans. The Unsubsidized Stafford Loan and Grad PLUS loan are non-need based loans available for both undergraduate and graduate students who do not qualify for need-based financial aid. Even though these loans are not subsidized, interest rates are set by Congress, the programs are closely supervised, and they provide many protections that private loans rarely offer. There are also non-need based grants and scholarships that consider merit rather than financial need. These awards are granted by the college or university as well as outside organizations. Merit-based scholarships are typically awarded for outstanding academic achievements and maximum SAT or ACT scores. However, some scholarships may be awarded due to special talents like athletic scholarships, leadership potential, and other personal characteristics. In order to be considered for such awards some institutions require an additional application process while others automatically consider all admitted students for their merit-based scholarships.Non-need-based aid versus need-based aid
With the yearly rising cost of tuition, room and board, and fees among schools across the nation, low-income students are finding it harder to pay for their education. In an attempt to help students meet the high, costly demands of college, schools have increased merit-based grants, for students with outstanding academic position, involvement in organizations, or high athletic talent. The issue is that these reasons for awarding scholarships take away from low-income students who often do not meet these merit standards. In other words, funds for merit-based scholarships are taking away from the already small amount of federal aid available to low-income students who simply cannot pay for college without some kind of financial aid. In recent years, government has responded to the financial crisis students are facing and therefore passed legislation that boosted the value of grants for low-income students and trimmed subsidies for private education lenders. Schools have also taken action for the sake of students.Graduate and professional students
The following types of federal financial aid are available to graduate and professional students. Aid for these students is primarily loans. * The William D. Ford Federal Direct Loan (Direct Loan) Program: Eligible students may borrow up to $20,500 per school year. These loans are unsubsidized; Congress has determined that subsidized loans (no interest while enrolled) are only available to undergraduates. Graduate and professional students enrolled in certain health profession programs may receive additional Direct Unsubsidized Loan amounts each academic year. These federal loans, although unsubsidized, are far superior in interest rate and repayment terms to private student loans. * Federal Perkins Loan (Perkins Loan) Program: This is a school-based loan program for eligible students with exceptional financial need. Students may qualify for a Perkins Loan of up to $8,000 each year depending on financial need, the amount of other aid received, and the availability of funds at the school. Each college has a set amount of Perkins Loans for its students; there has been controversy over the formula that is used to apportion the loans to colleges. * Teacher Education Assistance for College and Higher Education (TEACH) Grant: The TEACH Grant Program provides grants of up to $4,000 a year to students who are completing or plan to complete coursework needed to begin a career in teaching. The TEACH Grant is different from other federal student grants in that it requires students to take certain kinds of classes to get the grant, and then to do a certain kind of job to keep the grant from turning into a loan. * Federal Work-Study (FWS) Program: The Work-Study Program provides part-time jobs for undergraduate and graduate students with financial need. This program allows students to earn money to help pay education expenses. The program encourages community service work and work related to a student's course of study. * Federal Pell Grant: A Pell Grant, unlike a loan, does not have to be repaid. Most graduate and professional students are not eligible for Pell Grants, but those enrolled in a post-baccalaureate teacher certification program are eligible. Graduate students may also be eligible for these financial aid programs: * Aid from other federal agencies (i.e., research grants or fellowships) * State aid (i.e., state loans) * Institutional aid (i.e., institutional scholarships or graduate assistantships/fellowships) * Non-institutional scholarshipsInternational students
There is little financial aid available for foreign students, with the unique exception of Canadian and Mexican students. A majority of aid is awarded as grants, scholarships, and loans that come through public and private sources which restrict their awards to American citizens. That being said there is financial aid still available for international students. There are colleges and universities that offer aid to international students. To find out if the school in question offers such assistance inquire of the financial aid office of the institution. Some schools offer grants, loans and jobs, and give anywhere from 15 to 150 awards to foreign students. For example, schools such asCollege cost calculators
Post-secondary institutions post a Cost of Attendance or Price of Attendance, also known as a "sticker price." However, that price is not how much an institution will cost an individual student. To make higher education costs more transparent before a student actually applies to college, federal law requires all post-secondary institutions receiving Title IV funds (federal funds for student aid) to post net price calculators on their websites by October 29, 2011. As defined in The Higher Education Opportunity Act of 2008, the net price calculator's purpose is:“…to help current and prospective students, families, and other consumers estimate the individual net price of an institution of higher education for a student. The net price calculator shall be developed in a manner that enables current and prospective students, families, and consumers to determine an estimate of a current or prospective student’s individual net price at a particular institution.”The law defines estimated net price as the difference between an institution's average total Price of Attendance (the sum of tuition and fees, room and board, books and supplies, and other expenses including personal expenses and transportation for a first-time, full-time undergraduate students who receive aid) and the institution's median need- and merit-based grant aid awarded. Elise Miller, program director for the U.S. Department of Education's Integrated Postsecondary Education Data System (IPEDS) stated the idea behind the requirement: "We just want to break down the myth of sticker price and get beyond it. This is to give students some indication that they will not necessarily be paying that full price." The template was developed based on the suggestions of an IPEDS’ Technical Review Panel (TRP), which met on January 27–28, 2009, and included 58 individuals representing federal and state governments, post-secondary institutions from all sectors, association representatives, and template contractors. Mary Sapp, Ph.D., assistant vice president for planning and institutional research at the University of Miami, served as the panel's chair. She described the mandate's goal as “to provide prospective and current undergraduate students with some insight into the difference between an institution’s sticker price and the price they will end up paying.” To meet the requirement, post-secondary institutions may choose between a basic template developed by the U.S. Department of Education or an alternative net price calculator that offers at least the minimum elements the law requires. A report issued by The Institute for College Access and Success, "“Adding it all up 2012: are net price calculators easy to find, use and compare?” found key issues with the implementation of the net price calculator requirement. In “Adding it all up,” the authors state, “this report takes a more in-depth look at the net price calculators from 50 randomly selected colleges. While we found some positive practices that were not evident at the time of our previous report, net price calculators are still not reliably easy for prospective college students and their families to find, use, and compare.” After the requirement came into effect, Abigail Seldin and Whitney Haring-Smith launched the free website College Abacus, which hosted a system that would allow students to enter the personal information once, and then use and compare net-prices of multiple schools. The Gates Foundation's College Knowledge Challenge announced College Abacus as one its winners in January 2013; the $100,000 grant from the Gates Foundation enabled College Abacus to expand from its beta version with 2500+ schools to a fully comprehensive version with all the colleges and universities in the United States.
Debt vs. grants
No-loan financial aid
In 2001,Loan cap
Some universities have opted to have a "loan cap" program, which is a maximum loan — either per year or for the four years combined — designed to reduce the cost of attendance for low-income and middle-class students. The following schools have a loan cap program:Effect of financial aid on enrollment, persistence, and degree attainment
Studies examining the effects of financial aid on postsecondary outcomes have generally found positive effects. For instance, a study reviewing the literature on the effects of grant aid on enrollment finds that grant aid positively increases college enrollment, with approximately 3 to 4 percentage points increase in the likelihood of enrollment for a $1,000 reduction in costs. Similarly, a systematic review and meta-analysis by Tuan Nguyen and colleagues examining the effects of grant aid find that, across more than 40 studies, grant aid increases the probability of students persisting from year to year and of completing their degree by 2 to 3 percentage points, and an additional $1,000 of grant aid improves year-to-year persistence and degree attainment by 1.5 to 2 percentage points. This comprehensive study also finds that grant aid programs with additional non-monetary supports such as academic support and advising have larger effects, and that grant aid effects are weaker for merit-based aid than for need-based aid. In a study on the correlation between the price of higher education and enrollment rates, Donald Heller finds that the amount of financial aid available for students is a strong factor in enrollment rates. Different factors have different effects on financial aid: * Decreases in the amount of financial aid leads to decreases in enrollment. However, different types of financial aid have differing effects. Grant awards tend to have a stronger effect on enrollment rates. * Changes in tuition and financial aid affect poorer students more than they affect students with higher incomes. * In terms of race, changes in financial aid affects black students more than it affects white students. * Changes in financial aid affect students from community colleges more than students from four-year schools.Need-blind admissions
Need-blind admissions do not consider a student's financial need. In a time when colleges are low on financial funds, it is difficult to maintain need-blind admissions because schools cannot meet the full need of the poor students that they admit. There are different levels of need-blind admissions. Few institutions are fully need-blind. Others are not need-blind for students who apply after certain deadlines, international students, and students from a waitlist. Some institutions are moving away from need-blind admissions so that they can fulfill the full need of the students that are admitted. Meeting the full-need will probably increase the funds for financial aid. For example, Wesleyan University is only need-blind if it has enough money to satisfy the full need of admitted students.Outside the United States
In Germany, the main source of student financial aid is the Bundesausbildungsförderungsgesetz, colloquially known as BAFöG.See also
*References
External links