FEDERAL FINANCIAL AID INTRODUCTION AND TOPICS

SOME STATE LOANS MAY PROVIDE BETTER TERMS THAN SOME FEDERAL LOANS. THE THREE MAJOR FORMS OF FEDERAL FINANCIAL AID available from the federal government are grants (grants are like free money), loans (money that must be repaid with interest), and work-study (ideally you do work related to your course of study and get paid) . FEDERAL LOANS ARE THE SAFEST LOANS. Interest rates on federal loans do not change over time and are not affected by your credit rating. Federal loans also come with some guaranteed borrower protections in case you're unemployed or have other financial problems after college. Perkins and Stafford Loans allow a GRACE PERIOD.

 

FEDERAL FINANCIAL AID ELIGIBILITY REQUIREMENTS

Demonstrate financial need, except for some loan programs (Unsubsidized Stafford Loans and both PLUS programs). Have a high school diploma, a GED, or have passed an independently administered, approved "ability to benefit" exam. Be a U.S. citizen or eligible noncitizen. Be enrolled or accepted for enrollment, at least half time, in a degree or certificate program at a college, vocational school, or correspondence program approved by the U.S. Department of Education. Make satisfactory academic progress. Possess a valid Social Security number. Have complied with U.S. Selective Service registration requirements. File a FAFSA. Not owe a refund on any state or federal educational grant and not be in default on a student loan (you'll need to sign a statement on the FAFSA). Complete an application for each loan for which you apply. For questions regarding citizenship, see the FAFSA, contact your financial aid office, or call toll free 800.4.FED.AID. Not all colleges participate in all federal programs, so check with your financial aid office first. This is essentially from EdFund.

FEDERAL GRANTS  LIST OF PROGRAMS

The PELL GRANT PROGRAM is the largest federal grant program. It is need based wih no minimum grade point average or other academic requirements but a Pell Grant recipient must attend an eligible school and must maintains satisfactory academic progress.  Pell Grants are primarily available to undergraduate students although in some cases, a Pell Grant may be awarded for attending a post-baccalaureate teacher certificate program. The maximum Federal Pell Grant award for 2009-2010 is  $5350. Pell-Grant eligibility is determined by the U.S. Department of Education based on your answers on the Free Application for Federal Student Aid (FAFSA). Submit your FAFSA as soon after January 1 as possible.

The SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS (FSEOG) are awarded only to undergraduates with exceptional financial need; priority is given to students receiving a Pell Grant. For 2008-2009, the  FSEOG grants ranged from $100 to $4000 per year. FSEOG is a campus-based program (that is, it is administered directly by the financial aid office at each participating school). Not all schools participate in FSEOG.

ACADEMIC COMPETITIVENESS GRANTS (ACG) are awarded to first and second year undergraduates. The annual award for first year students is $750 and the award for second year students is $1,300. Some elligibility criteria are: Table due to University of California Santa Cruz ACG First Year ACG Second Year U.S. citizen Required Required Pell Grant recipient Required Required Enrolled full-time Required Required First year student Required N/A Completed rigorous high school course load* Required N/A Cumulative GPA of 3.0 at beginning of sophomore year N/A Required

NATIONAL SCIENCE AND MATHEMATICS ACCESS  TO RETAIN TALENT (SMART) are awarded to third and fourth year undergraduates. The eligibility criteria are:   Table due to University of California, Santa Cruz SMART Third Year SMART Fourth Year U.S. citizen Required Required Pell Grant recipient Required Required Enrolled full-time Required Required Majoring in physical, life, or computer sciences, engineering, mathematics, technology, or a critical foreign language Required Required Cumulative GPA of 3.0 at beginning of each term Required Required

FEDERAL PROGRAM  WORK STUDY

WORK STUDY is a need-based program that provides paying jobs for undergraduate and graduate students, allowing them to earn money to help pay education expenses. The program attempts, but often does not succeed, to provide work related to each student's course of study. It is probably not unusal for a work-study job to be no more profitable (financially and intellectually) than a beginning-level job at Walmart. Always make sure not to let work interfere with your academic experience.

FEDERAL LOANS  LIST OF PROGRAMS

THE MAJOR FEDERAL LOAN PROGRAMS     Need Based      For whom      FAFSA Required    Interest Rate if Loan    Fee for the Loan                        Perkins   Yes   Undergrads, Grads, and Professional Students   Yes   5.0%   0.0 Stafford subsidized   Yes   Undergrads, Graduate, and Professional Students   Yes   Undergrads 5.6% Grads of Pro 6.8%   At most 1.5% Stafford unsub- sidized   No   Undergrads, Graduate, and Professional Students   Yes   6.8% for all   At most 1.5% PLUS for Parents   No   Undergrads    Depends  on College    Direct Loan 7.9%; FFEL: 8.5%   4.0% PLUS for Graduate Students   No   Graduate and Professional Students   Yes   Direct Loan 7.9%; FFEL: 8.5%   4.0%

FEDERAL LOANS PERKINS LOANS

PERKINS LOANS are the best student federal loans available and if you are offered a Perkins Loan just say "Yes." Perkins Loans are awarded to undergraduate and graduate students with exceptional financial need as determined from FAFSA. Perkins Loans are a campus-based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government. It is a subsidized loan, with the interest being paid by the federal government during the in-school and 9-month grace periods. There are no origination or guarantee fees, and the interest rate is 5% with a 10-year repayment period. Submit your FAFSA as soon after January 1 as possible.

FEDERAL LOANS STAFFORD LOANS

STAFFORD LOANS are almost always the loan of choice for students who need more than grants, scholarships, and Perkins Loans provide. Some benefits of a Stafford Loan are: no prepayment penalty (although at 6.8% or less, who would want to prepay), tax deductible interest for some borrowers, and 100% loan forgiveness in case of death or permanent disability. Both subsidized (need based) and unsubsidized (not need based) Stafford Loans are for undergraduate and graduate students and both require completion of FAFSA.       Unless you qualify and opt for an alternative repayment plan, you must repay Stafford loans within 10 years. Lenders offer standard, graduated, and income-sensitive repayment plans. Monthly payments on these loans begin six months after you graduate, drop below half time, or leave school. If you are going to graduate or professional school, you can request to defer payments.      Subsidized Stafford Loans are need based with the federal government paying the interest on the loan while you are in school, during the six month grace period after graduation, and during periods of approved deferment.      Unsubsidized Stafford Loans are not need based and may be taken out by all qualified students, regardless of their income or assets. Interest accrues on the loan from the day the loan is disbursed but you can defer the payments until six months after graduation by capitalizing the interest. Capitalizing the interest adds the interest due to the loan balance, increasing the size and cost of the loan. The borrower pays all the interest (and, of course, the principal).      LINK. For Stafford Loan, the loan interest rates and the loan limits are given:         UNDERGRADUATE STUDENT         GRADUATE STUDENT

FEDERAL FINANCIAL AID PLUS LOANS FOR PARENTS

PLUS LOANS FOR PARENTS OF UNDERGRADUATES is oftentimes the loan of choice for parents of undergraduates who need more than a Stafford Loan allows. PLUS Loans are not need based. The federal government does not require that you file the Free Application for Federal Student Aid (FAFSA) to qualify for a Parent PLUS Loan but some schools do require the FAFSA for Parent PLUS borrowers (check with the college). There is a credit check for a PLUS, but it's cursory - you will be turned down only if you've declared bankruptcy, lost a home through foreclosure in the past five years or are more than 90 days late on bill payments. And Congress just extended the late-payment requirement to 180 days for mortgage payments and medical bills. The interest rate is a competitive 7.9% fixed rate if your child's college participates in the federal government's direct-lending program, 8.5% if the school works with third-party lenders (check with the financial aid office at your college). Loan fees are as high as 4% of the loan amount (an origination fee of 3% and a default fee of 1%) being deducted from each loan disbursement; some lenders  waive all or part of this fee. Parents can now defer repaying the loan until after their child graduates.       The Parent PLUS Loan can be used to cover up to 100 percent of the total cost of education minus other financial aid awarded to the student. The total cost of education (for a student attending at least half time) includes: tuition and fees, books, food, housing, transportation, loan fees, an allowance for dependent care, costs related to a disability, reasonable costs for eligible study-abroad programs, and miscellaneous expenses (miscellaneouse expenses may include a reasonable amount for the documented cost of a personal computer). An independent student or a dependent student whose parents cannot get a PLUS Loan is eligible to borrow additional Stafford Loan funds. Some additional benefits of a PLUS loan for parents are: minimal federal credit requirements, defer repaying the loan until after graduation, up to ten years to repay, deferred repayment of up to three years in cases of economic hardship with an additional three years in cases of unemployment, no prepayment penalty, tax deductible interest for some borrowers, no income restrictions or collateral requirements, and 100% loan forgiveness in case of the death of the student, death of the borrower, or permanent disability of borrower. |      Some parents dislike PLUS loans because they don't want to be responsible for repaying the loan (although the student is allowed to take over the payments). But if you're a parent, telling your child to get a private loan won't necessarily get you off the hook. To get favorable terms on a private loan -- or, in some instances, to get a loan at all -- most students need a co-signer with good credit. And a parent who co-signs for a loan is responsible for payments if the borrower falls behind.

FEDERAL FINANCIAL AID GRADUATE PLUS LOANS

GRADUATE PLUS LOANS are for graduate and professional students. These loans, which are not need based, are subject to a fixed rate of 7.9 percent or 8.5 percent with the loan fees being as high as 4% of the loan amount (an origination fee of 3% and a default fee of 1%), deducted proportionately from each loan disbursement; some lenders  waive all or part of this fee. Before applying for these PLUS loans, the applicant must complete and submit FAFSA and apply for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Programs. Satisfying the requirements in the last sentence are for your benefit because it makes sure that you will get the best deal you can from the federal government.       Some additional benefits of a GRADUATE PLUS LOAN are that up to 100% of the cost of education (tuition, books, food, housing, transportation) less any other financial aid, minimal credit requirements with no collateral requirements or income limitations, take up to 10 years to repay with no pre-payment penalty, defer repayment as long as you are in school at least half-time, and tax deductible interest for some borrowers.

FEDERAL FINANCIAL AID LINKS

Three websites of possibleinterest:            WHAT YOU NEED TO KNOW AS A BORROWER answers quite well the           question it asks.             FEDERAL AND PRIVATE STUDENT LOANS. What's the Difference? Seems           objective even though put out by a student loan lender (Chase).           FEDERAL STUDENT AID SUMMARY CHART "Is a comprehensive resource           on student financial aid from the U.S. Department of Education."

FEDERAL FINANCIAL AID CONSOLIDATING AND REPAYING LOANS

Loan consolidation CONSOLIDATION is the process of combining one or more eligible educational loans into a single new loan.  The Pennsylvania State University offers LOAN CONSOLIDATION BASICS.   From , a U.S. Department of Education website, obtain information about REPAYING FEDERAL STUDENT LOANS. Loan consolidation is the process of combining one or more eligible educational loans into a single new loan. The website loanconsolidation.ed.gov explains consolidation. LOAN CONSOLIDATION for all your student loans payments is a possibility. Check out LOAN CONSOLIDATION.   The FEDERAL DURECT CONSOLIDATION LOANS INFORMATION CENTER porvides some factors that you should consider when deciding if consolidation is right for you. DIFFICULTY REPAYING: DEFERMENT OR FORBEARANCE. If you have trouble making your education loan payments for a Federal Perkins Loans, FFEL Loans, or Direct Loans, contact the Direct Loan , contact immediately the organization that services your loan. For Stafford and Perkins Loans, principal and interest payments may be deferred while the student borrower is:           Attending school at least halfime          Unemployed (up to three years)           Experiencing economic hardship (up to three years). For Parent PLUS loans, at leassst one of the three preceding conditions apply to the parent borrower (the situation of the student is irrelevant. not the student).

FEDERAL FINANCIAL AID FFEL AND DIRECT LOAN PROGRAM

THE FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM AND THE DIRECT LOAN PROGRAM.. The U.S. Department of Education administers the FFEL Program and the Direct Loan Program. Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans, PLUS Loans for parents, and PLUS Loans for graduate or professional students. Schools generally participate in either the FFEL program or the  Direct Loan Program although, occassionally, a school might participate in both.       The main difference between the Federal Family Loan (FFEL) Program and the DIRECT LOAN PROGRAM is that FFEL loans are borrowed from private lenders such as banks and credit unions whereas Direct Loan funds are borrowed directly from the federal government. FFEL is a private public partnership whereas the Direct Loan Program is a program of the federal government. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.       For those in the FFEL program, we mention some private lenders later in this section.  Your college may make some recommendations about FFEL lenders but do some checking yourself.