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Financial Aid Calendar

by Student Loan Daddy
written by Student Loan Daddy

January

  • Submit the FAFSA as soon as possible after January 1. Be sure to list the schools you are considering (up to six) on the application. Estimate the required tax information if you have not yet filed. And don’t forget to check out our Tips on Completing the FAFSA.
  • Submit state financial aid applications, if required. Check with your school’s Financial Aid Office for deadlines.
  • Use the Student Loan Daddy Scholarship Search Engine to find free aid opportunities.
  • Approximately two weeks after submitting your FAFSA, you should receive notice that the application was received.

February

  • Approximately two weeks after submitting your FAFSA, you should receive notice that the application was received.
  • If you submitted your FAFSA early in January, you might receive your Student Aid Report (SAR) in February—it usually takes four to eight weeks.
  • Submit a state financial aid application, if required.
  • Check with the schools to which you’ve applied and complete any financial forms they require.

March

  • If you submitted your FAFSA early in January or early February, you might receive your Student Aid Report in March—it usually takes four to eight weeks. If you haven’t received your Student Aid Report (SAR) yet (assuming it’s been at least four weeks since you submitted it), contact the federal processor at 1-319-337-5665.
  • Review your SAR carefully; make any necessary corrections directly on Part 2 of the SAR and return it to the address provided, or submit changes to the FAFSA online via FAFSA Corrections on the Web.

April

  • College acceptance letters usually arrive before May 1.
  • Look for an Award Letter from each of the schools to which you’ve been accepted. This letter lists the types and amounts of financial aid you’ll receive for the upcoming academic year.

May

  • Choose the school you wish to attend and let them know. Notify the schools you didn’t select so they can award your financial aid package to other eligible students.
  • Complete student loan applications, including Federal Stafford Loans, Federal PLUS Loans for Parents. If you still need money for college, apply online for a Student Loan Daddy Private Loan.
  • If you haven’t already done so, you can submit your FAFSA online.

June

  • If you haven’t already done so, submit your FAFSA online at www.studentaid.gov.
  • Complete student loan applications, including Federal Stafford Loans, Federal PLUS Loans for Parents. If you still need money for college, apply online for a Student Loan Daddy Private Loan.

July

  • Notify your school about any changes in your financial situation, including any outside scholarships or grants you’ve received.
  • It’s still not too late to complete student loan applications, including Federal Stafford Loans, Federal PLUS Loans for Parents. If you still need money for college, apply online for a Student Loan Daddy Private Loan.
  • High school seniors—now is the time to request brochures and information from the schools you’re interested in attending.

August

  • If you’ve been awarded work-study, contact your school’s Financial Aid Office to complete any school-required paperwork and review current openings.
  • Apply for scholarships using the Student Loan Daddy Scholarship Search Engine.
  • High School Seniors — Prepare for and take entrance exams such as the ACT and SAT. Register online for fall SATs.
  • High School Seniors — Attend college open houses and schedule admissions interviews at the schools you’re interested in attending. It’s a good idea to meet the school’s financial aid office, too, to get the school-specific paperwork and information you’ll need to apply for financial aid.

September

  • High School Seniors — Decide which teachers, friends, coaches, employers and mentors you’ll ask to write your letters of recommendation for you.

October

  • Continue to look for scholarships and grants.
  • High School Seniors — Apply for early decision, if applicable.

November

  • Go over the FAFSA form and put together the paperwork you’ll need. For help, see Tips on Completing the FAFSA.
  • High School Seniors — Collect letters of recommendation in preparation for submitting college admissions applications.

December

  • Happy Holidays! Warm up by filling out the FAFSA Pre-Application Worksheet in anticipation of a January submission.
  • High School Seniors — Now is the time to submit applications for admission to the colleges of your choice.
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financial aid

STUDENT LOANS

by Student Loan Daddy
written by Student Loan Daddy

When scholarships and grants aren’t enough to cover your college costs, student loans can help you fill in the gaps and provide the remaining financial aid you need.

Student loans come in two principal varieties: government-issued federal student loans and non-federal private student loans.

FEDERAL STUDENT LOANS

Federal student loans are issued by the U.S. Department of Education to help students pay for college as well as post-baccalaureate graduate studies. Federal student loans are available in varying loans amounts to both undergraduate and graduate students and can be issued both with and without regard to financial need.

Most government student loans don’t require either a credit check or a co-signer, although there are some graduate student loans that are credit-based and will require you to have an acceptable credit history.

Federal college loans are also available to qualifying parents of undergraduate students.

Federal education loans can be either subsidized or unsubsidized:

  • With subsidized student loans, the government will cover your interest charges while you’re in school or in an authorized period of deferment (during which your student loan payments are postponed).
  • With federal unsubsidized student loans, although you won’t have any payments due while you’re in school or in an authorized period of deferment, interest charges will continue to accrue. Once you need to begin repaying your unsubsidized student loans, the accrued interest will be added to your principal loan balance and capitalized, meaning you’ll now be accruing interest charges on the previously accrued interest, as well as on your original loan balance.

Undergraduate Student Loans

There are two types of federal college loans for undergraduates: Perkins loans and Stafford loans. Both loans require that you fill out the FAFSA in order to be eligible. There’s no credit check or co-signer required for either Stafford student loans or Perkins student loans.

  • Perkins student loans are awarded to eligible low-income students. Perkins loans carry a fixed interest rate of 5% and are available in loan amounts of up to $5,500 for each year of your undergraduate studies. Perkins student loans are subsidized loans.
  • Stafford student loans are awarded both with and without regard to financial need. Financially eligible undergraduates will qualify for subsidized Stafford loans. Unsubsidized Stafford loans, on the other hand, are awarded without regard for financial need.Subsidized Stafford student loans carry a fixed interest rate of between 3.4% and 6.8%, depending on when your loan was issued to you, and are available in loan amounts of up to $5,500 a year, depending on your year in school.Unsubsidized Stafford student loans carry a fixed interest rate of 6.8% and are available in loan amounts of up to $12,500 a year, depending on your year in school and on whether you’re financially independent or a dependent of your parents.

Graduate Student Loans

There are three types of federal graduate student loans: Perkins loans, Stafford loans, and Grad PLUS loans. All three federal graduate loan programs require that you fill out the FAFSA in order to be eligible.

There’s no credit check or co-signer required for either Stafford graduate loans or Perkins graduate loans. Grad PLUS loans, on the other hand, have modest credit requirements and will require you to undergo a credit check. If you can’t qualify on your own for a Grad PLUS loan, you may need a creditworthy co-signer.

  • Perkins graduate student loans are awarded to eligible low-income graduate students and are available in loan amounts of up to $8,000 a year. Like undergraduate Perkins loans, Perkins graduate loans carry a fixed interest rate of 5%.
  • Stafford graduate student loans, like undergraduate Stafford loans, are awarded both with and without regard to financial need. Financially eligible graduate students will qualify for subsidized Stafford graduate loans. Unsubsidized Stafford graduate loans are awarded without regard for financial need.All Stafford graduate student loans, both subsidized and unsubsidized, carry a fixed interest rate of 6.8%. Subsidized Stafford graduate loans are available in loan amounts of up to $8,500 a year, while unsubsidized Stafford graduate loans are available in loan amounts of up to $20,500 a year.
  • Grad PLUS graduate student loans are designed to cover up to 100% of your cost of attendance and are awarded without regard to financial need. Grad PLUS loans are unsubsidized and carry a fixed interest rate of 7.9%.

Parent Loans

Federal parent loans, known as PLUS loans (“Parent Loans for Undergraduate Students”), are available to qualifying parents of undergraduate students. PLUS loans have modest credit requirements and will require your parent to undergo a credit check. Parents who don’t qualify for a PLUS loan may obtain a creditworthy co-signer in order to help them qualify.

  • PLUS parent loans are awarded without regard to financial need in loan amounts that will cover up to 100% of the student’s cost of attendance. PLUS loans are unsubsidized and carry a fixed interest rate of 7.9%.

PRIVATE STUDENT LOANS

Private student loans are credit-based loans issued by banks and private lenders rather than by the federal government. Private student loans are available for both undergraduates and graduates, as well as eligible international students and continuing education students.

Qualifying For A Private Student Loan

Although you don’t need to fill out the FAFSA in order to qualify for a private student loan, as you do for federal student loans, you will need to undergo a credit check. You may need a creditworthy co-signer in order to qualify.

And in most cases, even once you’re approved for a private education loan, your school will need to certify the loan — essentially, letting the lender know that you do, in fact, need a private student loan and approving the loan amount you’ve applied for — before the student loan money will be disbursed. In the case of school-certified private student loans, the funds will generally be sent to your school rather than directly to you.

(Keep in mind that although private lenders themselves don’t require the FAFSA from applicants for private student loans, your school may require that you use your federal financial aid options — which do require you to file a FAFSA in order to be considered — before your financial aid office will certify a private loan for you.)

Private Student Loans Vs. Federal Student Loans

Private student loans typically carry variable interest rates, unlike federal college loans, which are all fixed-rate loans. Private student loans also generally come with less-flexible repayment options and fewer built-in borrower protections than federal loans.

Because private student loans can end up being pricier and riskier than federal student loans, you should make sure to take advantage of all your federal financial aid options before you turn to private loans.

If, after scholarships, grants, and federal college loans, you still have school expenses to meet, private student loans may be able to provide the additional education financing you need.

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financial aid

Financial Aid

by Student Loan Daddy
written by Student Loan Daddy

Financial aid, also sometimes referred to as student aid, is financial assistance available to students to help pay for college, graduate school, and other post-secondary studies. Financial aid can be either need-based or non-need-based.

  • Need-based financial aid is awarded to students who demonstrate financial need, as measured by the income and financial thresholds established by whatever agency or entity is awarding the financial aid. Definitions of financial need can vary from agency to agency and may change from year to year based on certain economic indicators, such as the local or national poverty threshold, the federal cost-of-living adjustment, or the national inflation rate.
  • Non-need-based financial aid is available to students who request help with paying for college or graduate school, even if they don’t demonstrate financial need. Although non-need-based financial aid isn’t limited to students within lower income brackets, you’ll still generally need to show that you have outstanding college expenses or other school costs that yo威而鋼 u need to meet.

In general, financial aid, whether need-based or non-need-based, will not be awarded in excess of your cost of attendance, as determined by your school.

SOURCES OF FINANCIAL AID

Federal Financial Aid

Federal financial aid, provided by the U.S. government through the Department of Education, is the largest and best-known source of money for college. The federal financial aid program provides over $100 billion in financial aid to nearly 14 million college students, graduate students, and their families every year.

School & State Financial Aid

Financial aid may also be provided by state agencies and by colleges and universities themselves.

Like federal financial aid, state financial aid and institutional financial aid (student aid awarded by your school or school’s financial aid office) may take the form of scholarships, grants, or student loans.

TYPES OF FINANCIAL AID

Financial aid can take one of four basic forms:

  • Scholarships and grants
  • Work-study
  • Student loans
  • Parent loans

Scholarships & Grants

Scholarships and grants are financial aid awards that don’t need to be repaid. In essence, scholarships and grants provide you with free money to help pay for college or graduate school.

Any particular scholarship or grant award may be need-based, merit-based, or a combination of both.

The federal financial aid program provides a number of grants for low-income students and students who demonstrate financial need.

Work-Study

Work-study, a form of need-based federal financial aid available through the Federal Work-Study program, provides part-time jobs for undergraduate and graduate students, allowing you to earn money to help pay for college. The program encourages community service work and work related to your major or course of study.

A work-study job may involve assisting a professor, working at the university library, or doing administrative or research work on campus. You may also be able to get a work-study position off-campus at a nonprofit organization, public agency, or company that has an agreement with your school to provide work-study opportunities.

As an undergraduate in the Work-Study program, you’ll be paid by the hour, and your work-study hourly pay rate must be at least equal to the current federal minimum wage.

Student Loans

Student loans provide you with money for college or graduate school that, unlike scholarships and grants, will need to be repaid.

Although most student loan programs allow you to defer your repayment until after you’ve graduated or left school, that doesn’t mean the student loan money is free. While your payments are postponed, you’ll still be accruing interest on all your non-need-based student loans. (Interest charges on need-based federal student loans — referred to as subsidized student loans — are covered by the government while you’re in school.)

Student loans, like a credit card or any consumer loan, assess interest charges, so the amount you repay will almost always be more than the amount of money you were initially awarded.

Like scholarships and grants, student loans can be either need-based or non-need-based.

An additional consideration is that student loans may also be either credit-based or non-credit based.

  • Credit-based student loans require you to undergo a credit check and meet certain credit and/or income criteria. Federal Grad PLUS graduate student loans, for instance, have modest credit requirements that you’ll need to meet in order to qualify.The most common type of credit-based student loans are the private student loans offered by banks and private lenders as supplementary financial aid to your federal financial aid package. With private student loans, the interest rate you’re charged and the fees you pay are typically pegged to your credit rating: the better your credit, the lower your interest rate and fees.
  • Non-credit-based student loans are awarded without any regard for your credit history or credit rating. You won’t have to undergo a credit check or obtain a co-signer.Examples of non-credit-based student loans are federal Stafford student loans and federal Perkins student loans. Many state student loans awarded by state financial aid agencies may also be non-credit-based.

A note about student loan defaults and delinquencies: It’s important to keep in mind that, although you can’t be turned down for a non-credit-based student loan on the basis of a generally weak, unestablished, or spotty credit history — such as missed car payments or a large amount of credit card debt — late payments or defaults on federal student loans specifically can affect your ability to get any federal college loans or non-federal private student loans in the future.

Parent Loans

Parent loans are awarded to parents of dependent students who need additional financial aid to help pay for college. Whereas student loans are made in the student’s name, with the student as the primary borrower, parent loans are made in the parents’ name, and the parents will bear all responsibility for repaying the loan.

Parent loans are typically non-need-based, credit-based college loans.

Federal PLUS parent loans, available through the federal financial aid program, have modest credit requirements. Some lenders may also offer private parent loans.

APPLYING FOR FINANCIAL AID

Applying For Federal Financial Aid

In order to be considered for any federal financial aid, each year that you’re in school, you’ll need to submit the Free Application for Federal Student Aid, known more commonly as the FAFSA.

Unless you complete the FAFSA, you won’t be eligible for any federal grants, federal work-study, or federal student loans. (Only federal PLUS parent loans may be awarded without a FAFSA. However, although the Department of Education doesn’t require a FAFSA from PLUS loan applicants, your school might. Make sure to check with your financial aid office for your school’s specific financial aid guidelines.)

Applying For School & State Financial Aid

Many state financial aid agencies and university financial aid offices also use the FAFSA to determine eligibility for school or state financial aid.

Make sure, however, to research the exact financial aid forms and paperwork required by your own state and school. Some state financial aid agencies have their own financial aid form that must be submitted either in addition to or in lieu of the FAFSA. Many colleges and universities also have their own financial aid forms, which are designed to collect additional financial information not accounted for in the FAFSA.

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financial aidresource center

Financial Aid Glossary

by Student Loan Daddy
written by Student Loan Daddy

Academic Year 

September through May, when most schools are in session.

Accrual Date 

The date when a loan’s interest charges begin to accrue.

ACT 

Standardized multiple-choice test administered to high school students. Colleges may use ACT scores to determine admission eligibility. The ACT is administered five times a year and is designed to measure academic proficiency in English, math, reading, and science.

Adjusted Available Income 

The income remaining after taxes and basic living allowances have been subtracted.

Advanced Placement (AP) 

College Board program that offers students the opportunity to take college-level courses while they are enrolled in high school. Students may gain advanced standing and/or earn college credit through their performance on the Advanced Placement examinations given each year in May.

Amortization 

Payments made over a period of time on a loan’s principal and interest.

Assets 

When calculating the expected family contribution (EFC), all assets are considered, including: bonds, checking and savings accounts, stocks, trusts, other securities, real estate (this does not include a person’s home), income, business equipment, and inventory.

Asset Protection Allowance 

The formula used by the U.S. Department of Education and a financial aid office to determine which parental assets to exclude when calculating a parent’s financial contribution to a student’s education (expected family contribution).

Assistantship 

Student employment, usually referring to departmental research assistance or student teaching.

Associate’s Degree 

A two-year college degree.

Auto Debit 

Loan payments deducted automatically from checking or savings account on a monthly basis.

Award Letter 

Separate, official notices sent to each student from the financial aid office at (each) college(s) where the student has applied for admission. They detail the student’s financial need and the financial aid package awarded (amounts awarded and sources of the awards).

Bachelor’s Degree 

A four-year college degree.

Bursar’s Office 

The college or university office responsible for billing and collections.

Campus-Based Aid 

Financial aid funds provided to a college from the government. Each college determines financial aid applicants’ eligibility to receive the funding. Programs included in campus-based aid include federal work-study, Pell grants, and Federal Supplemental Education Opportunity Grants (FSEOG).

Central Processing System (CPS) 

The U.S. Department of Education’s computer system; matches and calculates the expected family contribution (EFC), and delivers the Student Aid Report (SAR).

Citizen (and Eligible Non-Citizen) 

To receive federal aid, an applicant must be a U.S. citizen, a U.S. national, or a permanent resident who has an I-151, I-551 or I-94.

Commercial Lender 

Commercial institutions that loan money, including banks, credit unions, mutual savings banks, savings and loan associations, stock savings banks, or trust companies.

Commuting Student 

A student who lives at home or off campus.

Compound Interest (Capitalization) 

Interest paid on a loan’s principal and on any unpaid interest. Compound interest (or capitalization) increases the amount of money the borrower must repay and increases monthly payments.

Cooperative Education (Co-Op) 

Colleges and universities pay students to work in a professional setting while attending school.

Co-signer (Co-applicant) 

An individual who co-signs on a loan; if the first borrower on a loan defaults, the co-signer (in most cases) is responsible for repayment on that loan.

Cost of Attendance (COA) 

A student’s total cost of attending college. This figure includes books, fees, room and board, supplies, transportation, tuition, and other miscellaneous personal expenses. The COA also depends on marital and residency status.

Credit Rating 

A numerical score based on credit limits, balances, and personal information assigned by credit bureaus and credit reporting agencies to measure individual’s creditworthiness. Federal Stafford loans do not require a credit score but credit checks are required for Federal PLUS loans and most private student loans.

CSS Profile

College Scholarship Service (CSS) is an application required by some private colleges and universities to determine eligibility for non-federal financial aid.

Custodial Parent 

The parent that the student lived with the prior 12 months, in situations of divorce or separation.

Default 

Non-payment or late payment of loan installments or failure to meet the terms and conditions of a loan. Typically, payments are considered in default after 270 days without payment. Lenders are entitled to all legal means necessary for debt recovery. This can include wage withholding (garnishing wages), withholding tax refunds, and even confiscation of collateral if any is attached to the loan. Defaulting on a government loan can eliminate future federal financial aid and will negatively affect credit rating.

Deferment 

When a lender allows a borrower to postpone loan payments. A borrower must usually satisfy specific eligibility requirements for a loan deferment. If a loan is in default, the lender will not allow deferments.

Delinquent 

A loan becomes delinquent when payments are not made on time. When delinquency occurs, the lender can add late fees to the loan payments.

Dependency Status 

Whether or not the student is financially Dependent on his or her parents based on federal guidelines. All students are considered Dependents unless they are 24 years of age as of January 1, married, graduate or professional students, responsible for a legal Dependent other than a spouse, Veterans of the U.S. Armed Forces, or orphans or wards of the court (currently or formerly).

Dependent 

Someone who depends on another for more than half of his or her financial support.

Direct Loans 

Federal government funds loaned to students through institutions. This is referred to as the Direct Loan Program. If a student attends a school that participates in the Direct Loan Program, the student may not apply for federal loans through private lenders.

Disbursement 

When a student’s federal loan funds are sent to the student. Loan payments are co-paid to both the student and the school. These funds cover educational costs (tuition, fees, etc.) and related living expenses. Any excess funds are released to the student or applied to the student’s account.

Eligible Program 

A course of study that leads to a degree or certificate and meets the U.S. Department of Education’s requirements for an eligible program.

Enrollment Status 

A student’s enrollment status indicates whether the student attends school full-, half-, or part-time. Full-time refers to a minimum of 12 credit hours. Half time usually refers to at least six credit hours. In most cases, a student must be enrolled at least half-time to qualify for financial aid.

Exit Counseling (or Exit Interview) 

Prior to graduating withdrawing, or dropping below half-time enrollment, borrowers are required to complete exit counseling to help prepare them for repayment. Exit counseling provides valuable information about borrower’s rights and responsibilities, as well as helpful money-saving ideas.

Expected Family
Contribution (EFC) 

The government determines the amount of money a student and their family must pay toward the student’s education costs. The EFC depends on a student’s dependency status, the size of the student’s family, whether or not there are other family members in school, taxable and nontaxable income, access to parent’s assets, and other factors.

FAFSA (Free Application for Federal Student Aid) 

The submission of the FAFSA is required to determine eligibility for virtually all forms of government financial aid. The FAFSA form is available from the U.S. Department of Education or any financial aid office. Find the FAFSA online by visiting the Education Department’s FAFSA website at http://www.fafsa.ed.gov/.

Federal Family Education Loan Program (FFELP) 

This federal program allows private lenders to offer federal loans including Federal Stafford loans (subsidized and unsubsidized) and Parent Loans for Undergraduate Students (PLUS). Since FFELP loans are guaranteed against default by the federal government, they usually have low interest rates.

Federal Direct Student Loan Program
(FDSLP) 

A federal program in which certain institutions (“direct lenders”) are provided federal government funds to loan to students.

Federal Loan 

A loan guaranteed by the federal government.

Federal Stafford Loan 

A low-interest federally guaranteed loan for students. Stafford loans are either subsidized (need-based) or unsubsidized (non-need-based). The government pays the interest on a subsidized loan while a student is in school plus a six-month grace period after leaving school. Interest accrues on unsubsidized Stafford loans from the disbursement date. A student can receive a subsidized loan and an unsubsidized loan for the same enrollment period.

Federal Supplemental Educational Opportunity Grant (FSEOG) 

A grant for undergraduates with exceptional financial need. Federal Pell Grants recipients often get priority for a FSEOG, which has no repayment requirement.

Federal Work-Study 

A federal program that provides jobs for undergraduate and graduate students with demonstrated financial need. The Federal Work-Study Program allows the student to earn money while encouraging community service work and often the employment relates to a student’s course of study.

Fellowship 

Free aid that covers full or partial tuition and reasonable living expenses, usually awarded to students who display proven potential in their field of study.

Financial Aid Administrator 

Responsible for advising and counseling students regarding financial aid, and overseeing their financial aid packages.

Financial Aid Package 

The total amount and sources of financial aid (federal and non-federal) a student receives.

Financial Need 

The cost of attendance (COA) minus the expected family contribution (EFC).

Fixed Interest 

Loan interest rates that do not change over the loan’s lifecycle.

Forbearance 

Temporarily allows a borrower to postpone principal payments on a loan due to financial hardship. However, the borrower is still responsible for the interest that accrues during the forbearance period.

Free Application for Federal Student Aid (FAFSA) 

The submission of the FAFSA is required to determine eligibility for virtually all forms of government financial aid. The FAFSA form is available from the U.S. Department of Education or from any campus financial aid office. Complete your FAFSA online at www.fafsa.ed.gov.

Grace Period 

The time lapsed between a student’s graduation (or termination) and the beginning of loan repayments (usually six to nine months).

Graduated Repayment 

When a borrower’s required monthly loan payments increase over time.

Grant 

Need-based financial aid requiring no repayment.

Guarantee Fee 

Usually 1% of the loan amount, paid to the guarantee agency to insure against loan default.

Guaranty Agency or Guarantor 

The fee paid to the loan guarantor to insure against loan default. For federal loans, it is usually one percent of the loan amount.

Half-Time Enrollment 

A student’s enrollment status indicates whether the student attends school full-, half-, or part-time. Half-time usually refers to at least six credit hours. In most cases, a student must be enrolled at least half-time to qualify for financial aid.

HEAL 

Health Education Assistance Loans are federally backed loans to students in approved health education programs. New loans to students were discontinued in 1998.

Home Equity 

A mortgage’s unpaid principal subtracted from the home’s current market value.

In-School Interest Rate 

Rate at which interest accrues on Federal Stafford Loans while students are enrolled at least half-time in school. The in-school rate is typically lower than the rate at which interest accrues when the loan is in repayment.

Income-Sensitive
Repayment 

Loan repayment plan under which the borrower’s monthly payment amount adjusts annually, based solely on the borrower’s expected total gross monthly income.

Independent Status 

A student is considered independent if he or she: is 24 years or older (as of Dec. 31 of the award year), is a graduate or professional student, is married, has legal dependents, is an orphan or ward of the court; or is a veteran of the U.S. Armed Forces.

Institutional Methodology 

The formula certain schools use in determining a student’s financial need for non-portable financial aid.

Interest 

The amount of money charged for borrowing from a lender. Interest charges are usually included in each month’s payments.

Interest Period 

The contractual period of time during which interest accrues or is charged.

Interest Rate

The percentage of a sum of money charged to the borrower for its use.

Internships 

Part- and/or full-time professional work opportunities for students. Interns are usually paid or they gain college credits.

Lender 

Any institution that loans money, such as banks, credit unions, savings and loans associations, organizations like NextStudent, and schools (under the Federal Direct Loan Program.)

LIBOR 

London Interbank Offered Rate. LIBOR is a financial index used as a basis for determining many private loan interest rates.

Line of Credit 

A source of credit with a predetermined limit that can serve as a loan. Once qualified, the lender allows the borrower to borrow up to that predetermined limit. Lines of credit are usually activated when the borrower writes a check against his/her line of credit.

Loan 

The temporary use of money provided by a lender.

Maturity Date 

The date a loan reaches its maximum payment period and must be paid in full.

Merit-Based Aid 

Financial aid based on special talent or ability instead of financial need. Money for education awarded through contests, competitions, or certain scholarships is an example of merit-based aid.

National
College Fair 

A free program that allow students to interact with admission representatives from a wide range of postsecondary institutions to discuss course offerings, admission and financial aid requirements, college life in general, and other information pertinent to the college selection process. National College Fairs are held in the spring and in the fall each year.

Need 

The expected family contribution (EFC) subtracted from the cost of attendance (COA).

Needs Analysis 

How much a student or a student’s family can afford to pay towards the student’s college education, as determined by the financial resources reported on the FAFSA form.

Need-Based Aid 

The cost of education compared to a student’s (or a student’s family’s) ability to meet those costs.

Need-Blind Admissions 

An admissions policy in which the ability or inability to pay college costs is not considered when determining a student’s eligibility for admission.

Non-Portable Funding 

College funding that can’t be transferred to another college or university. For example, many colleges have scholarship funds that are specific to that particular college. If a student leaves or transfers, the money remains at that school.

Origination Fee 

A fee paid by the borrower to the lender to cover administrative fees for his or her loan.

Parental Contribution 

An estimate of a parent’s ability to contribute to a student’s educational expenses.

Pell Grant 

Need-based financial aid awarded to undergraduate students completing a four-year bachelor’s degree. Repayment of these grants is not required.

Perkins Loan 

A low-interest federal loan available to both undergraduate- and graduate-level students demonstrating extreme financial need. To apply for the Perkins loan, a student must have already applied for the Federal Pell Grant. Perkins loans are administered by financial aid offices.

PLUS Loan (Parent Loan for Undergraduate Students) 

A federal loan made available to parents of dependent undergraduate students. The parent may borrow up to the cost of education less the student’s financial aid package to cover the student’s total educational expenses.

Portable Funding 

College funding that can be used at any college or university regardless of whether a student transfers or remains at his or her original school.

Prepaid Tuition Plan 

Savings plan that guarantees the same rate of increase on a student’s savings as college costs increase. Regardless of whether college costs increase at a faster rate, it is guaranteed that a student’s invested money will be sufficient for college costs when he or she enters college.

Prepayment 

Loan repayment ahead of schedule.

Principal 

The unpaid or original dollar amount on a loan.

Private Student Loan 

Sometimes called “alternative loans,” private student loans are non-government loans offered by banks, credit unions, and other private lenders. These loans are not based on financial need, but rather on your creditworthiness and ability to repay. Private student loans are designed to supplement federal education loans and can be used for a wide range of education purposes, including tuition, books, living expenses, and a computer.

Professional Judgment 

When a financial aid administrator adjusts the EFC, COA, or dependency status of a student or a family. It typically occurs in the event of extreme changes in the student’s personal situation, such as a death in the family, unemployment, disability, etc.

Promissory Note 

The legal binding contract the borrower signs. It states the terms, details, and obligations of the borrower to repay the lender.

PSAT 

The Preliminary SAT is a standardized test administered to high school juniors and seniors each October. The PSAT has the same format as the SAT, and serves as a rough predictor for SAT performance. PSAT scores from the junior year count toward National Merit Scholarship.

Renewable Scholarships 

Scholarships awarded over more than one year. Some renewable scholarships are automatically renewed, which means a student need not resubmit paperwork.

Repayment Schedule 

The designated term and payment amounts for a loan, including interest rates, monthly payments, and payment due dates. The repayment schedule is documented in the promissory note.

Research Assistantship 

A form of college funding typically reserved for graduate-level students that allows participants to perform research duties for their supervisors or professors. In exchange, students are usually awarded tuition reductions. These positions are administered by colleges.

Satisfactory Academic Progress 

Most federal aid requires satisfactory academic progress, which is based on maintaining a specific grade point average set forth by the institution. If the student does not show satisfactory academic progress, federal aid can be denied.

SAT 

The SAT is the standardized test that colleges and universities use to predict how well a student might do at their college. The SAT tests math and verbal reasoning abilities, and compares it to the abilities of students from other high schools.

Scholarships 

Free student aid based upon merit. Corporations, organizations, foundations, etc., will typically award scholarships to students based on grades, community involvement, extracurricular activities, athletics, and arts.

Secondary Market 

When the original lender sells an education loan to another lender, the purchaser of the loan is in the secondary market. The terms of the loan will not change in the secondary market and the borrower will be notified whenever a sale has occurred.

Secured Loan 

Loans secured by collateral such as houses, cars, or other assets. If the borrower defaults on this type of loan, the lender reserves the right to confiscate or sell the collateral used in acquiring the loan.

Servicer 

The party paid by the lender to oversee the status of a loan, distribute funds, collect payments, and handle deferments, forbearances, and other related issues.

Simple Interest 

Interest charged on the principal balance of a loan, but not charged on interest that has accrued over time.

State Student Incentive Grants 

Matching funds provided by the federal government to state governments to help state residents with financial aid.

Stipend 

Fixed or regular pay; salary often awarded to the student with a fellowship, scholarship, or grant.

Student Aid Report (SAR) 

The official summary of eligibility for financial aid sent to the student by the government after needs analysis is performed.

Student Consolidation Loan 

Allows the borrower to combine a number of existing loans into one loan. Borrowers typically consolidate student loans to lower monthly payments.

Student Loan Cancellation 

Dismissal of a student loan due to circumstances such as death or total and permanent disability.

Subsidized Loan 

A need-based loan with interest paid by the federal government while the student is in school, in the grace period and during authorized periods of deferment.

Teaching Assistantship (TA) 

A form of college funding that provides a partial/full tuition waiver and a small stipend to supplement the cost of living. Teaching assistantships are often reserved for graduate-level students.

Term of a Loan 

The length of time allowed for repayment.

TERI 

The Education Resources Institute is a private, nonprofit institution. All NextStudent Private Loans are guaranteed by The Education Resources Institute.

TERI-Approved

Educational institutions that have met the guidelines for participating in lending and informational programs offered through The Education Resources Institute.

Title IV Programs 

Programs created by Title IV of the Higher Education Act of 1965 (as amended), including federal Pell grants, Federal Supplemental Educational Opportunity Grants (FSEOGs), federal work-study, federal Perkins loans, federal Stafford loans, federal PLUS loans, direct Stafford loans, and direct PLUS loans.

Tuition 

The enrollment fee charged by an institution.

Undergraduate Student 

A student studying towards a four-year baccalaureate degree.

Unmet Need 

Funding needed in addition to scholarships, grants, loans, or other financial aid awards, to cover a student’s total cost of attendance.

Unsecured Loan 

A type of loan that does not require the borrower to provide the lender with collateral. Typically, unsecured loans carry higher interest rates and often require a co-signer.

Unsubsidized Loan 

A student is responsible for paying the interest on an unsubsidized loan while attending school or while the loan is in deferment.

Variable Interest 

Interest that can fluctuate. Most variable-interest loans have an annual or maximum cap, which prevents interest rates from exceeding a specified amount within a specified period of time.

Verification 

Proper documentation required by a financial aid officer to verify the accuracy of information reported on a financial aid application.

Weighted GPA 

A weighted GPA takes into account the credit hours of a class such that an A in a three-credit hour class counts more toward the total GPA than does an A in a one-credit course.

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financial aidresource centerstudent loans

Financial Aid Questions

by Student Loan Daddy
written by Student Loan Daddy

Financial Aid FAQs and Answers

Am I eligible for financial aid?

Just about everyone qualifies for some type of financial aid. In fact, over 8 million students receive financial aid every year. Even if you’re not a straight-A student or a star athlete, you may be eligible for more aid than you think. To see if you meet basic eligibility requirements, take our Financial Aid Eligibility Quiz. Then, complete the Free Application for Federal Student Aid to see how much aid you can get.

When do I start the process?

It’s never too soon to start. There are steps you can take beginning in high school to help you prepare both financially and academically. Otherwise, you should start the year before you go to college by completing the Free Application for Federal Student Aid (FAFSA) as soon as possible after January 1.

What is FAFSA and where do I find it?

The Free Application for Federal Student Aid (FAFSA) is used to determine how much aid you can receive and how much your family is expected to contribute toward your college costs. You must complete a FAFSA (or renewal FAFSA) each you wish to be considered for financial aid.

You can find the FAFSA form online at www.fafsa.ed.gov, or you can get a paper copy from your school’s financial aid office or your high school guidance counselor.

For help with completing your FAFSA, see our online Financial Aid Advisor, “Tips on Completing the FAFSA.”

How can I increase my chances of getting more aid?

The single most effective way to increase your chances of qualifying for more money is to apply as soon as possible after January 1 of the year you wish to receive financial aid. The aid pool at most institutions is limited, and is typically awarded on a first-come, first-served basis. For more information, see our financial aid tips for getting the most money for college.

How do I get the money?

Methods of distributing financial aid vary from campus to campus. Most financial aid will not be given directly to you. The majority of aid gets credited directly to your student account at the start of an academic term.

How do I know if I’m a dependent student?

If you are less than 24 years of age on December 31 of the school year, an undergraduate student, single, not in the military, have no dependents, and are not an orphan or ward of the court, then you are a Dependent student as far as the Department of Education is concerned.

Which loans require credit checks?

Federal Stafford loans do not require any credit checks. However, if your son or daughter has defaulted on a student loan or is not making satisfactory academic achievement, they may not be eligible to obtain a new federal loan. The PLUS loan (Parent Loan for Undergraduate Students) requires a credit check and may be denied if the parent has adverse credit history. All private student loans require credit checks.

When do I start repayment of my loans?

    • Federal Stafford loans: The borrower is not required to make any payments until six months after leaving school or going below half-time. For example, if the student receives a degree in May, but goes on to graduate school in the fall, no payments must be made because there was not a six-month lapse in schooling.
    • Federal PLUS loans: Repayment will start usually no later than 60 days after the last disbursement. All federal loans have at least two disbursements, typically one for each school term. At most schools, the last disbursement will take place in January, and the repayment will normally start between February and March.
    • Private student loans: The repayment terms may vary, depending on the type of private loan you have.

Is each loan separate, or do they just roll them all into one account? 

Each loan is considered a separate loan, but all federal loans under the same Social Security Number may be consolidated. In a federal student loan consolidation, your individual federal college loans are paid off to create one new consolidation loan. The repayment term may then be extended to minimize the monthly payment, while maintaining the benefits of the original, separate loans. Private student loans will not be included in a federal student loan consolidation. You would need to consolidate your private loans separately in a private consolidation loan.

Student Loan Consolidation FAQs and Responses

Why should I consolidate my student loans?

Consolidating student loans offers many benefits-even if you’re currently making your monthly student loan payments without any difficulty.

    • You can make monthly bill paying easier with one student loan payment to one lender.
    • The rate on a federal loan is fixed for the life of the loan. Federal student loans and parent loans issued prior to July 1 2006, carry variable interest rates that are adjusted annually.
    • Consolidating can help ease the pressure on your monthly budget by reducing your monthly student loan payment by 10% – 60%.
    • You can save money by using your student loan payment savings to pay off high-rate debt, such as credit cards.
    • Consolidation will help your credit scores and debt-to-income ratio, both key factors if you’re looking to qualify for a credit card, buy a car, rent an apartment, or purchase or refinance a home.

Won’t my total cost increase if I extend repayment to 30 years?

Extending the repayment period does increase total interest payments, since smaller payments are made over a longer period of time. However, there are no prepayment penalties for accelerating repayment, so you could pay off the loan in a shorter period of time and save on total interest payments.

Can my parents consolidate their federal parent loans with my student loans?

All loans must be under the same borrower’s Social Security Number, thus parents cannot consolidate their PLUS parent loans with their children’s Stafford student loans, or vice-versa.

How is the interest rate determined?

The interest rate is determined by taking a weighted average of the interest rates on all loans to be consolidated and rounding up to the nearest 0.125% or 8.25%, whichever is less.

Is the interest tax deductible?

Most people can deduct interest paid on federal student consolidation loans. Consult your tax advisor for more information.

How do I know what my payment will be?

Try our student loan consolidation calculator to get an idea of the lower payments you can expect from a student consolidation loan.

How do I apply?

Call the U.S. Department of Education at (800) 557-7392, or visit the Federal Direct Consolidation Loans Information Center.

Stafford Loan FAQs and Responses

What’s the difference between subsidized and unsubsidized Stafford loans?

It’s all about financial need.

Subsidized Stafford student loans are awarded to students with demonstrated financial need. While students are in school, Uncle Sam pays the interest on subsidized Stafford loans, and payment is deferred (delayed) until after graduation. Once out of school, though, the student assumes responsibility for the loan, including interest.

With unsubsidized Stafford student loans, you’re responsible for the interest from the time funds are disbursed. Unsubsidized federal college loans are not based on financial need; in fact, virtually every student is eligible for an unsubsidized Stafford loan. Although interest starts to accrue immediately, you can delay repayment until after graduation.

How much money can I get with a federal Stafford student loan?

Your maximum available Stafford loan amounts vary depending on your year in school, whether you’re considered a financial dependent of your parents, and whether your parents have qualified for a federal PLUS parent loan.

What if it isn’t enough?

If Stafford student loans are not enough to pay for school, your parents (if you’re a dependent student) may be able to borrow under the federal PLUS program (Parent Loans for Undergraduate Students). With the PLUS loan, parents can borrow up to the total cost of education at your school, less any other aid you are awarded.

If federal aid leaves you short, you may be able to get the money for college you need with a private education loan. Private student loans are credit-based, non-federal student loans available to undergraduate, graduate, and continuing education students that can cover up to 100% of the cost of your education.

How are loan funds disbursed?

Stafford loan funds are usually disbursed at the beginning of each semester. Funds for tuition and fees are paid direction to your school, and funds for living expenses and other costs are typically distributed in the form of a check or deposit to your bank.

What is the interest rate?

As of July 1, 2006, unsubsidized Stafford student loans and Stafford graduate student loans carry a fixed interest rate of 6.8%.

How do I apply for a Stafford loan?

You’ll need to complete and submit the FAFSA (the Free Application for Federal Student Aid) each academic year.

Private Student Loan FAQs and Responses

What’s the difference between federal and private student loans?

Federal student loans are guaranteed by the federal government, and offer attractive terms such as low fixed interest rates, deferred repayment, subsidized interest payments (for student who demonstrate financial need), and flexible repayment terms. Neither Stafford student loans nor Perkins student loans require a credit check or co-signer. The credit checks for PLUS parent loans and Grad PLUS graduate student loans are modest, much less stringent than for private student loans and other types of consumer loans. You must complete the FAFSA (the Free Application for Federal Student Aid) in order to be eligible for federal education loans.

Private student loans are non-government loans offered by banks, credit unions, and other private lenders. These loans are not based on financial need but rather on your creditworthiness and ability to repay. Private student loans are designed to supplement federal loan programs and can be used for a wide range of education purposes, including tuition, books, living expenses, and a computer. The rates and terms for private student loans vary by lender and borrower creditworthiness. If you don’t qualify for a private student loan on your own, you may need to get a co-signer.

Do I need a co-signer for a private student loan?

Not necessarily. You may be eligible for a private student loan if you have a satisfactory credit history, are employed full time, and are a U.S. citizen or permanent resident. If you don’t meet the minimum eligibility requirements for a private student loan, you can apply with a co-signer who does.

What are the rates for private student loans?

Rates on private student loans vary by lender, program, and the creditworthiness of the borrower.

What is TERI?

The Education Resources Institute (TERI) is a private, nonprofit institution that used to guarantee all NextStudent private student loans. Under previous private loan programs, to be eligible for a NextStudent private student loan, you were required to be enrolled at least halftime in a TERI-approved school.

How do I apply for a private student loan?

Just fill out this quick information form, or call our friendly Education Finance Advisors at (877) 680-9879.

Parents’ FrequentlyAsked Questions and Responses

How much should I save for my child’s education?

How much you need to save depends on the school your child attends. Tuition and fees at public colleges are generally lower than those at private schools. Regardless of the school, though, education costs have been rising, and are expected to continue increasing over the next decade.

Here’s how much college funding you’ll need to save to send one child to an average four-year private or public college. Don’t let these numbers frighten you. Start implementing your college savings plans today.

Child’s Age (Years) Average Cost
Private College		 Average Cost
Public College
One $257,543 $118,312
Four $222,475 $102,200
Eight $183,031 $84,080
Twelve $150,580 $69,173
Sixteen $123,884 $56,909

Which is better, a prepaid tuition plan or a college savings plan?

A prepaid tuition plan offers a conservative approach to investing for college, and can be right program for students planning to attend a state college. And, if tuition costs increase, you win-the number of credit hours you purchased remains the same, regardless of any changes in college costs.

The NextStudent Scholar’sEdge™ savings plan is more flexible, allowing you to save for any attendance at any college. The amount you invest, plus the accumulated return on your investment, may well exceed college costs-so you’ll come out ahead.

Both plans are tax-deferred, and allow tax-free withdrawals for education-related expenses.

If savings may impact my child’s federal aid eligibility, why should I save at all?

Whether you save or not, you will be expected to contribute to your child’s education to the extent possible. If you haven’t put away any money at all, then you may have to take out parent loans either as part of your financial aid package or to pay part or all of your expected family contribution, or both. Even though you and your child may be eligible for low-cost federal student loans, any type of college loans means paying interest, whereas saving money means earning interest.

How much will I be expected to contribute toward my child’s education?

To meet the cost of attendance, each school looks to the student and parents to make an expected family contribution (EFC). The EFC is based on your family’s ability to pay and is determined by need analysis derived from the information reported on your child’s FAFSA (the Free Application for Federal Student Aid. The EFC normally includes both a student’s share and the parents’ share, both of which take into account income and assets. The total EFC is calculated using a standard formula established by law so that, regardless of the college your child attends, your EFC will be the same.

How is EFC calculated?

The EFC calculation uses a standard formula based on the information reported on the FAFSA. This calculation considers family size, the number of family members attending college, whether the student is dependent or independent, and the family’s income and assets (both student’s and parents’), including cash, checking and savings accounts, real estate other than your family home, and investments. The difference between your EFC and the cost of admission (COA) determines your financial need.

Because both the cost of the school and your family finances are considered, your family may qualify for more financial aid than you think.

How will contributing to a 529 impact financial aid eligibility?

Although your savings will be considered in the EFC calculation, income is a bigger factor than assets. However, both types of 529 plans will impact your EFC. A college savings plan, such as the NextStudent Scholar’sEdge plan, is considered the parents’ assets and is factored into the EFC at 5.6% so that a portion of the assets are considered in the financial aid calculation. A prepaid tuition plan, on the other hand, is considered to be the student’s asset, and reduces financial aid dollar-for-dollar.

Who should save — me or my child?

While there are potential tax benefits to saving in your child’s name, there are also potential financial aid implications. Parent assets are factored into the EFC at low rate-5.6%, while student assets are assessed at 35% of assets and 50% of after-tax income over $1,750.

Who should borrow — me or my child?

You should definitely investigate federal college loans for your student first, such as Stafford student loans. These are the lowest-cost student loans available and offer significant benefits such as flexible repayment terms, deferment and forbearance options, and the perks of consolidation student loan consolidation.

How is a PLUS loan different from a Stafford loan?

Both loans are federally guaranteed, but federal PLUS loan are made to the parents of dependent undergraduates, while Stafford loans are available to both undergraduate and graduate students and are made directly to the student in her or his name.

PLUS loans and Stafford loans also differ in rate, maximum loan amount, and repayment terms:

    • Interest Rates: The interest rate on a Stafford loan disbursed after July 1, 2006, is a fixed 6.8%, generally among the lowest available student loan rates. The interest rate for a PLUS loan disbursed after July 1, 2006, is a fixed 7.9%, slightly higher than the Stafford loan rate, but still quite low compared to other types of consumer financing.
    • Repayment: Repayment on federal PLUS loans begins within 30–60 days after the final disbursement, although parents have the option to defer their payments until six months after their child has graduated or left school. Repayment on federal Stafford student loans can also be deferred until after the borrowing student has graduated, left school, or dropped below half-time enrollment.
    • Loan Amounts: PLUS borrowers can take out up to 100% of their child’s college cost of attendance, less any financial aid (such as student loans and work-study) their child has received. Students qualify for different maximum Stafford loan amounts depending on their year in school, their dependency status, and whether their parents qualified for a parent PLUS loan.

Is there a credit check required for a federal PLUS loan?

Yes, parents must pass federal guidelines for creditworthiness. These guidelines are generally less stringent than for other types of consumer credit, such as private student loans, home equity loans, and credit cards.

What if I’m not approved for a PLUS loan?

A student whose parent(s) have been turned down for a PLUS loan may be eligible to borrow additional funds in unsubsidized Stafford student loans, subject to the school’s approval.

How much does a federal PLUS loan cost?

The Federal PLUS loan has a 3% government origination fee and a 1% guarantee fee, which is normally waived. Fees are taken out of the proceeds of the loan, so there’s no upfront money required to obtain a PLUS loan.

How are federal PLUS loan funds disbursed?

The school’s financial aid office will distribute the funds directly to the student in scheduled payments over the course of the academic year. All federal college loans have at least two disbursements, typically one for each school term. At most schools, the last disbursement will take place in January, and the repayment will normally start between February and March.

Are there any prepayment penalties on the federal PLUS loan?

No.

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