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Subject: FAQ: Financial Aid, Scholarships, and Fellowships [Monthly posting]
Newsgroups: soc.college.financial-aid,soc.college,soc.college.grad,soc.college.gradinfo,misc.education,news.answers,misc.answers,soc.answers
Summary: Information about financial aid, college funding, etc.
Distribution: world
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[email protected]
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Organization: FinAid Page, Inc.
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Archive-name: college/financial-aid-faq
Last-Modified: Thu Feb 20 14:27:09 1997 by Mark Kantrowitz
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;;; ****************************************************************
;;; Student Financial Aid FAQ **************************************
;;; ****************************************************************
;;; Written by Mark Kantrowitz
This post is a collection of useful information about financial aid
for undergraduate and graduate education. The Financial Aid FAQ is
compiled by Mark Kantrowitz, maintainer of the Financial Aid
Information WWW page and author of the "Prentice Hall Guide to
Scholarships and Fellowships for Math & Science Students".
Please mail comments, corrections, additions, suggestions, criticisms
and other information to
[email protected].
*** Copyright:
Copyright (c) 1995-96 by Mark Kantrowitz. All rights reserved.
This FAQ may be freely redistributed in its entirety without
modification provided that this copyright notice is not removed. It
may not be sold for profit or incorporated in commercial documents
(e.g., published for sale on CD-ROM, floppy disks, books, magazines,
or other print form) without the prior written permission of the
copyright holder. Permission is expressly granted for this document
to be made available for file transfer from installations offering
unrestricted anonymous file transfer on the Internet.
Permission is expressly granted for university financial aid offices
to distribute free copies of this FAQ to their students.
If this FAQ is reproduced in commercial offline media (e.g., CD-ROM,
books, magazines, etc.), a complimentary copy should be sent to Mark
Kantrowitz, FinAid Page, Inc., 2010 Wendover Street #1, Pittsburgh, PA
15217-1942 USA.
This article is provided AS IS without any express or implied warranty.
*** Recent Changes:
;;; 1.00
;;; 12-APR-95 mk Created.
;;;
;;; 1.01
;;; 15-MAY-95 mk Numerous additions/changes to the glossary supplied by Ann
;;; White, and a few corrections to the rest of the FAQ.
;;; 15-MAY-95 mk Added new sections: "Types of Financial Aid".
;;; a section for people for whom "The Financial Aid
;;; Office Didn't Give Me Enough Aid!", and a section
;;; "Figuring Financial Need".
;;; 15-MAY-95 mk Thanks to Ted Malone for some comments on resources vs
;;; assets, prepaid tuition plans, and asset shifting games.
;;; 18-MAY-95 mk Modified comments on financial aid consultants slightly.
;;; 18-MAY-95 mk Added new sections: "Common Questions and Answers" and
;;; "Telephone Numbers".
;;; 1-JUN-95 mk Thanks to Ron Stamps for corrections to the comments about
;;; tax returns in [6].
;;; 1-JUN-95 mk Added section on GATE loans.
;;;
;;; 1.02:
;;; 26-JUN-95 mk Added note to [9] about the taxability status of ROTC
;;; scholarships, based on information supplied by John
;;; Stafford.
;;; 29-JUN-95 mk Thanks to Michael Alexander for his copious comments on
;;; this FAQ and the correction of several errors.
;;; 2-MAY-96 mk Updated international student information in section [11]
;;; to match the information provided on the FinAid page.
*** Topics Covered:
[0] What is the purpose of this newsgroup?
[1] The Financial Aid Information WWW Page
[2] Sources and Types of Financial Aid
[3] Determining Financial Need
[4] Consequences of the Need Analysis Formula
[5] Don't Get Taken
[6] Be Wary of Scholarship Search Companies
[7] Financial Aid Consultants
[8] Don't Assume You Don't Qualify
[9] General Advice
[10] Financial Planning Tips
[11] Financial Aid for Foreign Students
[12] My School Didn't Award Me Enough Aid!
[13] Taxability of Financial Aid Awards
[14] Common Questions and Answers
[15] Mailing Lists and Newsgroups
[16] Recommended Books
[17] Financial Aid Software
[18] Scholarship Search Services
[19] Glossary of Financial Aid Terminology
[20] Telephone Numbers
Search for \[#\] to get to question number # quickly.
----------------------------------------------------------------
Subject: [0] What is the purpose of this newsgroup?
The newsgroup soc.college.financial-aid exists for the discussion of
financial aid issues related to post-secondary education (both
undergraduate and graduate). Topics may include, but are not limited
to, grants, scholarships, fellowships, loan programs, work-study,
international student aid, and updates on current changes to financial
aid programs.
The newsgroups soc.college and soc.college.grad are for discussion of
undergraduate and graduate issues unrelated to financial aid. The
newsgroup soc.college.gradinfo is for universities and departments to
post information about their graduate programs. Discussion should NOT
take place in soc.college.gradinfo. The newsgroup alt.grad-student.tenured
is for discussions relevant to graduate students who are "tenured"
(i.e., have passed their qualifying examinations).
This FAQ is posted to the soc.college.financial-aid newsgroup and
related newsgroups once a month. Between postings the FAQ may be
obtained at the URL
http://www.finaid.org/finaid/faqs/finaid.faq
You can get a copy of the FAQ sent to you by email by sending a
message to
[email protected] with
send faq
The FAQ will be sent to the email address extracted from the header of
your request message. If this address is incorrect, you can specify an
alternate address using the command
send faq to userid@host
where userid@host is the correct reply address.
The FAQ postings are also archived in the periodic posting archive on
rtfm.mit.edu:/pub/usenet/news.answers/college/ [18.181.0.24]
as the file financial-aid-faq. If you do not have anonymous ftp
access, you can access the archive by mail server as well. Send an
E-mail message to
[email protected] with "help" and "index" in
the body on separate lines for more information.
You can also access the FAQ through Thomas Fine's Web-based FAQ
archive, through the URL
http://www.smartpages.com/faqs/college/financial-aid-faq/faq.html
----------------------------------------------------------------
Subject: [1] The Financial Aid Information WWW Page
This FAQ posting does not include a list of URLs for financial aid
resources on the World-Wide Web. Instead, we suggest that you take a
look at FinAid, the Financial Aid Information web page described
below. If you encounter an online financial aid resource that is not
already included in this web page, please send email to
[email protected].
The Financial Aid Information Page, also known as the FinAid Page, is
the most comprehensive collection of student financial aid information
on the Internet.
The page includes a free online financial aid estimation service that
provides an estimate of your expected family contribution and
financial need. The page also includes links to
+ college and university financial aid Web and Gopher servers
+ information from the US Government and other sources
+ information about grants and loans
+ online scholarship and fellowship databases
+ a collection of financial aid calculators, including a loan repayment
calculator and a savings plan designer.
+ a glossary of financial aid terms
+ a bibliography of financial aid resource materials
In addition, the Financial Aid Information page is providing free
access to fastWEB (Financial Aid Search Through the WEB), a searchable
database of more than 180,000 private sector scholarships, fellowships,
grants, and loans. Why pay a scholarship search service to use their
database, when you can search one of the best databases for free?
It also provides several free handouts and documents, such as "Funding
for Graduate School", and links to the online versions of Octameron
Associates' book "Don't Miss Out: The Ambitious Student's Guide to
Financial Aid" and the US Department of Education's guide to federal
financial aid programs.
The page also runs an "Ask the Aid Advisor" service, in which 60
financial aid administrators and professionals have volunteered to
answer questions submitted by students and parents.
The Financial Aid Information page is accessible on the World-Wide Web
through the URL
http://www.finaid.org/
You can read this page using a Web browser such as Netscape, Microsoft
Internet Explorer, Mosaic, or Lynx. If you do not have a Web browser,
you can search the WWW by telnet to www.w3.org. There is also an email
interface; to use it, send mail to
[email protected], and use lines
like
www
http://www.finaid.org/finaid.html
to retrieve the text of a particular URL (in this case, the Financial Aid
Information page's home page).
----------------------------------------------------------------
Subject: [2] Sources and Types of Financial Aid
Sources of funding include federal, state, and local governments,
businesses and foundations, community groups, and colleges and universities.
There are two basic types of financial aid:
1. GIFT AID. Gift aid does not need to be paid back. There are three
common forms of gift aid:
+ GRANTS are awarded based on the applicant's demonstrated
financial need.
+ SCHOLARSHIPS are awarded to undergraduate students based
on the applicant's academic merit, although financial need
is sometimes taken into account in determining the award
amount.
Scholarships provide funds toward tuition, fees,
and other required educational expenses. Most scholarships
do not provide funds for living expenses.
+ FELLOWSHIPS are awarded to graduate students based on the
applicant's academic merit. Financial need is rarely taken
into account.
Most fellowships provide a stipend for living expenses in
addition to funds for tuition, fees, and other required
educational expenses. Residential fellowships provide
support for a student to use an institution's facilities,
such as special library or museum collections. Dissertation
fellowships support students while writing the thesis.
Some forms of gift aid, such as ROTC scholarships and certain
medical fellowships, require a few years of service in exchange
for the financial aid. If one fails to complete the service
requirement, then one must pay back the award. But most forms of
gift aid do not need to be repaid and do not include a service
requirement.
2. SELF-HELP AID
+ LOANS. Loans are normally repaid with interest. Some loans
do not need to be repaid until the student has graduated or
otherwise left school. Loans represent more than half of all
financial aid.
+ STUDENT EMPLOYMENT. There are three common forms of student
employment:
o Federal and state work-study programs. Work-study programs
provide employment during the academic year that should be
"career oriented", although some students have received
gopher-type jobs. The work is part-time, and often limited
to under 10 hours per week. Part of the salary is paid for
by the government. Most students who receive work-study jobs
are undergraduate students, but graduate students sometimes
meet the eligibility requirements.
o Assistantships. Teaching Assistantships and Research
Assistantships normally provide graduate students with a
full or partial tuition waiver and a small stipend and
require them to perform teaching and/or research duties.
o Regular part-time employment during the academic year or
the summer months.
Loans and student employment are sometimes collectively refered to as
Self Help.
Most types of financial aid programs are "need-based". This means that
the amount of aid you receive depends on your financial situation.
Most government sources of aid are need-based. Other sources of
financial aid are "merit-based", which usually depend on academic,
artistic, or athletic talent, and may use your grades, test scores,
hobbies, and special talents as awarding criteria.
Most sources of financial aid require that you be enrolled at least
half-time, though some awards are restricted to full-time students.
There may be other restrictions as well. For example, most federal aid
programs are restricted to US citizens, permanent residents, or
eligible non-citizens. If you are a US citizen, male, and have reached
age 18, you must be registered with Selective Service to receive
federal aid.
----------------------------------------------------------------
Subject: [3] Determining Financial Need
Your school's financial aid administrators calculate your financial
need using information supplied by you. If you are classified as a
dependent student, as are most undergraduate students, your parents
will also be required to supply some information.
Much of this information is contained on the Free Application for
Federal Student Aid (FAFSA). The FAFSA must be submitted for you to be
considered for virtually all need-based aid, including most federal
and state sources of financial aid. Some schools may require the
Financial Aid PROFILE (formerly known as the FAF or "Financial Aid
Form"), or a supplemental application form for additional information.
Most schools suggest you submit the FAFSA as soon as possible after
January 1 of your senior year in high school (the year you'll be
starting college) and no later than May 1. The FAFSA should normally
be submitted by March 1 for you to be eligible for most state aid.
(Do not submit the FAFSA before January 1, or it will be automatically
rejected.)
The FAFSA requires financial information for the previous tax year.
For example, for the 1996-97 academic year, you must provide 1995
financial information. Even though you may not be able to complete
your federal income tax return until March or April, you should not
wait to file your FAFSA until your tax returns are filed with the IRS.
Instead, use estimated income information and submit the FAFSA as soon
as possible after January 1. This practice is completely acceptable
and recommended, especially if you anticipate your family circumstances
changing during the subsequent year.
The following documents from both student and parents, as appropriate,
will assist you in filling out the FAFSA:
+ US Income Tax Returns (IRS Form 1040, 1040A, or 1040EZ) for the
fiscal year that just ended and W-2 and 1099 forms.
+ Records of untaxed income, such as Social Security benefits,
AFDC or ADC, child support, welfare, pensions, military subsistence
allowances, and veterans benefits.
+ Current bank statements and mortgage information.
+ Medical and dental expenses for the past year which weren't
covered by health insurance.
+ Business and/or farm records.
+ Records of investments such as stocks, bonds, and mutual funds,
as well as bank Certificates of Deposit (CDs) and recent
statements from any money market accounts.
+ Social Security numbers.
Four to six weeks after you file the FAFSA, you will receive a Student
Aid Report (SAR). The SAR summarizes the information you provided on
the FAFSA and indicates the amount of Pell Grant eligibility, if any.
It also indicates the Expected Family Contribution (EFC).
The determination of financial need depends on two numbers:
+ The Cost Of Attendance (COA) for your school. This may also be
known as the school's "budget".
+ The Expected Family Contribution (EFC). This is the amount of
money your family is expected to contribute to your education.
Your financial need is the difference between the COA and EFC:
Financial Need = COA - EFC
The amount of financial aid for which the student is eligible will be
based on this number. Your school will try to meet this demonstrated
need through a financial aid "package", which combines aid from federal
and state sources with loans, institutional grants, and student
employment.
Unfortunately, your school may not be able to provide you with financial
aid to meet your entire demonstrated financial need. Many colleges and
universities must create a "Unmet Need" or "Need Gap" between the cost
of attendance and the amount you can afford to pay because of limited
funds. Schools have limited funds available for financial aid, and they
must determine how to best allocate the funds to their neediest
students. Very few schools can afford to meet the demonstrated need of
all their students, so most assume that all students and/or parents must
pay a certain minimum amount, regardless of their need. Others give
financial aid only to the neediest students. You're expected to obtain
the funds for the unmet need or gap through summer or term-time
employment earnings and educational loans, including the Federal Parent
Loan for Undergraduate Students (PLUS).
[Recently, a few schools have started using academic merit to adjust the
size of the need gap. These schools sweeten the pot for the more
academicly talented students in order to entice them into matriculating.]
Moreover, your financial aid package may be reduced by any "outside
resources" you receive. A resource is something that is available
because the student is in school, and is normally counted after need is
determined. For example, if your parents have contributed money to a
prepaid tuition plan, the money received from that plan toward the
student's education will be subtracted from the determination of
financial need. Other resources include VA educational benefits and
outside scholarships. Thus the determination of the school's financial
aid package is actually based on
Remaining Financial Need = Financial Need - Resources
So even though resources do not affect the size of the Pell Grant the
student will receive, they do affect the amount of Stafford or
campus-based aid available. They are often counted 100% toward meeting
need, and the university will reduce the size of the financial aid
package to compensate. Resources represent a direct reduction of cost
(e.g., a prepaid tuition plan cuts the amount of tuition the student
will pay) and therefore less need.
[A few schools will "reward" students for bringing in outside
scholarships by using a portion of the outside funds to reduce the self
help level, or by using them to reduce the loan portion of the financial
aid package and not the institutional grants.]
The school's "budget" or COA will include tuition, fees, room and board,
books and supplies, travel, and personal and incidental expenses. In
many cases there is a standard fixed budget amount for some of these
categories. For example, the budget amount for travel may vary depending
on the student's home state. Likewise room and board expenses may be
reduced and travel expenses increased for commuter students.
Budget allowances are used only for determining the estimated expenses
that a student will experience during the enrollment period. Actual
costs will vary depending on the your particular lifestyle. If special
circumstances should warrant a higher budget amount, consult your
financial aid administrator, who is permitted to increase your budget,
if appropriate, with documentation. For example, students with child
care expenses or expenses related to a disability may be able to get
their budget increased to compensate. If your books and supplies cost
more than the amount in your budget, save your receipts and show them to
a financial aid administrator.
The federal formula approved by Congress to calculate the EFC
is called the Federal Methodology (FM). The federal methodology is
used to determine eligibility for federal funds. If a college or
university relies on a different formula for awarding its own funds,
that formula is called the Institutional Methodology (IM). Different
colleges and universities may use different institutional methodologies.
The EFC is the sum of the student contribution and the parent contribution:
EFC = Student Contribution + Parent Contribution
An independent student is not expected to have a parent contribution.
To be classified as independent for Federal aid purposes, a student must
either be 24 years of age or meet one of the following exceptions
1. be married
2. have a dependent
3. be a graduate or professional student
4. be a ward of the court or an orphan
5. be a veteran
Some schools (mostly private) expect both natural parents to contribute
to their children's educational expenses, regardless of a divorce or any
court orders to the contrary. In cases of divorce where the custodial
parent remarries, the financial information for both the custodial
parent and the step-parent must be included on the FAFSA as well as any
child support and/or alimony received from the non-custodial parent.
If a student is classified as independent because of marriage, the
spouse's financial information must be included on the form.
The calculation of the expected student contribution changes from school
to school, but is generally 35% of the student's assets and 50% of the
student's summer earnings. (The federal calculation is 50% of the summer
earnings above $1,750 and 35% of the student's reported assets.)
The parent contribution depends on the number of parents with earned
income, their income and assets, the age of the older parent, the family
size, and the number of family members enrolled in postsecondary
education. Income is not just the adjusted gross income from the tax
return, but also includes nontaxable income such as social security
benefits and child support. The Higher Education Amendments of 1992
eliminated home equity from the EFC, but many private colleges and
universities still use a parent's home equity as a way of rationing
their school's own grant and scholarship funds. Money set aside for
retirement in a pension plan such as a 401K, IRA, Keogh, or 403b is
usually not counted as an asset. However, the funds contributed to a
tax-deferred retirement program during the previous year must be
included on the FAFSA as "other untaxed income". In addition, an asset
protection allowance shelters a portion of the assets from the
calculation of the parent contribution. The asset protection allowance
increases with the age of the parents to allow for emergencies and
retirement needs.
The need analysis system assumes that the parents contribute 6% to 12%
of their assets above a threshold, and 25% of the gross income above a
threshold (the minimum living allowance, which depends on the number of
family members living at home), less an allowance for family members in
college. The following formula is meant to be illustrative -- the
federal formula is a bit more complicated -- but gives a fairly
good estimate of the parent contribution (PC). Let n be the number of
family members in college.
EPC = 12% of max(0, assets - $30,000)
+ 25% of (income - $18,000)
- (n - 1) x $900
PC = EPC + (n - 1) x $500
--------------------
n
----------------------------------------------------------------
Subject: [4] Consequences of the Need Analysis Formula
There are several consequences of the structure of the needs analysis
formula that are worth noting.
1. The parent contribution is divided by the number of family members in
college. Changes in the number of family members in college can
significantly affect the amount of aid received. For example, even
families that are well-off may become eligible for financial aid when
two or more family members are enrolled in college at the same time. So
parents should not assume that they are ineligible for aid just because
they make too much money or own a house.
[Thus the single greatest thing a parent can do to affect their
children's eligibility for federal aid is to go back to school. Many
private schools, however, exclude parents in college from their need
analysis calculations.]
Note that the family members must be enrolled at least half-time and
working toward a degree at a Title IV institution to be counted as
being in college. The service academies DO NOT count as Title IV
institutions.
2. The assets and income of parents are "taxed" by the federal
methodology need analysis formula at a much lower rate than those of the
student. This means that it may not be to the advantage of the parents
to shift income and assets to their children, despite the tax savings.
Generally, no more than 6% of a parent's assets (excluding their home
equity and retirement programs) are expected to be used for the child's
educational costs. For virtually all parents, the first $30,000 to
$40,000 of their assets (depending on their age and family size) will be
ignored completely in the federal methodology need analysis formula.
Since the student's assets are "taxed" at a much higher rate than the
parents' assets, the family should spend down the student's assets
before using any of the parents' assets to pay for the student's education.
Otherwise the student's assets will again be subject to the high "tax"
rate during the next year's need analysis. Just because the formula
assumes that students contribute 35% of their assets and parents only
6%, doesn't mean you have to treat those percentages as targets.
3. The financial aid award or "package" is based on the assets and
earnings for the year before the student matriculates in college. So
parents should be careful about financial activity the year before
their children enter college. For example, parents who avoid
creating capital gains during the child's senior year in high school
will be at an advantage in the federal methodology need analysis system.
Likewise, they may wish to wait until after the child has entered
college to withdraw money from pension plans to pay for college expenses.
----------------------------------------------------------------
Subject: [5] Don't Get Taken
College costs a lot of money, and there are some companies that try
to take advantage of students and parents. The lure of "FREE MONEY"
can fool even skeptical people.
Every year there are a few scams based on imitations of legitimate
foundations and scholarship search companies. Be cautious if you must
pay money to get money -- it might very well be a scam. If a foundation
charges an application fee to apply for their scholarships, it could be
a scam. A $10 or $20 application fee may seem rather innocuous, but if
the "foundation" receives a few thousand applications, they can pay out
a $1,000 scholarship or two and still pocket a hefty profit.
If you have questions about financial aid or are suspicious about a
program, go to your school's financial aid office. (You can ask them
for advice even if you are still in high school.) They can provide
you with the accurate and current information, and verify whether a
foundation is legitimate. The amount of assistance they can give you
varies from school to school. Some school financial aid offices have
extensive financial aid book collections and run free or low cost
scholarship search services. Others are limited to answering questions
about filling in the financial aid forms. Nevertheless, they should be
the first place you ask for help, not your last.
You can also check the legitimacy of a business by calling the local
Better Business Bureau, State Attorney General's Office, and State
Bureau of Consumer Protection.
If you've been the victim of a scholarship scam, you may wish to call
the National Fraud Information Center at 1-800-876-7060 to report the
problem.
Send email to
[email protected] about a suspicious scholarship
offer, and we'll do our best to check it out and let you know what we
find.
----------------------------------------------------------------
Subject: [6] Be Wary of Scholarship Search Companies
A scholarship search company will charge you a fee to compare your
"profile" against a database of scholarship programs and report any
matches. Although a well-designed database could save you some time, you
should be cautious before spending money to use such a service.
"Guarantees" of scholarships are usually worthless, and few students
have won scholarships using such services.
Many scholarship search companies promulgate the myth that
"more than $6 billion in financial aid went unclaimed last year",
suggesting that the money is there for the taking. In reality, most
scholarship and fellowship programs grant awards to 5-10% of their
applicants. If money is going unclaimed -- and it certainly isn't as
much as $6 billion -- it's because it can't be claimed, not because the
award is inadequately advertised.
While you are encouraged to seek aid from all sources, including
scholarships, it should be noted that of the $42 billion available from
all sources of financial aid each year, scholarships represent less than
5% of the total. Most students who go to college do not receive a
scholarship to finance their educational costs.
If you are very talented, you may be able to win some scholarships to
help pay for your education, but most students with run-of-the-mill
qualifications will not. Even the handful of scholarships for C students
are looking for people with potential and promise. It is still worth
applying for scholarships for which you are eligible, but be realistic
about your chances.
Some scholarship search services offer a "guarantee" that you will
receive at least one scholarship or they will refund your fee. Note
that this is not a guarantee that you'll win a scholarship, but that
their report will list at least one scholarship for which you are
eligible to apply. In most cases it is very difficult or nearly
impossible to meet their conditions for a refund. Sometimes the refund
is in the form of a savings bond, which has a current redemption value
that is half of the face value.
A scholarship search service may also claim that their database contains
more than 250,000 awards. In reality, there are no more than about 5,000
sources of financial aid when one excludes college-controlled aid and
government aid. That is still a lot, but inflated numbers sound more
impressive.
Most search services are information franchises -- the operator sends
your information to a central database and may have no real financial
aid experience. Some of these databases are updated infrequently and may
contain minimal information other than the contact address and a short
description. The quality of the match may also be very loose. You may
find that you are ineligible for most of the scholarships listed in your
report, or that the deadline has already passed.
There are several things you should do before using a scholarship search
service:
1. Ask your friends if they know of anybody who used such a service
and won an award. If nobody you know has used the service and won
any money, perhaps it isn't as good as they claim.
2. Before using any scholarship search service, ask how many students
actually won scholarships as a result of using their service, and
how many didn't. Insist on real numbers, not vague hedges. Few
users of scholarship search services are awarded a scholarship.
3. Spend an hour or two in your local library. You may find more
helpful and detailed scholarship information from some of the books
we recommend in [16] below.
There are several hundred scholarship books available. You can
find an annotated bibliography as part of the Financial Aid
Information web page. Some of these books are outstanding, with
carefully researched and verified information. Others are nothing
more than a printout of the contents of one of the major scholarship
search databases.
When considering whether to use a book, look at its copyright
date. You don't want to waste time with a book that is too old, since
the information does change.
If you are trying to conduct a comprehensive search, look not only
at scholarship books, but at the encyclopedia of associations and
similar resources.
See [18] below for a word of warning from the Better Business Bureau
about scholarship search services.
[To help students avoid wasting money on scholarship search services,
the Financial Aid Information page is providing free access to fastWEB
(Financial Aid Search Through the WEB), a searchable database of more
than 180,000 private sector scholarships, fellowships, grants, and loans.]
----------------------------------------------------------------
Subject: [7] Financial Aid Consultants
Financial aid consultants help students and parents through the
financial aid process by providing advice and assistance that
supplements the services offered by the schools themselves. Just as
some people seek out the services of tax preparer for their income tax
returns, a competent financial aid consultant can help a family
navigate through the sometimes confusing financial aid application
process.
Financial aid consultants may provide a variety of services, such as
running scholarship searches, publishing newsletters and booklets,
providing an estimate of the expected family contribution, and helping
you through the process of applying for financial aid, including
filling out the FAFSA, PROFILE, and other financial aid forms for you,
and assisting you with any appeals. Some financial aid consultants may
offer strategies for maximizing your eligibility for financial aid.
As with any business, there are good consultants and there are bad
consultants. Some consultants are reasonably priced, charging $50 to
$100 for a comprehensive set of services, and others line their own
pockets by charging hefty fees of $250 to $1,000.
If you need just a little help filling out your financial aid forms,
you may not necessarily require the services of a financial aid
consultant. Many schools run free workshops and offer free help in
filling out the financial aid forms accurately.
On the other hand, a school may not tell you how to take advantage of
the loopholes in the need analysis process to maximize your eligibility
for aid (see sections [4] and [10], for example).
Many financial aid administrators will warn you against using a
financial aid consultant because
1. The financial aid administrator's job is to distribute limited
funds fairly. They are often dedicated professionals, and strongly
resent attempts to circumvent the need analysis process.
2. The financial aid administrator may have encountered an
incompetent consultant who made errors on the financial aid forms
and failed to submit the forms on time (and subsequently blamed it
on the financial aid office). They may also have encountered an
unscrupulous or unprofessional financial aid consultant who gave
parents unethical advice.
3. Using a financial aid consultant will cause your FAFSA and
school aid applications to be more heavily scrutinized. (Paid
consultants are required to sign the FAFSA, even if they don't
fill out the FAFSA on your behalf. Beware of any consultant who
refuses to sign the FAFSA.)
Probably every financial aid administrator has encountered a few horror
stories. Financial aid administrators get particularly upset about
consultants who hurt the family by giving financially unsound advice.
Before deciding whether to use a financial aid consultant, ask them
about their qualifications. A consultant who has worked in the
financial aid office at a university, or who is a CPA (Certified Public
Accountant) or CFP (Certified Financial Planner), will be more likely to
be able to help you than one who has no experience as a practicing
financial aid administrator. The only experience some consultants have
had with financial aid has come from filling out their children's
financial aid forms. An inexperienced consultant may make costly mistakes.
Try calling your campus financial aid office before using a consultant.
They may be able to recommend a consultant with experience as a
financial aid administrator, or tell you about past problems they've had
with particular consultants.
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Subject: [8] Don't Assume You Don't Qualify
Don't assume that you don't qualify for financial aid. Virtually all US
citizens or eligible non-citizens enrolled at least half-time are now
eligible for some form of financial aid, including the Federal
unsubsidized Stafford Loan and the Federal Parent Loan for Undergraduate
Students (PLUS). Even if you don't qualify for a grant, you may still be
eligible for other forms of financial assistance.
Many families don't apply for financial aid because they believe that
they earn too much money or own a home, or because their friends and
relatives have told them that they won't qualify. They then prevent
themselves from getting any aid by failing to apply for it. You don't
need to be poor to get financial aid. For example, some loans and
scholarships are available regardless of need, and the number of family
members in college can significantly affect your eligibility for aid.
Also, as mentioned previously, a parents' home equity or retirement
programs are no longer considered in the federal methodology need
analysis formula. There are several factors in addition to income that
are used to determine your eligibility for financial aid, and there is
no simple cut-off based on income. Talk to the school's financial aid
administrators if you have any questions.
You can't get aid if you don't apply. So you should definitely fill out
the FAFSA and apply for financial aid if you feel you may need
assistance.
It is important to apply for financial aid before admission, even if
you think you won't qualify during your first year. For example, the
Brown University Guidebook for Undergraduate Financial Aid says
"... it is important that students who plan to apply for admission to
Brown apply for financial aid as well if they have reason to believe
that the costs of attendance exceed what they and their parents can
reasonably be expected to contribute. Only under the most extraordinary
circumstances is it possible to grant scholarship aid to first year
students who failed to apply for aid before admission. Budget
limitations may also preclude the granting of University scholarships
to new upperclass applicants."
Moreover, don't apply only to those schools you think you can afford.
The more expensive schools may provide larger financial aid packages to
compensate for the greater cost of attendance. Do not reject any school
simply because of the high cost of tuition and room and board. Tuition
and living expenses are like list prices; universities offer financial
aid packages as discounts against the list price to bring the cost
closer to what you can afford. Compare schools based on the bottom
line, not the list price. You may find that the difference in the
bottom line is not as significant a factor as you previously assumed.
Do not limit your initial choice of schools by the high price tag.
It is, however, a good idea to apply to several different types and
costs of schools for insurance purposes. Just as you apply to one or
two safety schools that you are sure will admit you, you should also
apply to a few schools you are certain you can afford.
Certainly college costs should be one of the factors you consider when
deciding where to go to school, but it shouldn't be the *only*
consideration.
Many students and parents avoid the financial aid office, thinking of
the financial aid office as "the enemy". Most financial aid office
employees are dedicated (underpaid and overworked) professionals who
want to help you as much as they can. Their job is to distribute
limited funds fairly to all the students. Within their constraints,
however, they will do their best to ensure that you can afford to
graduate from their university. True, their estimate of what you can
afford may not match your own assessment, but they aren't out to get
you. They will try to help you if you ask.
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Subject: [9] General Advice
For information about college-controlled aid, talk to the financial
aid administrators at the school. You will find out about any special merit
scholarships when you apply for financial aid at the school. A recent
trend is for many second tier schools (and even a few top rank
schools) to offer non-need merit-based aid to attract top students.
To find private sources of aid, spend a few hours in the library
looking at scholarship and fellowship books or consider a reasonably
priced (under $30) comprehensive scholarship search service. Some good
books are recommended in section [16]. Always write away for up-to-date
information, enclosing a self-addressed stamped envelope for the
application materials. You should also think of any organizations to
which you belong that might have aid funds available: religious
organizations, fraternal organizations, clubs, athletics, veterans
groups, ethnic groups, rotary clubs, unions, and your and your parents'
employers. If you are presenting a paper at a technical conference,
many conferences have travel funds available to enable students to
attend the conference.
Every high school student should consider checking the "yes" box on the
ETS Student Search Service form or the ACT Student Profile Form,
releasing your information to scholarship programs. Some scholarship
programs, such as the National Merit Scholarship Corporation (NMSC),
rely on this information for determining eligibility, and if
you don't check the box you won't be considered for the award.
High school students should also consider applying for the Pell Grant.
Some sources of financial aid require you to have applied for the Pell
Grant before you can be considered eligible for their program.
Graduate students who applied for the National Science Foundation (NSF)
or Hertz Foundation graduate fellowships as undergraduate seniors
should know that they can apply a second time as first year graduate
students. If you didn't win a NSF as a senior, ask for a copy of your
evaluation forms. Often the evaluations will be rather explicit in
identifying the weaknesses in your application, and you can address
those areas the second time you apply.
You are encouraged to mail your FAFSA and obtain a certificate of
mailing to verify that you mailed it. The cost is only 55 cents. You do
not need to send your FAFSA or PROFILE by registered, certified, or
overnight mail. [I personally send important mail by certified mail,
return receipt requested, but I tend to be paranoid about forms being
lost in the mail.]
Be very careful not to miss any deadlines.
Ask the school's bursar office about the availability of installment
payment plans. Many universities will let you spread the cost of
tuition out over the full year, instead of requiring you to pay a lump
sum up front.
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Subject: [10] Financial Planning Tips
Financial planning is the process of designing a plan to meet your
financial goals. It involves identifying the goals (e.g., saving for
your retirement, paying for your children's education, buying a
house), your current position (net worth = assets - liabilities; net
cash flow = income - expenses), and the steps you need to take in
order to reach those goals. Just knowing how much you spend on monthly
expenses can be an eye-opening experience. Given this information, you
can then play "what if" games and make better decisions for your
future.
1. It pays to save.
Even though the federal methodology need analysis formula will take
parent assets into account when calculating the family contribution,
it is still worth saving money for college despite the "savings penalty".
Your home equity and retirement savings aren't counted, and an
age-dependent asset protection allowance shelters some of your
assets from the need analysis. Moreover, parent assets are assessed
at a very low percentage rate.
Try saving at least $100 a month from the date of birth. This
probably won't cover the full cost of the child's education, but it
can make a difference between being able to pay for college and not.
If you can afford it, $400 or more a month is a much better target.
Education is one of the best financial investments you can make. A
bachelor's degree yields an increase in lifetime earning potential
of nearly half a million dollars according to Census Bureau data.
This is equivalent to a 20% annual return on investment.
2. Don't play asset shifting games.
The financial need of most families are assessed primarily on
income, not assets. Remember, the value of your home and retirement
plans will usually not be included in calculating the parent
contribution. [Although the federal calculation of financial need
does not include home equity, some private colleges and universities
still consider it when awarding institutional grants.] Moreover, the
federal methodology also ignores the first $30,000 to $40,000 in
savings and investments, depending on the number of parents, their
age, and the family size.
Consult an accountant before shifting parent assets to your
children. Although there can be a significant tax benefit, remember that
the federal methodology need analysis system assumes that children
contribute 35% of their assets to their education each year.
The federal methodology assumes that parents contribute a MUCH lower
percentage of their assets, so it is usually better to leave the
assets with the parents. Saving a few dollars in taxes now may cost
a lot more in aid eligibility later.
Some people may advise shifting assets to grandparents, non-custodial
parents (if parents are divorced) or other relatives. Even if such
asset-shifting games are financially sound, they are at best unethical,
if not fraudulent. You haven't lost control over the assets -- your
relatives cannot spend the money as they wish. When you fail to report
these assets on the FAFSA and PROFILE, you are providing false
information. Such actions are as bad morally as stealing from your
neighbors or cheating on your taxes.
For most people parent assets are not really a factor in parent
contributions. The asset protection allowance prevents a threshold
amount of assets from being included in the calculation of the
parent contribution. Student assets, on the other hand, do play a
significant role in the calculation of the student contribution.
3. Prepaid Tuition Plans and Asset Shifting
Although shifting assets to a prepaid tuition plan by making a lump
sum payment will shelter the money from the financial need
assessment, since it no longer counts as an asset, this technique
is ultimately ineffective as a way of increasing the size of the
student's financial aid package.
Having fewer assets results in a smaller EFC, and hence makes you
eligible for a larger Pell grant. However, most universities treat
prepaid tuition plans as a resource. This means that before they
decide how much financial aid to award from institutional funds,
they will reduce the computed need by the money received from the
prepaid tuition fund. This makes sense, because resources yield a
reduction in cost (e.g., less tuition) and thus less need.
So this may change the balance between grants and loans a little, but
it will not increase the total amount of aid received. The financial
aid administrator will normally adjust the rest of the student's
financial aid package to compensate, reducing the amount of
institutional aid. Moreover, instead of having the money which was paid
into the prepaid tuition plan "taxed" at the usual low rate for parent
assets, it is effectively "taxed" at 100%. So shifting the money from
an asset to a resource will actually yield a reduction in financial
aid.
Thus the only reasons a parent should pursue a prepaid tuition plan
include:
+ If a state ever designs a plan that is acceptable to the IRS, the
earnings of funds invested in the plan will be tax-free, yielding
extra buying power. [According to the 19-MAY-95 issue of the
Chronicle of Higher Education, the IRS has dropped its attempt to
tax the income of the Michigan Educational Trust.]
+ Some plans allow a parent to "lock in" the cost of tuition at
current rates. Your investments in the plan may be used to pay
a guaranteed portion of tuition at one of the participating
schools, regardless of any future tuition increases. The
percentage of tuition depends, of course, on the particular
university. Given that tuition tends to increase at about
twice the rate of inflation, this might be a good way of
preserving buying power.
+ Help parents plan for the future as a kind of financial planning.
For example, an installment plan would make automatic monthly
deductions from one's salary and pay it into the prepaid
tuition plan.
On the other hand, using a prepaid tuition plan restricts you to a
particular set of schools, limiting your options. You may be better
off investing your money in mutual funds or other investments that
outpace inflation.
4. Ask about the impact of a second income on aid eligibility.
If the second income is low and introduces additional expenses
(e.g., child care), sometimes it does not pay for the second parent
to work. Examine the tradeoffs very carefully.
5. Don't try to finagle the financial aid regulations and policies.
Many financial aid consultants suggest various ways of taking
advantage of loopholes in the financial aid system. Some of these
strategies are sound, but others have backfired on the families who
follow them. For example, a few years ago some "consultants" advised
parents to amend their previous year's tax returns to remove their
child as a claimed exemption. The idea was to qualify the child as
an independent student when applying for financial aid. Not only can
this trigger an audit, but financial independence is not the only
requirement for determining independent status. Parents who followed
this advice lost a fair amount of money in lost tax savings, not to
mention fees paid to high-priced consultants.
If the advice you receive involves questionable ethics, think twice
before following it. There is good advice and there is bad advice.
Good tips include spending student assets before parent assets,
keeping investments in the parent's name, and reducing family income
below the $50,000 threshold that causes assets to be ignored.
Any financial aid administrator will admit that these strategies
take advantage of genuine loopholes in the need analysis formula.
But there are also strategies that try to circumvent the system,
instead of trying to work within the rules. Unethical tips include
hiding assets, trying to qualify a truly dependent child as an
independent, or providing false information on a financial aid form.
6. Try to bargain or appeal to the financial aid administrator only
when the family financial situation has changed significantly or
where a great disparity in aid offers suggests that an error has
occurred.
Some people may recommend trying to bargain with the school's
financial aid officer to try to increase the aid offer. The only
case in which this will definitely work is if there is a significant
disparity in the net cost of attendance (e.g., more than $2,000) or
if the family's financial picture has changed significantly (e.g.,
death or disability of a parent, fire, serious illness). Most
financial aid administrators will review the award if there is a
good reason for doing so, but all will refuse to get into a bidding
war with other universities. This is especially true at the Ivy
League schools and top research universities.
If you really want to attend a school but are convinced that you
cannot afford it, talk to a financial aid administrator at the school.
They may be able to help, especially if it looks like they will lose
an outstanding student because of a few thousand dollars difference
in the aid package. They may, for example, be able to modify your
financial aid package so that your outside scholarships reduce the
loans and not the institutional grants, or suggest other sources of
financial aid.
7. Don't lie or act in an unethical manner.
If the financial aid administrator believes that false information was
provided on the financial aid forms, they can require additional
documentation or even disallow your claims. Many schools go through
a process known as verification, in which a high percentage of their
students are required to provide full documentation of every piece
of information listed on the financial aid forms.
Read the certification paragraph about providing false information
that appears on the front of the FAFSA form. In particular, the
FAFSA states that
any person who intentionally makes false statements
or misrepresentations on this form is subject to fine
or imprisonment or both under provisions of the United
States Criminal Code
That includes the student and his or her parents. If you received
funds as a result of providing false information, you will be
required to repay those funds.
8. Start looking for aid early.
Start planning for your children's education as soon as possible.
Most parents wait until the beginning of their child's senior year to
start worrying. This is often too late to make a difference. Encourage
your children early on in academics and athletics, and start saving as
early as possible. There are many sources of financial assistance,
but you have to start searching for this aid early. It is never too
early to start planning for your children's education.
9. Plan for the cost of education.
College costs typically increase at about nearly twice the inflation
rate. Plan accordingly.
10. Indicating the wrong tax return form on the FAFSA can negatively affect
eligibility for some aid programs, such as the Pell Grant.
Many parents choose to file the 1040 even though they are eligible
to file the 1040A or 1040EZ. Likewise, companies like H&R Block often
automatically file the 1040 form, regardless of the AGI or earnings.
This can sometimes cause their children to not qualify for the Pell
Grant.
Parents should ask their tax preparers whether they would have
been eligible to file a 1040A or 1040EZ. The question is NOT whether
you would have gotten a bigger refund with the 1040, just whether you
would have been eligible. If so, the answer to number 64 (or 53 for
independent students) is A.
11. Loan repayment.
When repaying your educational loans, try to make as large a
payment as possible. The longer you take to repay the loan, the more
interest you will pay. A shorter loan period will save you money in
the long run. There is also never a prepayment penalty for paying
off a loan early.
If you are having trouble repaying your loan under the standard
10-year repayment plan for FFELP loans, consider consolidating the
loan with a longer term. You may want to consolidate your loans
anyway, to reduce the amount of paperwork associated with servicing
several loans. Some graduates have found it necessary to consolidate
their loans in order to qualify for a mortgage. There are other
repayment options that may also help.
If your loans are unsubsidized (i.e., the government does NOT pay
the interest while you are in school), try to avoid capitalizing
the interest. This can significantly increase the size of the loan,
especially if you are in school for an extended period (e.g., for a
graduate degree).
Talk to your bank about setting up an automatic payment plan, where
a fixed amount of money is withdrawn from your checking account
each month to pay for your loan. This may help you manage the
repayment, if you find it difficult to avoid spending money while
it is in your checking account.
Remember, your student loans will show up on your credit report.
Defaulting on your student loans can have serious consequences for
your ability to get credit for purchasing a home.
12. Divorce and prenuptual agreements do not shelter funds.
Many universities require both natural parents to provide for
their children's education. Only when the custodial parent (the
parent with whom the child lived the most during the past 12 months)
remarries does this obligation shift from the non-custodial parent
to the step-parent.
Thus, if your parents are divorced and the custodial parent has not
remarried, the income and assets of both (natural) parents must be included
on the university financial aid form. This rule holds even if the
non-custodial parent refuses to supply the required information.
(The financial aid administrator may make an exception in cases of
documented spousal abuse or abandonment. In general, however, getting
divorced is not an effective means of increasing eligibility for
institutional funds.)
If the custodial parent has remarried, the step-parent's income and
assets must be included on any financial aid form, including the FAFSA.
By step-parent, we mean the new spouse of the custodial parent,
not the spouse of the non-custodial parent.
There are no exceptions, even if the step-parent refuses to provide
any money for the step-children's support or to supply the required
financial information. It may seem cruel, but no information, no
aid. If the parent and step-parent do not comply with the reporting
requirements, the student is out of luck. It is the student's
responsibility to get the parents to cooperate.
Likewise, prenuptual agreements are ineffective at sheltering
assets from the calculation of the parent contribution. If a
step-parent is being counted in place of a natural parent, then all
of that parent's assets should be considered subject to the
determination of financial need.
However, any child support and/or alimony received from the
non-custodial parent must be included on the FAFSA.
The federal need analysis system treats step-parents as though they
were natural parents if
+ they are married to the custodial parent (the natural parent
whose information is being reported on the FAFSA), or
+ they have legally adopted the student
The step-parent's income must be reported for the entire base year,
even if the marriage did not occur until the subsequent year.
Likewise, the system does not recognize prenuptual agreements.
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Subject: [11] Financial Aid for Foreign Students
There is very little financial aid for foreign nationals, with the
possible exception of citizens of Canada and Mexico. Most grants,
scholarships, and loans from public and private sources are restricted
to US citizens.
Some countries provide financial aid for their citizens to study in
the US, and there may be some aid available from the US government for
students from specific countries. US government student loans,
however, are not available to international students. Your best bet for
finding out if there is any financial aid for students from your
country is to contact your embassy, the US Department of State, and
the US Information Agency. You should also write to the Agency for
International Development, Office of International Training,
Washington, DC 20523.
Your own government may have financial aid available. Usually this
support requires that you return home after your education is complete.
There may also be private organizations in your home country that
provide support for study in the US.
Some US schools have direct exchange programs with their counterparts
in foreign countries. Such exchange programs often include financial
aid for the international student. To find out about these programs, ask
your local university.
Fulbright scholarships are awarded to approximately 4,700 students
worldwide each year. For information about the Fulbright Program,
contact the US embassy or consulate in your country.
International students who are already enrolled in a US university should
visit the
+ International Student Advisor
+ Financial Aid Office
+ Career Planning & Placement Office
for information about financial aid for foreign students. The campus
library may also have some relevant books.
Foreign graduate students have significantly more opportunities for
financial aid than foreign undergraduate students. The amount of
financial aid for foreign graduate students is nevertheless quite limited.
International students who intend to enroll in a graduate program at a
US university should contact the schools that interest them. Ask both
the relevant department(s) and the university's Financial Aid Office
about financial aid for international students. Most support for
graduate study in the US by international students is provided by the
schools themselves in the form of teaching assistantships and research
assistantships. These assistantships are based on academic merit, not
financial need. There is very little financial aid for international
students available from private sources.
Another suggestion is to read some of the ethnic newspapers that are
published in the US. Some sources of financial aid are publicized only
in such foreign language newspapers. If there isn't anything listed,
try calling the editor of the newspaper to see if they know of any
possibilities, such as a member of the community who might be willing
to sponsor your education.
Scholarship search services offer to search a database of scholarships
for awards that match your profile. Unfortunately, the vast majority
of awards in these databases are restricted to US citizens and
permanent residents. Don't waste your money on these services.
According to NAFSA (Association of International Educators),
two-thirds of international students in the US finance their education
using their own resources and the resources of their family.
Of the few private scholarships for international students, most require
that you apply from your home country. If you are already in the US
you might not be eligible. So you should search for financial aid
before you arrive in the US.
You may find some of the following publications helpful. Before you
order a copy, check whether your library has a copy. The US
Embassy in your country may have copies in their library.
1. IIE, Funding for US Study - A Guide for Foreign Nationals. This
publication lists more than 600 sources of funding for
international students (mostly for graduate and postdoctoral
programs). It is published by the Institute for International
Education, 809 United Nations Plaza, New York, NY 10017-3580.
Their telephone numbers are 1-212-883-8200 and 1-212-984-5412,
their fax number is 1-212-984-5452, and their email address is
[email protected].
2. Octameron Associates publishes a book entitled Scholarships for
International Students; the most recent edition I've seen has a
copyright date of 1988, which is quite out-of-date. There may be
more recent versions.
3. College Board, College Handbook: Foreign Student Supplement. This
book provides information about college-specific financial aid for
international students, among other topics. You can order the book
for $16 plus $8.31 for overseas shipping from College Board
Publications, Box 886, New York, NY 10101-0886, USA. If you are in
the US, you can call 1-800-323-7155 to place an order.
4. Marguerite J. Dennis, Complete College Financing Guide, 3rd
Edition, Barron's Educational Series, 1994. ISBN 0-81-201-635-1.
One chapter is devoted to funding for international students
wishing to study in the US. You can order the book for $17.50 plus
$15.69 for overseas shipping from Barron's Educational Series,
Inc., 250 Wireless Boulevard, Hauppauge, NY 11788. (The shipping
charge is $2.32 for destinations in the US.)
5. Gregory A. Barnes, The International Student's Guide to the
American University, National Textbook Company, Lincolnwood, IL,
1993. $12.95. 208 pages. Includes a chapter on financial aid.
6. Sidonia Dalby, Sally Rubenstone, and Emily H. Weir, The
International Student's Guide to Going to College in America,
Macmillan, New York, 1996. ISBN 0-02-860-587-0.
7. A Selected List of Fellowship Opportunities and Aids to Advanced
Education for U.S. Citizens and Foreign Nationals, National
Science Foundation, Washington, DC, 1994.
8. Carlotta R. Mills, Foundation Grants to Individuals, 9th edition,
1994. (Updated annually.) This book is published by the Foundation
Center, and includes some scholarships and fellowships available
to international students. You can order the book for $55 plus $11
for overseas shipping from Foundation Center, 79 5th Avenue, 8th
Floor, New York, NY 10003. (The shipping charge is $4.50 for
destinations in the US.)
9. W. Wickremasinghe, Scholarships and Grants for Study or Research
in the USA, 2nd edition, American Collegiate Service, Houston,
TX, 1989, 151 pages, ISBN 0-940937-01-8. This book contains a
compilation of financial aid opportunities available from
colleges, US foundations, and international organizations. You can
order the book for $21.95 from American Collegiate Service, PO Box
442008, Houston, TX 77244. Call 1-714-493-9863 for more
information.
10. Alan Wernick, The International Student Handbook, American
Immigration Law Foundation, Washington, DC, 1992, ISBN
1-878677-42-X, $10.95. This book does not provide any information
about financial aid, but does provide a lot of information that
international students may find helpful. Copies may be ordered
from the American Immigration Law Foundation, 1400 Eye Street, NW,
Suite 1200, Washingotn, DC 20005.
An organization that may be able to provide some information is NAFSA,
the Association of International Educators, located in Washington, DC.
Call 1-202-462-4811 and ask for the "Recording on Financial Aid".
This recording provides information for foreign students interested on
studying in the US and US students who are interested in studying
abroad. NAFSA does not provide any grants to foreign students, with
the exception of a small grant program for students from East Central
Europe (1-202-462-4811 x3081), the Baltic States (1-202-462-4811
x3081), or the former states of the Soviet Union (1-202-462-4811
x3077). Your school's international student advisor should have
information about these programs.
The Rotary Foundation of Rotary International provides grants to
university students and teachers to act as "goodwill ambassadors"
around the world. The Rotary Foundation also sponsors international
exchanges of business and professional people, and provides provides
grants to improve the quality of life around the world. An example of
this is their Ambassadorial Scholarship Program. For more information
about their programs, write to Rotary Foundation, 1560 Sherman Avenue,
Evanston, IL 60201.
The AAUW Education Foundation provides graduate fellowships to women
with the equivalent of a Bachelors degree who are not citizens or
permanent residents of the United States. International Fellowships
support graduate students writing doctoral dissertations and
postdoctoral scholars conducting research in the United States. Upon
completion of studies, fellowship recipients must return to their home
countries to pursue a professional career; preference will be given to
applicants who can verify that they have a definite position awaiting
them. Applications become available from August 1 through November 15.
The deadline is December 2 (Airmail), and the 1996 fellowship stipend
is $15,065. For more information write to AAUW Educational Foundation,
Department 60, 2201 N. Dodge St, Iowa City, IA 52243-4030, call
1-319-337-1716, or fax 1-319-337-1204, or write to American
Association of University Women, 1111 Sixteenth Street N.W.,
Washington, DC 20036-4873 or call 1-202-728-7603.
Two organizations that may have some information are:
* Institute of International Education. The IIE administers the US
Fulbright program and manages more than 250 international
education programs. For more information, write to Institute for
International Education, 809 United Nations Plaza, New York, NY
10017-3580, call 1-212-883-8200 or 1-212-984-5412, fax
1-212-984-5452, or send email to
[email protected].
* Council for International Educational Exchange (CIEE), 205 E 42nd
Street, New York, NY 10017.
A few US banks will offer student loans to international students if
the loan is co-signed by a creditworthy US citizen or permanent
resident. There may also be restrictions on the type of visa (F1 or
J1). These include:
* The Education Resources Institute (TERI) (1-800-255-8374 x210 or
1-617-426-0681). The TERI Professional Education Plan (PEP) loan
is available for graduate and professional study. Their lenders
include Citibank (1-800-692-8200 x480), Bank of Boston (PO Box
312, Boston, MA 02117-0312), Baybank (1-800-332-8374 or
1-617-320-2422; PO Box 510, Dedham, MA 02026), and Nellie Mae
(1-800-634-9308; 50 Braintree Hill Park, Braintree, MA 02184).
* USA Funds (1-800-LOAN-USA). These loans include US residents with
a green card, but do not include international students. For more
information write to Option 4 Loan Program, USA Funds MC M372, PO
Box 6180, Indianapolis, IN 46209-9303.
* Norwest Bank (1-703-749-0131 or the financial aid department at
1-800-366-6227). These MBA loans are for graduate business and
medical students who are international students. For more
information write to Norwest Bank/HEMAR Insurance Corp., GMAC,
2400 Broadway Suite 320, Santa Monica, CA 90404-3064.
International students should note that in addition to tuition, fees, room
and board, and living expenses, they will have to pay for health
insurance. US law requires universities to verify that foreign
students have health insurance before allowing them to enroll.
The I-20 form requires proof that you have enough funding for your
first year of study. Do not count on being able to scrape up the
funding after you arrive in the US. Getting a job is usually not an
effective means of financing an education in the US. There are
numerous restrictions on employment by foreign nationals, and some
types of Visas prohibit it entirely. You should know where your money
is coming from before you jump on a plane. Several schools require
proof that you have enough money for the entire course of study,
because too many international students are forced to return home
after only a year of study.
The bottom line is that there is very little financial aid available,
and many foreign students do not study in the US because they cannot
afford the expense.
For a more in-depth treatment of these issues, as well as taxes,
visas, the FAFSA form, and financial aid for Canadian students, please
see the International Students area of the Financial Aid Information Page.
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Subject: [12] My School Didn't Award Me Enough Aid!
Most family complaints about insufficient financial aid derive from the
practice of "need gapping" described in section [3]. There is little
that can be done about this, other than applying for scholarships and
fellowships, working during the school year and summer, and applying
for educational loans.
Howerver, if there is a significant discrepancy between the amount of
aid awarded and your financial need, perhaps you didn't bring some
special circumstances to the attention of the financial aid
administrator. Make an appointment to review your financial situation
with a counselor in the financial aid office, especially if your family
circumstances have changed since the financial forms were filed. If the
circumstances warrant, they may be able to adjust the amount of
financial aid for which you qualify. This process is known as
Professional Judgment (PJ). For most families, however, the increase
will be limited to the amount of educational loans, with the
institutional grants remaining unchanged.
There are several special circumstances that families sometimes forget
to mention:
1. Affecting the cost of attendance:
+ Unusually high supply costs (e.g., art students)
+ Child care expenses
+ Expenses related to a disability (e.g., braille machine
and readers for blind students, transportation expenses
for handicapped students)
+ Health insurance for students who are no longer covered by
their parents' health plan.
2. Affecting the parent contribution:
+ Death of a parent
+ Unemployment of a parent for 10 weeks or more
+ Change in income due to a change of jobs, a reduction in
the number of hours worked, or retirement
+ Loss or reduction of alimony and child support received (or an
increase in alimony and child support payments)
+ Divorce or separation of parents after submission of the FAFSA
+ Loss or reduction of disability and unemployment benefits
+ Losses due to natural disasters, such as floods, tornados,
hurricanes, and mine subsidence
+ Unusual medical/dental and nursing home expenses
+ Child care expenses
+ Casualty and theft losses
If you encounter these circumstances, you may need to provide estimated
income information on your financial aid form instead of relying on the
past year's financial information.
If there aren't any special circumstances, but the financial aid
administrators awarded you less aid than you think you need, you're
probably wondering how you will be able to afford your education. Here
are a few suggestions:
1. Consider a home equity loan. A home equity loan lets you borrow
against the equity in your home, and you can deduct the interest on
your taxes. You can use the home equity loan to pay off your
other debt such as credit cards -- a good idea, since the interest
rate will be lower -- and also use some of the proceeds to pay
for your education.
2. Obtain a Federal PLUS and Unsubsidized Stafford Loans. You do
not need to demonstrate financial need in order to be eligible
for these loans. Of course, if you are eligible for a Subsidized
Stafford Loan, you should use it before you rely on unsubsidized
of educational loans.
3. Part-time work. You can get part-time work during the academic
year, and a summer job during summer vacation.
4. Save money by completing your education more quickly. If you can
graduate in three years instead of four, you'll have saved 25%
of the cost of your education. Advanced Placement (AP) tests,
institutional advanced standing examinations, and taking an extra
course every semester can shave a semester or a year off of your
academic career.
5. Cut costs:
+ Sell your car and buy a bicycle, or ride the bus and
carpool. If you must keep your car, increase the deductible
on your auto insurance policy to $1,000.
+ Share an apartment to cut housing costs, or live at home.
+ Make long-distance telephone calls only at night, or cut
them out entirely.
+ Learn to cook and stop eating out. There are a lot of
nutritious but inexpensive meals you can make.
+ Sell your TV and VCR.
+ Shopping tips:
- Only buy what you absolutely need, and only when it is
on sale. Consider buying in bulk.
- Buy generic drugs and store brands.
- Eat a full meal before going grocery shopping. Never go
shopping on an empty stomach.
- Buy used textbooks, or sell your books when you're done
with them.
- Buy your clothing and furniture at Goodwill, Dollar a
Pound, discount stores, and garage sales.
+ Marry a wealthy spouse.
If you're majoring in a lucrative field, such as business or computers,
don't worry too much about the size of your loans. When you graduate
and get a job, you'll probably be earning enough money to pay off your
educational loans in a reasonable number of years. For other fields,
you should consider how you will be able to repay your loans before
getting too heavily into debt. Likewise, students who intend to go on
to graduate or professional school should carefully consider how their
finances will affect their future options.
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Subject: [13] Taxability of Financial Aid Awards
I'm not providing tax advice here. Use this information at your own
risk. For real tax advice, consult the relevant IRS publications or a
qualified accountant.
Relevant IRS publications include:
520 Scholarships and Fellowships
901, 515 US Tax Treaties (foreign students should see pages 12-18)
508 Educational Expenses
To order copies of these publications, call the IRS Forms Distribution
Center at 1-800-TAX-FORM (1-800-829-3676). Questions may be directed
to the IRS taxpayer's assistance center at 1-800-829-1040.
If the student is not a degree candidate, the full amount of any
financial aid is subject to federal income tax, even if it is spent on
educational expenses.
If the student is a degree candidate, then scholarship and fellowship
amounts used for tuition and REQUIRED course-related expenses (e.g.,
fees, books, supplies, and equipment) are exempt from federal income
tax and may be excluded from gross income. Amounts used for living
expenses (room and board) and other non-required expenses (computers,
travel, etc.) are not exempt.
The scholarship or fellowship must NOT, however, be awarded in
compensation for teaching and research services performed by the
student. The portion of the award that represents payment for services
is taxable. For example, a teaching assistantship or research
assistantship is not necessarily exempt. If you are required to teach
a class in exchange for your tuition waiver and stipend, it may be the
case that the award is fully taxable. In such cases, for the tuition
waiver portion of a TAship or RAship to be exempt, the rest of the
stipend must represent fair compensation for the services rendered.
Stipends paid for living expenses are, of course, always taxable. If
the tuition waiver is exempt, then only the stipend portion of your
award will be reported to you (and the IRS) as income on your W2 form.
Some universities or departments work around the "payment for
services" restriction by making teaching duties part of the
educational program. For example, one department provides every
graduate student in the department with a full fellowship, and
requires each graduate student to TA two classes before they can
graduate. Since the teaching and research duties are uniform for all
students and are construed as educational requirements -- more for the
benefit of the student than the university -- these duties do not
represent payment for services. They are graduation requirements and
not conditions for receiving the grant. These duties are an essential
part of the students' graduate education; TAships provide the student
with teaching experience necessary for their future careers as
faculty, and RAships provide the student with the opportunity to
conduct doctoral research and to work on their dissertation. After
all, a PhD is a research degree, so it makes sense to require research
experience as part of the degree program.
[The IRS recently started challenging the validity of such
arrangements. According to the May 5, 1995, issue of the Chronicle of
Higher Education, the IRS has asked the University of Wisconsin at
Madison for $81 million in back taxes, claiming that the work
performed by research assistants is not part of their graduate
education and hence subject to taxation like any other job. Note that
the university was careful to distinguish between research
assistantships intended to further the student's education and
research assistantships aimed at assisting faculty with their own
research. Federal income tax and Social Security tax was withheld from
the latter but not the former. The university will be fighting the
charges in US Tax Court.]
ROTC scholarships and the service academies are specificly exempted
from this requirement in the tax code, even though they could be
considered payment for services. So the tuition, books, and the
monthly stipend students receive from ROTC are exempt from tax. Pay
for summer training, however, is taxable, and the student will receive
a W2 for this work. (Veteran's educational benefits, however, may be
taxable. Check with the VA.)
Excludable expenses are eliminated from gross income before any
deductions. Thus you can exclude the exempt amounts and still take
advantage of the standard deduction. Note that if you itemize your
deductions, you cannot both exclude the educational expenses from
gross income and deduct them -- no double dipping.
The full amount of a scholarship or fellowship is usually exempt from
FICA (social security) whether or not the student is a degree
candidate.
Universities are not required to report scholarship or fellowship
income for US students to the IRS via W2 or 1099 forms, nor do they
have any responsibility for withholding estimated tax for these
students. (The only exception being assistantships where the
compensation represents pay for services and must be reported on a
W2.) For foreign students, however, the university is required to
withhold appropriate taxes. (Many universities are too conservative
in the amount withheld, so foreign students should cite the terms of
the appropriate tax treaty on their return to claim a refund of the
excess taxes withheld.)
If you received a taxable scholarship or fellowship which was not
reported to the IRS on a W2 or 1099 form, you are required to include
it on line 7 and write "SCH" to the left. If you report taxable
scholarship or fellowship income in this fashion, it is wise to attach
an explanatory letter to your return, especially if you exclude any
required educational expenses.
If your scholarship or fellowship was reported to the IRS on a W2 or
1099 and you wish to exclude additional required educational expenses
(e.g., the university excluded tuition and fees but not required
books), exclude the amount of the expenses from the amount reported on
line 7, and attach an explanatory letter. It is very important to
attach such a letter, since the IRS computers will notice the
discrepancy between the amounts reported to the IRS and the wages you
listed on your return. Failing to attach such a letter will likely
cause your return to be audited. (Some people recommend reporting
educational expenses as a negative amount on line 22, "Other Income",
instead of subtracting the expenses from line 7. In either event, you
should still attach an explanatory letter.)
Many new graduate students ask whether their moving expenses are tax
deductible. Unfortunately they aren't, according to the IRS, because
graduate students aren't really employees.
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Subject: [14] Common Questions and Answers
This section contains a list of common questions with concise answers.
General Questions:
1. I probably don't qualify for aid. Should I apply for aid anyway?
Yes. Many families mistakenly think they don't qualify for aid, and
prevent themselves from receiving financial aid by failing to apply
for it. In addition, there are a few sources of aid such as
unsubsidized Stafford and PLUS loans that are available regardless
of need. The FAFSA form is free. There is no good excuse for not applying.
2. Do I need to be admitted before I can apply for financial aid at a
particular university?
No. You can apply for financial aid any time after January 1. To
actually receive funds, however, you must be admitted and enrolled at
the university.
3. Do I have to reapply for financial aid every year?
Yes. Most financial aid offices require that you apply for
financial aid every year. If your financial circumstances change,
you may get more or less aid. After your first year you will
receive a "Renewal Application" which contains preprinted information
from the previous year's FAFSA. Note that your eligibility for financial
aid may change significantly, especially if you have a different number
of family members in college. Renewal of your financial aid package
also depends on your making satisfactory academic progress toward a
degree, such as earning a minimum number of credits and achieving a
minimum GPA.
4. How do I apply for a Pell Grant and other types of need-based aid?
Submit a FAFSA. For student employment, student loans, and parent
loans, you should check the appropriate boxes.
5. Are my parents responsible for my educational loans?
No. Parents are, however, responsible for the Federal PLUS loans.
Parents will only be responsible for your educational loans if you
are under 18 and they endorse your loan. In general you and you
alone are responsible for repaying your educational loans.
On the other hand, if your parents (or grandparents) want to help
pay off your loan, you can have your billing statements sent to
their address. Likewise, if your lender or loan servicer provides
an electronic payment service, where the monthly payments are
automatically deducted from a bank account, your parents can agree
to have the payments deducted from their account. But your parents
are under no obligation to repay your loans. If they forget to pay
the bill on time or decide to cancel the electronic payment
agreement, you will be held responsible for the payments, not them.
6. Why is the family contribution listed on the SAR different from the
family contribution expected by the university?
The federal formula for computing the expected family contribution
is different from those used by many universities. In particular, the
federal formula does not consider home equity as part of the assets.
7. If I take a leave of absense, do I have to start repaying my loans?
Not immediately. The subsidized Stafford loan has a grace period of
6 months and the Perkins loan a grace period of 9 months before the student
must begin repaying the loan. When you take a leave of absense you
will not have to repay your loan until the grace period is used up. If
you use up the grace period, however, when you graduate you will have
to begin repaying your loan immediately. It is possible to request
an extension to the grace period, but this must be done *before* the
grace period is used up.
If your grace period has run out in the middle of your leave, you
will have to make a payment on your student loans.
8. I got an outside scholarship. Should I report it to the financial
aid office?
If you are receiving any kind of financial aid from university or
government sources, you must report the scholarship to the
financial aid office.
Unfortunately, the university will adjust your financial aid package
to compensate. Nevertheless, the outside scholarship will have some
beneficial effects. At some universities outside scholarships are used
to reduce the self-help level. For example, at MIT 40% of the
scholarship amount is applied toward the self-help level, and the rest
replaces institutional funds. At other universities outside
scholarships are used to replace loans instead of grants.
9. What are GATE loans, and why doesn't my university participate?
GATE loans is a nonprofit private loan program (Guaranteed Access
to Education) offered through participating schools in conjunction
with Bank of America, Bank of Boston, and the National Collegiate
Trust (NCT). There is a minimal credit check and schools can
recommend whatever loan amount they'd like the student to receive.
The interest rate is also rather low.
Students and parents should call 1-617-639-2000 for more information
about the program (in New York, 1-212-551-3650).
If this program is so wonderful -- no loan limit, no credit check,
low interest rate -- why don't more schools participate? There are
several reasons why a university might not want to participate in
this program:
+ There is some risk-sharing by the schools. As a result, the
program will be most attractive to schools with a low default
rate.
+ The schools receive less than the full face value of the
loans immediately, with the up-front amount depending on the
school's default rate and the interest rate. In effect, the
schools are providing part of the loan capital.
+ There are no federal guidelines or regulations governing this
loan program.
+ Membership is not open to two-year colleges.
Universities that are interested in participating in the GATE loan
program should call 1-800-895-GATE (4283) and ask to speak to Kevin
Walker or Thatcher Fields.
10. Where can I get information about Federal student financial aid?
Call 1-800-4-FED-AID (1-800-433-3243) or 1-800-730-8913 (if hearing
impaired) and ask for a free copy of "The Student Guide: Financial
Aid from the US Department of Education". You can also write to
Federal Student Aid Information Center
PO Box 84
Washington, DC 20044
FAFSA Questions:
1. Are photocopies of the FAFSA acceptable?
No. Only the original FAFSA form produced by the US Department of
Education is acceptable. Photocopies, reproductions, facsimiles, and
electronic versions are all not acceptable. (See DCL GEN-95-21.)
2. I sent in my FAFSA over four weeks ago, but haven't heard anything.
What should I do?
If you haven't received a Student Aid Report (SAR), call the Federal
processor at 1-319-337-5665. You must provide them with your Social
Security number and date of birth as verification.
You can also write to
Federal Student Aid Programs
PO Box 4038
Washington, DC 52243-4038
to find out whether your FAFSA has been processed or to request a
duplicate copy of your SAR.
3. My parents are separated or divorced. Which parent is responsible
for filling out the FAFSA?
If your parents are separated or divorced, the custodial parent is
responsible for filling out the FAFSA. The custodial parent is the
parent with whom you lived the most during the past 12 months.
Note that this is not necessarily the same as the parent who has
legal custody. If you did not live with one parent more than the
other, the parent who provided you with the most financial support
should fill out the FAFSA. This is probably the parent who claimed
you as a dependent on their tax return. If you have not received any
support from either parent during the past 12 months, use the most
recent calendar year for which you received some support from a
parent or lived with either parent.
Note, however, that any child support and/or alimony received from the
non-custodial parent must be included on the FAFSA.
Financial aid applications can be somewhat confusing because there
are several different criteria applied for different kinds of
parenthood:
1. The parent with whom the child lived the most during the past
12 months.
2. The parent who provided the most financial support to the child
during the past 12 months.
3. The parent who provided more than half the child's support (and
will continue to do so).
4. The parent who has legal custody.
5. The parent who claimed the child as a dependent on their tax return.
As noted above, criteria 1 and 2 are used for determining the
custodial parent, with the first criteria being primary.
For determining household size (the number of family members),
criteria 3 is the most important. However, the student's custodial
parent gets to list him or her even if the custodial parent does not
provide more than half of the student's support. This leads to the
anomalous situation where a student can be counted as belonging to
two different households. For example, suppose the non-custodial
parent remarries and has college-aged children of his own. If the
non-custodial parent provides more than half of the student's support,
he gets to list the student as a member of his household even though
the custodial parent has also listed the student as a member of her
household. (The IRS tax return instructions prevent this kind of double
dipping on tax returns, but the FAFSA instructions apparently don't.)
Criteria 3 is also used to determine whether the student has one or
more dependents, in the rules for specifying whether the student is
an independent student with dependents.
Criteria 4 and 5 are not used in the financial aid formulas, but are
sometimes used to give an indication of the right choice when the
other criteria are insufficient. Criteria 5 is also sometimes used to
substantiate claims made under criteria 3. For example, a financial
aid administrator may ask a parent for a copy of their tax return, to
see whether they claimed the child as a dependent. Criteria 5 usually
implies criteria 3, because the IRS definition of a dependent includes
a 50% support test. There IRS definition includes a few exceptions
where the parent isn't required to provide more than half the child's
support in order to claim the child as a dependent, but in almost
every case, if the parent could not claim the child as a dependent
(criteria 5), they did not provide more than half the child's
support (criteria 3).
4. My parents are divorced, and the parent I'm living with has remarried.
Does my step-parent have to report his or her income and assets on
the FAFSA?
Yes, provided that the parent you're living with is the one filling
out the FAFSA (your custodial parent). If your step-parent is
married to them at the time you fill out the FAFSA, they must report
their income and assets even if they weren't married to them in the
previous year.
Myths About Financial Aid:
1. Won't the government take away our home if we apply for aid for our
children's education?
No. Absolutely not. This myth seems to be pervasive, and causes
many families to avoid applying for financial aid. The government
does NOT take away your home when you apply for financial aid.
2. All financial aid packages include term-time work, and working
while trying to study is bad.
First of all, numerous studies have shown that a small amount of
term-time employement (10 hours per week) improves academic
performance. Secondly, you can always refuse the work-study aid and
pay for the expenses covered by that aid through other means, such
as loans and summer employment.
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Subject: [15] Mailing Lists and Newsgroups
There are no student-oriented mailing lists for discussion of
financial aid issues. Mailing lists like FINAID-L, MEDAID-L, FINNET-L,
STUDEMP, and DIRLOAN2 are focussed on the issues facing financial aid
and student employment offices, not students. Typical topics include
financial aid administration job announcements, discussions of changes
in federal aid regulations, EDE and SARs, and so on. Requests for
advice or counseling on how to obtain financial aid are not welcome on
these lists, and are usually ignored. Accordingly, I am not including
instructions on how to subscribe to these mailing lists.
There is one mailing list for announcements of grants and
fellowships of interest to graduate and postdoctoral students.
To subscribe to GRANTS-L, send mail to
[email protected]
with
subscribe grants-l YOUR NAME
in the message body.
To alleviate the lack of a financial aid discussion forum for students
and parents, an unmoderated newsgroup for discussion of financial aid
issues for higher education has been created. The soc.college.financial-aid
newsgroup is open to the discussion of post-secondary educational
financial aid. Topics may include, but will not be limited to, grants,
scholarships, fellowships, loan programs, work-study, international
student aid, and updates on current changes to aid programs.
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Subject: [16] Recommended Books
The following scholarship books are recommended as giving particularly
good value for the money.
[Yes, I recommend my own book, but I feel I am justified. The book has
received testimonials from the heads of admission and/or financial aid
at MIT, Harvard, Stanford, Wellesley, Moorehouse, and Purdue, and has
received only positive reviews in the popular press. We are in the
process of revising the book for a second edition, but the current
edition is still rather up-to-date.]
In addition to the books listed below, graduate students may want to
take a look at the Chronicle of Higher Education. The Chronicle is a
weekly newspaper for the higher education community, and most
university libraries and career centers should have a subscription.
Most new fellowship programs are announced in the Chronicle.
1. Need a Lift?, The American Legion, Indianapolis, IN, 43rd edition, 1993.
$3.00, 128 pages. Excellent coverage of programs for veterans and their
dependents. For more information, write to The American Legion,
National Emblem Sales, PO Box 1050, Indianapolis, IN 46206.
2. Huber William Hurt, Harriett-Jeanne Hurt, and Christian E. Burckel, The
College Blue Book - Scholarships, Fellowships, Grants and Loans,
Volume 5, Macmillan Publishing Company, New York, 24th edition,
1993. ISBN 0-02895-004-6 ($48.00) 855 pages.
3. Mark Kantrowitz and Joann P. DiGennaro, Prentice Hall Guide to
Scholarships and Fellowships for Math and Science Students, Prentice
Hall, Englewood Cliffs, NJ, 1993. ISBN 0-13045-345-5 paper ($19.95)
325 pages. Complete resource guide for science, math and engineering
students, from high school through graduate school.
4. Debra M. Kirby and Christa Brelin, Fund Your Way Through College:
Uncovering 1,700 great opportunities in undergraduate financial aid,
Visible Ink Press, Detroit, MI, 1994. ISBN 0-81039-457-X ($19.95) 731
pages. Comprehensive list of undergraduate scholarships.
5. Deborah L. Wexler, The A's and B's of Academic Scholarships 1996-97,
Octameron Associates, Alexandria, VA, 18th edition, 1995. ISBN
0-94598-197-X ($7.50) 139 pages. College-controlled merit aid.
Revised annually.
6. Patricia McWade, Financing Graduate School, Peterson's Guides,
Princeton, NJ, 1993. ISBN 1-56079-147-0 ($14.95) 191 pages.
7. Carlotta R. Mills, Foundation Grants to Individuals, Foundation Center,
New York, 9th edition, 1994. ISBN 0-87954-493-7 ($55) 538 pages.
Comprehensive and accurate list of scholarships and fellowships.
Updated annually.
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Subject: [17] Financial Aid Software
John Hancock Financial Services is offering a free, no-obligation
interactive computer program designed to help families plan for their
children's college education as part of their College Savings Plus
Program. There is no cost or obligation for obtaining the free
software.
The software shows an estimate of future tuition, room and board costs
at more than 1,500 US public and private schools, based on the year the
user's child expects to begin attending college. The program is
available in IBM-compatible DOS and Apple Macintosh formats.
Copies are available through calling 1-800-633-1809 x555 or by sending
an email message with your name, address and diskette requirements to
[email protected] or
[email protected] or
[email protected].
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Subject: [18] Scholarship Search Services
Tips for Consumers from your Better Business Bureau (R)
July/August 1994
SOME SCHOLARSHIP OFFERS TAKE MONEY, NOT GIVE IT
With the first day of classes only weeks away, offers for "guaranteed"
scholarships, grants and loans may look very attractive to those college
students who didn't qualify or apply for financial aid. But before signing
up, the Better Business Bureau warns students to do their homework.
BBBs report that unethical scholarship companies are "guaranteeing" to
"match" students with sources of funding, regardless of their academic
qualifications, scholastic credentials or family economic status. Some
advertisements and sales pitches claim there are millions of dollars in
unclaimed scholarship monies just waiting to be tapped. However, in BBBs'
experience, few, if any, students receive funds.
In exchange for an up-front fee, which can range from $50 to several
hundred dollars, students receive lists of _possible_ scholarship sources.
While the company making the offer may claim scholarships are "guaranteed,"
prospective students should understand that only the sources actually
granting the funds can guarantee approval.
These scholarship companies do not assist students in obtaining
scholarships and they do not screen applicants. After purchasing the lists,
it is the students' responsibility to research and contact each
organization with a possible funding source.
Although many ads offer "money back guarantees" or $200 savings bonds to
students who don't receive any scholarship sources or funds, students who
are unsuccessful, or not satisfied, may find that refunds are difficult, if
not impossible, to obtain. The company may require students to prove,
through documentation, that they were denied a scholarship by _every_
source on the list.
Many of the scholarship sources that these companies provide for a fee, are
available at no cost from high school guidance offices, in the reference
sections of libraries or from the financial aid office of the college the
student is planning to attend.
For a reliability report on a scholarship company, consumers should call
the Better Business Bureau where the firm is located. For a copy of the
BBB's booklet, "Tips on College Financial Aid," send a self-addressed,
business-sized envelope and $2 for postage and handling to Council of
Better Business Bureaus, Dept. 023, Washington, DC 20042-0023.
Copyright 1994 Council of Better Business Bureaus, Inc. May be reprinted in
whole or part with attribution.
Council of Better Business Bureaus, Public Affairs Dept., 4200 Wilson
Blvd., Arlington, VA 22203 (703) 276-0100 Fax (703) 525-8277
The name Better Business Bureau is a registered servicemark of the Council
of Better Business Bureaus, Inc.
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Subject: [19] Glossary of Financial Aid Terminology
*** ACRONYMS:
ACT American College Testing Program
AFDC Aid to Families with Dependent Children
AP Advanced Placement
BIA Bureau of Indian Affairs
CLEP College-Level Examination Program
COA Cost of Attendance
CPS Central Processing System
CSS College Scholarship Service
CWS College Work-Study
ED US Department of Education
EFC Expected Family Contribution
EFT Electronic Funds Transfer
ELO Expanded Lending Option
ESAR Electronic Student Aid Report
FAA Financial Aid Administrator
FAFSA Free Application for Federal Student Aid
FAO Financial Aid Office
FAT Financial Aid Transcript
FFELP Federal Family Education Loan Program
FM Federal Methodology
FWS Federal Work-Study
GSL Guaranteed Student Loan
HEAL Health Education Assistance Loan
HHS US Department of Health and Human Services
HPSL Health Profession Student Loan
IM Institutional Methodology
IRA Individual Retirement Account
IRS Internal Revenue Service
ISIR Institutional Student Information Report
MDE Multiple Data Entry
NHSC National Health Corps Scholarship
NSL Nursing Student Loan
PC Parent Contribution
PCL Primary Care Loan
PHEAA Pennsylvania Higher Education Assistance Agency
PJ Professional Judgement
PLUS Parent Loan for Undergraduate Students
RA Research Assistantship
ROTC Reserve Officer Training Corps
SAP Satisfactory Academic Progress
SAR Student Aid Report
SC Student Contribution
SEOG Supplemental Educational Opportunity Grant
SLMA Student Loan Marketing Association
SLS Supplemental Loan for Students
SSIG State Student Incentive Grants
TA Teaching Assistantship
VA Veterans Administration
*** DEFINITIONS:
1040 Form, 1040A Form, 1040EZ Form
The Federal Income Tax Return. Every person who has received income
during the previous year must file a form 1040 with the IRS by April 15.
1090 Form
IRS form 1090 is used by business to report income paid to a non-employee.
Banks use this form to report interest income.
Academic Year
The period during which school is in session. The school year typically
runs from the beginning of September through the end of May at most
colleges and universities.
Accrue
To accumulate.
Accrual Date
The date on which interest charges begin to accrue. See also
"Subsidized Loan" below.
Adjusted Available Income
In the Federal Methodology, the remaining income after the allowances
(taxes and a basic living allowance) have been subtracted.
Amortization
Amortization is the process of spreading payments out in
installments over an extended period of time.
Appeal
An appeal is a formal request to have a financial aid administrator
review your aid eligibility and possibly use Professional Judgment to
adjust the figures. For example, if you believe the financial
information on your financial aid application does not reflect your
family's current ability to pay (e.g., because of death of a
parent, unemployment, or other unusual circumstances), you should
definitely make an appeal. The financial aid administrator may
require documentation of the special circumstances or of other
information listed on your financial aid application.
Asset
An asset is an item of value, such as a family's home, business, and
farm equity, real estate, stocks, bonds, mutual funds, cash, certificates of
deposit (CDs), bank accounts, trust funds, and other property and
investments.
Asset Protection Allowance
The asset protection allowance is a portion of your parents' assets
that are not included in the calculation of the parent contribution,
as calculated by the Federal Methodology need analysis formula. The
asset protection allowance increases with the age of the parents.
Associate Degree
The degree granted by two-year colleges.
Award Letter
After you have submitted the appropriate financial aid forms and
the university financial aid office has assembled a financial aid
package, you will receive an award letter. This letter provides
details on their analysis of your financial need and the breakdown of
your financial aid package according to amount, source, and type of aid. The
award letter will include the terms and conditions for the financial
aid and information about the cost of attendance. You are required
to sign a copy of the letter, indicating whether you accept or
decline each source of aid, and return it to the financial aid office.
Award Year
The academic year for which financial aid is requested (or received).
Bachelor's Degree
The undergraduate degree granted by four-year colleges and universities.
Base Year
The tax year prior to the academic year (award year) for which
financial aid is requested. The base year runs from January 1 of the junior
year in high school through December 31 of the senior year.
Financial information from this year is used to determine
eligibility for financial aid.
Borrower
The person who receives the loan.
Budget
See Cost of Attendance.
Bursar's Office
The Bursar's Office or Student Accounts Office is the university
office that is responsible for the billing and collection of
university charges.
Campus-based Aid
Campus-based financial aid programs are administered by the
university. The federal government provides the university with a
fixed annual allocation, which is awarded by the financial aid
administrator to deserving students. Such programs include the Perkins
Loan, Supplement Educational Opportunity Grant, and Federal
Work-Study. See also Direct Lending.
Cancellation
Some loan programs provide for cancellation of the loan under
certain circumstances. For example, if the student becomes a teacher
in certain national shortage areas, they may be eligible for
cancellation of all or part of the balance of their educational loans.
Capital Gain
A capital gain is an increase in the value of an asset such as
stocks, bonds, mutual funds, and real estate between the time the asset
was purchased and the time the asset was sold.
Capitalization
The practice of adding unpaid interest charges to the principal,
increasing the size of the loan. See Unsubsidized Stafford and
Direct Loans. Capitalization is sometimes called compounding.
Collateral
Collateral is property that is used to secure a loan. If the
borrower defaults on the loan, the lender can seize the collateral.
For example, a mortgage is usually secured by the house purchased
with the loan.
Collection Agency
A collection agency is often hired by the lender or guarantee agency
to recover defaulted loans.
College Work-Study
College Work-Study is simply a part time job.
Commuter Student
A student who lives at home and commutes to school every day.
Consolidation Loan
A consolidation loan combines several loans into one bigger loan
from a single lender. Consolidation loans offer the following
benefits:
+ Consolidation loans often reduce the size of the monthly
payment by extending the term of the loan beyond the 10 year
repayment plan that is standard with FFELP loans. Of course,
extending the term of a loan increases the total amount of
interest paid.
+ Consolidation loans also simplify the repayment process by
allowing a single payment to one lender instead of several
payments to different lenders.
Some graduate students have found it necessary to consolidate their
educational loans when applying for a mortgage on a house.
Consolidation loans can sometimes result in a lower interest rate,
as when a consumer loan is used to pay off credit card balances.
With educational loans, however, consolidation usually results in a
higher interest rate.
Aside from the simplification of the repayment process, consolidation
is usually not in the student's best interest. Instead, students who
are having trouble making their payments should consider some of the
alternate repayment terms provided for FFELP loans by the Higher
Education Act of 1992. Income contingent payments, for example, are
adjusted to compensate for a lower monthly income.
Cooperative Education
In a cooperative education program, the student spends some time
engaged in employment related to their major in addition to regular
classroom study. For example, one semester might be spent working,
and the other back at school.
Cost of Attendance
The cost of attendance (COA), also known as the cost of education or
"budget", is the total cost of education for the student, including
tuition, fees, room and board, books and supplies, transportation,
and personal and incidental expenses. Child care and expenses for
disabilities may also be included.
Credit Rating
A credit rating is an evaluation of the likelihood of a borrower to
default on a loan. People who make all their payments on time are
good credit risks. People who are frequently delinquent in making
their payments are considered bad credit risks. A good credit rating
is not required for most educational loans, with the exception of the
PLUS Loan. However, students who have defaulted on previous
educational loans may be required to agree to repay the loan and
begin making payments before they can become eligible for further
Federal aid.
Custodial Parent
If a student's parents are divorced or separated, the custodial
parent is the one with whom the student lived the most during the
past 12 months. The student's need analysis is based on financial
information supplied by the custodial parent.
Default
A loan is in default when the borrower fails to pay several regular
installments on time (i.e., payments overdue by 180 days) or
otherwise fails to meet the terms and conditions of the loan. If you
default on a loan, the university, the holder of the loan, and the
government can take legal action to recover the money, including
garnishing your wages. Defaulting on a government loan will make you
ineligible for future federal financial aid, unless a satisfactory
repayment schedule is arranged, and can affect your credit rating.
Deferment
Deferment occurs when a borrower is allowed to postpone repaying
the loan. No interest accrues during the deferment period. Most
federal loan programs allow students to defer their loans while they
are in school at least half time. Other loan programs, such as the
unsubsidized Stafford loan, allow students to defer repayment while
they are in school at least half time, but interest still accrues
during the deferment period. Students can defer the interest
payments by capitalizing the interest.
Delinquent
If the borrower fails to make a payment on time, the borrower is
considered delinquent and late fees may be charged. If the borrower
misses several payments, the loan goes into default.
Dependency Status
A student's dependency status determines to what degree the
student has access to parent financial resources.
An independent student is one who is at least 24 years old as of
January 1 (e.g., born before January 1, 1972 for academic year
1995-96), is married, is a graduate or professional student, has a
legal dependent other than a spouse, is a veteran of the US Armed
Forces, or is an orphan or ward of the court. All other students
are considered dependent.
If the financial aid administrator believes that you are not an
independent student they can require you to provide proof of
independent status to qualify, and their decision on your status is
generally not subject to appeal.
Note: ROTC students and cadets and midshipmen at one of the service
academies are not considered veterans. To be a veteran you must
have been engaged in active service in the US Army, Navy, Air Force,
Marines, or Coast Guard and received an honorable or medical discharge.
See your financial aid administrator if you have any special circumstances.
The FAA may be able to do an override of your dependency status on the
FAFSA, if warranted by involuntary dissolution of the family or
other very unusual situations. Special circumstances that are
sometimes sufficient for an override include:
+ a legal restraining order has been issued against your
parents because of abusive behavior
+ both of your parents have been incarcerated
+ your parents live in another country and you have been being
granted refugee status by the US Immigration Service.
You do not qualify for independent status just because your parents
have decided to not claim you as an exemption on their tax returns
or are refusing to provide support for your college education. You
must provide documentation to the satisfaction of the financial aid
administrator that you are truly self-supporting for them to override your
dependency status. A few financial aid offices may require that you
have a minimum annual income of $10,000 to establish self-sufficiency.
[Several financial aid books suggest that all one needs to do for a
student to become independent is for them to not be listed as a
dependent on their parents' tax return for the past two years and
for them to have earned at least $4,000 per year during the same
period. This is the OLD definition of independence, and is no
longer valid.]
Dependent
For a child or other person to be considered your dependent, they
must live with you and you must provide them with more than half of
their support. Spouses do not count as dependents in the Federal
Methodology. You and your spouse cannot both claim the same child as
a dependent.
Direct Loans
Direct Lending is a new federal program where the school becomes
the lending agency and manages the funds directly, with the federal
government providing the loan funds. Not all schools currently
participate in this program. Benefits of the program include
a faster turn-around time and less bureaucracy than the old "bank
loan" program. The terms for Direct Loans are the same as for the
Stafford Loan program.
Disbursement
The date on which the financial aid funds are released to the
student or transferred to the student's account for payment.
Doctorate
One of several degrees granted by graduate schools.
Electronic Funds Transfer
Electronic Funds Transfer (EFT) is used by some schools and Stafford and
Parent Loan lenders to wire funds for Stafford and PLUS loans
directly to participating schools without requiring an intermediate
check for the student to sign over.
Electronic Student Aid Report
An Electronic Student Aid Report (ESAR) is an electronic form of the
Student Aid Report.
Eligible Non-Citizen
Someone who is not a US citizen but is nevertheless eligible for
Federal student aid. Eligible non-citizens include US permanent
residents who are holders of valid green cards, US nationals, holders
of form I-94 who have been granted refugee or asylum status, and
certain other non-citizens. Non-citizens who hold a student visa or
an exchange visitor visa are not eligible for Federal student aid.
Endowment
Funds owned by an institution and invested to produce income to
support the operation of the institution. Many educational
institutions use a portion of their endowment income for financial
aid. A school with a larger ratio of endowment per student is more
likely to give larger financial aid packages.
Enrollment Status
An indication of whether you are a full-time or part-time student.
Generally you must be enrolled at least half-time (and in some cases
full-time) and working toward a degree to qualify for financial aid.
Entitlement
Entitlement programs award funds to ALL qualified applicants. The
Pell Grant is an example of such a program.
Entrance Interview
See Loan Interviews.
Equity
Equity is the dollar value of your ownership in a piece of
property. For example, your home equity is the current market value
of the home less the mortgage's remaining unpaid principal.
Exit Interview
See Loan Interviews.
Expanded Lending Option
Under the Expanded Lending Option (ELO), some schools can offer
higher annual and cumulative loan limits to students receiving the
Perkins Loan.
Expected Family Contribution
The Estimated Family Contribution (EFC) is the amount of money that
the family is expected to be able to contribute to the student's
education, as determined by the Federal Methodology need analysis
formula approved by Congress. The EFC includes the parent
contribution and the student contribution. The difference
between the COA and the EFC is the student's financial need.
FAF
The Financial Aid Form (FAF) is the old name for the Financial Aid
PROFILE. The Financial Aid PROFILE is a supplemental financial aid
form processed by the College Scholarship Service (CSS).
Federal Family Education Loan Program
The Federal Family Education Loan Program (FFELP) includes the
Federal Stafford Loan (Subsidized and Unsubsidized) and the Parent
Loan for Undergraduate Students (PLUS).
Federal Methodology
The Federal Methodology (FM) is the need analysis formula used to
determine the EFC.
Federal Work-Study
The Federal Work-Study (FWS) program provides students with part-time
employment during the school year. The federal government pays a
portion of the student's salary, making it cheaper for departments
and businesses to hire the student. For this reason, work-study
students often find it easier to get a part-time job. Eligibility
for FWS is based on need.
Fellowship
A form of financial aid given to graduate students to help support
their education. Some fellowships include a tuition waiver or a
payment to the university in lieu of tuition. Most fellowships
include a stipend to cover reasonable living expenses (e.g., just
above the poverty line). Fellowships are a form of gift aid and do
not have to be repaid.
Financial Aid
Money provided to the student and the family to help them pay for
the student's education. Major forms of financial aid include
gift aid (grants and scholarships) and self help aid (loans and work).
Financial Aid Package
The financial aid package is the complete collection of grants,
scholarships, loans, and work-study employment offered to a student to
enable them to attend the college or university.
Financial Aid Administrator
A Financial Aid Administrator (FAA) is a college or university
employee who is involved in the administration of financial aid.
Financial Aid Office
The Financial Aid Office is the college or university office that is
responsible for the determination of financial need and the awarding
of financial aid.
Financial Aid Transcript
The Financial Aid Transcript (FAT) is a record of all federal aid
received by the student. If you have previously attended a university
and are now applying for financial aid from the different university,
the university will require a FAT from all schools previously attended,
regardless of whether aid was received. They are required to do this by
federal law. You have to submit a FAT even if you were in high school
at the time. An electronic FAT process will be in place soon which will
eliminate the need for the student to submit a FAT.
Financial Need
See Need below.
Fixed Interest
In a fixed interest loan, the interest rate stays the same for the
life of the loan.
Forbearance
During a forbearance the lender allows the borrower to postpone
repaying the principal, but the interest charges continue to accrue.
Forbearances are usually granted in cases of extreme financial
hardship or other unusual circumstances.
Free Application for Federal Student Aid
The Free Application for Federal Student Aid (FAFSA) is used to
apply for Pell Grants and all other need-based aid. An electronic
version of the FAFSA called FAFSA Express will be available by disk
in the 1996-97 academic year.
Gapping
The practice of failing to meet a student's full demonstrated need.
See also "Unmet Need" below.
Garnishment
Garnishment is the practice of withholding a portion of a defaulted
borrower's wages to repay his or her loan, without their consent.
Gift Aid
Financial aid, such as grants and scholarships, which does not need
to be repaid.
Grace Period
A short time period after graduation during which the borrower is
not required to begin repayment. The typical grace period is six or
nine months.
Graduate Student
A student who is enrolled in a Masters or PhD program.
Graduated Repayment
Under a graduated repayment schedule, the monthly payments are
smaller at the start of the repayment period, and gradually
become larger.
Grant
A grant is a type of financial aid based on financial need that the
student does not have to repay.
Gross Income
This is income before taxes, deductions, and allowances have been
subtracted.
Guarantee Agency
A guarantee agency agrees to pay back a loan if the borrower
should default. There are 41 guarantee agencies for educational
loans in the United States. Each state has a different guarantee
agency that administers the Federal Stafford and Plus loans for
students in that state. A guarantee fee is a small percentage of the
loan that is paid to the guarantee agency as a form of insurance
against default. For the name, address, and telephone number of your
state's guarantee agency, call the Federal Student Aid Information
Center at 1-800-433-3243 (1-800-4-FED-AID).
Guaranteed Student Loan (GSL)
The Guaranteed Student Loan (GSL) is the old name for the subsidized
Stafford Loan.
Half-Time
Most financial aid programs require that the student be enrolled at
least half-time to be eligible for aid. Some programs require the
student to be enrolled full-time.
Health Education Assistance Loan
The Health Education Assistance Loan (HEAL) is a low interest loan
administered by the US Department of Health and Human Services (HHS).
It is available to medical school students pursuing medicine,
osteopathy, dentistry, veterinary medicine, optometry, podiatry,
clinical psychology, health administration, and public health.
Undergraduate pharmacology students are also eligible.
Health Professions Student Loan
The Health Professions Student Loan (HPSL) is a low interest loan
administered by the US Department of Health and Human Services (HHS).
It is available to medical school students pursuing medicine,
osteopathy, dentistry, veterinary medicine, optometry, and podiatry.
Undergraduate pharmacology students are also eligible.
Horizontal Equity
The principle of horizontal equity is that families with similar
financial circumstances should pay the same amount, regardless of how
their assets, investments, and income are defined.
In-State Student
An in-state student has met the legal residency requirements for the
state, and is eligible for reduced in-state student tuition at public
colleges and universities in the state.
Income
Income is the amount of money received from employment (salary,
wages, tips), profit from financial instruments (interest, dividends,
capital gains), or other sources (welfare, disability, child
support, Social Security, and pensions).
Income Contingent Repayment
Under an income contingent repayment schedule, the size of the
monthly payments depends on the income earned by the borrower.
As the borrower's income increases, so do the payments.
Independent Student
See Dependency Status.
Institutional Methodology
If a college or university uses its own formula to determine
financial need for allocation of the school's own financial aid funds,
the formula is referred to as the Institutional Methodology (IM).
Institutional Student Information Report
The Institutional Student Information Report (ISIR) is the
electronic version of SARs delivered to schools by EDExpress.
Insurance Fee
The insurance fee is passed on by the lender to the federal
government as insurance against default. The insurance fees are
charged as the loan is disbursed, and typically run to 1% of the
amount disbursed.
Interest
Interest is an amount charged to the borrower for the privilege
of using the lender's money. Interest is usually calculated as a
percentage of the principal. The percentage rate may be fixed for the
life of the loan, or it may be variable, depending on the terms of
the loan. All new federal loans use variable interest rates that are
tied to the cost of US Treasury Bills.
IRS
The Internal Revenue Service (IRS) is the federal agency
responsible for enforcing US tax laws and collecting taxes.
Lender
The bank or financial institution that provides funds to the student
or parent for an educational loan. Note: Some schools now
participate in the Federal Direct Loan program and no longer use a bank.
Loan
A loan is a type of financial aid which must be repaid, with interest.
Repayment on some educational loans, such as Perkins and
Stafford/Direct Loans, does not begin until the student has
graduated or otherwise left school.
Loan Forgiveness
Under certain circumstances, such as practicing medicine in a
national shortage area or teaching in a rural region, the federal
government will cancel all or part of an educational loan.
Loan Interviews
Students with educational loans are required to meet with a financial
aid administrator before they receive the first loan and before they
graduate. During these interviews, called entrance and exit interviews,
the FAA reviews the repayment terms of the loan and the repayment
schedule with the student.
Master's Degree
One of several degrees granted by graduate schools.
Multiple Data Entry Processor
A Multiple Data Entry (MDE) Processor is a company that processes
the FAFSA forms submitted by students. The College Scholarship
Service (CSS) and PHEAA are both MDE Processors.
Merit-based
Financial aid that is merit-based depends on your academic, artistic, or
athletic merit, or some other criteria, and does not depend on the
existence of financial need. Merit-based awards use your grades,
test scores, hobbies, and special talents to determine your
eligibility for scholarships.
Mortgage
A mortgage is a loan of funds for purchasing a piece of property
which uses that property as security for the loan. The lender has a
lien on the property and will receive the property if the borrower
fails to repay the loan.
National Health Corps Scholarship
The National Health Corps Scholarship (NHSC) is a scholarship program
administered by the US Department of Health and Human Services (HHS).
It is available to medical students studying allopathic and
osteopathic medicine and to dental school students studying dentistry.
Need
The difference between the COA and the EFC is the student's
financial need - the gap between the student's resources and the cost
of attending the school. The financial aid package is based on
the amount of financial need. The process of determining a student's
need is known as "need analysis".
Need Analysis
Need analysis is the process of determining a student's financial need
by analyzing the information provided by the student on his or her
financial aid form and using it to compute the EFC.
Need-based
Financial aid that is need-based depends on your financial situation.
Most government sources of financial aid are need-based.
Net Income
This is income after taxes, deductions, and allowances have been subtracted.
Nursing Student Loan
The Nursing Student Loan (NSL) is a low interest loan administered
by the US Department of Health and Human Services (HHS) and available
to students enrolled in nursing programs.
Origination Fee
The origination fee is paid to the bank to compensate them for the
cost of administering the loan. The origination fees are charged as
the loan is disbursed, and typically run to 3% of the amount disbursed.
Outside Resource
A resource is something that is available because a student
is in school and is counted after need is determined. Outside
scholarships, prepaid tuition plans and VA educational benefits are
examples of other resources.
Out-of-State Student
An out-of-state student has not met the legal residency requirements
for the state, and is often charged a higher tuition rate at public
colleges and universities in the state.
Overawards
A student who receives federal support may not receive awards
totaling more than $400 in excess of his or her financial need.
Packaging
Packaging is the process of assembling a financial aid package.
Parent Contribution
The Parent Contribution (PC) is an estimate of the portion of your
educational expenses that the federal government believes your parents
can afford. It is based on their income, the number of parents
earning income, assets, family size, the number of family
members currently attending a university, and other relevant
factors. Students who qualify as independent are not expected to
have a parent contribution.
Pell Grant
The Pell grant is a federal grant that provides funds of up to
$2,340 based on the student's financial need.
Perkins Loan
Formerly the National Direct Student Loan Program, the Perkins
Loan allows students to borrow up to $3,000/year (5 year max) for
undergraduate school and $5,000/year for graduate school (6 year max).
The Perkins Loan has one of the lowest interest rates and is awarded
by the financial aid administrator to students with exceptional
financial need. The student must have applied for a Pell Grant to be
eligible. The interest on the Perkins Loan is subsidized while the
student is in school.
PhD
One of several degrees granted by graduate schools.
Prepayment
Paying off all or part of a loan before it is due.
Primary Care Loan
The Primary Care Loan (PSL) is a loan administered by the US
Department of Health and Human Services (HHS) and available
to students enrolled in general and osteopathic medicine programs.
Principal
Principal is the amount of money borrowed under the loan.
Interest is charged as a percentage of the principal.
Professional Judgement
For need-based federal aid programs, the financial aid administrator
can adjust the EFC, adjust the COA, or change the dependency status
(with documentation) when extenuating circumstances exist. This
delegation of authority from the federal government to the financial
aid administrator is called Professional Judgement (PJ).
Professional Student
A student pursuing advanced study in law or medicine.
Promissory Note
A promisory note is the binding legal document signed by the
student borrower before loan funds are disbursed by the lender. The
promisory note states the terms and conditions of the loan, including
repayment schedule, interest rate, deferment policy, and
cancellations. The student should keep this document until the loan
has been repaid.
PLUS Loans
Parent Loans for Undergraduate Students (PLUS) are federal loans
available to parents of undergraduate students to help finance the
student's education. Parents may borrow up to the full cost of their
children's education, less the amount of any other financial aid received.
PLUS Loans may be used to pay the EFC. There is a minimal credit
check required for the PLUS loan. Check with your local bank to see
if they participate in the PLUS loan program.
Research Assistantship (RA)
A form of financial aid awarded to graduate students to help support
their education. Research assistantships usually provide the
graduate student with a waiver of all or part of tuition, plus a
small stipend for living expenses. As the name implies, an RA is
required to perform research duties. Sometimes these duties are
strongly tied to the student's eventual thesis topic.
Sallie Mae
See Student Loan Marketing Association.
Satisfactory Academic Progress
A student must be making Satisfactory Academic Progress (SAP) in
order to continue receiving federal aid. If a student fails to
maintain an academic standing consistent with the school's SAP policy,
they are unlikely to meet the school's graduation requirements.
Scholarship
A form of financial aid given to undergraduate students to help pay
for their education. Most scholarships are restricted to paying all
or part of tuition expenses, though some scholarships also cover
room and board. Scholarships are a form of gift aid and do not have
to be repaid. Many scholarships are restricted to students in
specific courses of study or with academic, athletic, or artistic talent.
Scholarship Search Service
A scholarship search service charges a fee to compare the student's
profile against a database of scholarship programs. Few students
who use a scholarship search service actually win a scholarship.
Secondary Market
Loans are often bought and sold to secondary markets. Thus the
bank you make your payments to may change during the life of the
loan. The terms of your loan do not change when it is sold to
another holder. The Student Loan Marketing Association (SLMA), also
known as Sallie Mae, is the nation's largest secondary market and
holds approximately one third of all educational loans.
Selective Service
Registration for the military draft. Male students who are US citizens and
have reached the age of 18 and were born after December 31, 1959
must be registered with Selective Service to be eligible for
federal financial aid.
Self Help Aid
Financial aid in the form of loans and student employment. If every
financial aid package is required to include a minimum amount of
self-help aid before any gift aid is granted, that level is known as
the self-help level. For example, the self-help level will be $8,150
at MIT in 1995-96 (The Tech, March 7, 1995, Vol. 115, No. 9, Page 1).
MIT has one of the highest self-help levels of private colleges and
universities, with an average self-help level of around $5,500 at the
more expensive schools.
Service Academy
The US Air Force Academy, US Coast Guard Academy, US Merchant Marine
Academy, US Military Academy, and US Naval Academy. Admissions is
highly selective, as students must be nominated by their
Congressional Representative in order to apply.
Simplified Needs Test
If the parents have an adjusted gross income of less than $50,000
and every family member was eligible to file an IRS Form 1040A or
1040EZ (or wasn't required to file a Federal income tax return),
the Federal Methodology ignores assets when computing the EFC.
Stafford Loans
Stafford Loans are federal loans that come in two forms, subsidized and
unsubsidized. Subsidized loans are based on need; unsubsidized loans
aren't. The Subsidized Stafford Loan was formerly known as the
Guaranteed Student Loan (GSL). Undergraduates may borrow up to $23,000
($2,625 during the freshman year, $3,500 during the sophomore year,
and $5,500 during each subsequent year) and graduate students up to
$65,500 including any undergraduate Stafford loans ($8,500 per year).
The Unsubsidized Stafford Loan may be used to pay the EFC.
State Student Incentive Grants
The State Student Incentive Grants (SSIG) program is a state-run
financial aid program for state residents. The states receive
matching funds from the Federal government to help them fund the program.
Statement of Educational Purpose
The Statement of Educational Purpose is a legal document in which
the student agrees to use the financial aid for educational expenses
only. The student must sign this document before receiving federal
need-based aid.
Student Accounts Office
See Bursar's Office.
Student Aid Report
The Student Aid Report (SAR) summarizes the information included in
the FAFSA and must be provided to your school's FAO. The SAR will
also indicate the amount of Pell Grant eligibility, if any, and the
EFC. You should receive a copy of your SAR four to six weeks after
you file your FAFSA.
Student Contribution
The Student Contribution (SC) is the amount of money the federal
government expects the student to contribute to his or her education
and is included as part of the EFC. The SC depends on the student's
income and assets, but can vary from school to school. Usually a
student is expected to contribute about 35% of his or her savings and
approximately one-half of his summer earnings above $1,750.
Student Loan Marketing Association
The Student Loan Marketing Association (SLMA), also known as Sallie
Mae, is the nation's largest secondary market and holds
approximately one third of all educational loans.
Subsidized Loan
With a subsidized Stafford loan, the government pays the interest on
the loan while the student is in school and during the six-month
grace period. Subsidized loans are awarded based on financial need
and may not be used to finance the family contribution.
Undergraduate students who qualify for the maximum amount of
unsubsidized Stafford loans may borrow up to $2,625 during the first
year, up to $3,500 during the second year, and up to $5,500 per year
during the third, fourth, and fifth years, for a maximum total of up to
$23,000.
Graduate and professional students may borrow up to $8,500 per year,
for a maximum total of $65,500 for undergraduate and graduate
subsidized loans.
Supplemental Educational Opportunity Grant
The Supplemental Educational Opportunity Grant (SEOG) is a federal
grant program for undergraduate students with exceptional need. SEOG
grants are awarded by the school's financial aid office, and provide
up to $4,000 per year. To qualify, a student must also be a
recipient of a Pell Grant.
Supplemental Loan for Students
Supplemental Loan for Students (SLS) are federal loans for
financially independent students. This program was eliminated in 1994
with the creation of the unsubsidized Stafford Loan program.
Teaching Assistantship (TA)
A form of financial aid awarded to graduate students to help support
their education. Teaching assistantships usually provide the
graduate student with a waiver of all or part of tuition, plus a
small stipend for living expenses. As the name implies, a TA is
required to perform teaching-related duties.
Term
The term of a loan is the number of years (or months) during
which the loan is to be repaid.
Undergraduate Student
A student who is enrolled in a Bachelors program.
Unearned Income
Interest income, dividend income, and capital gains.
Unmet Need
In an ideal world, the FAO would be able to provide each student
with the full difference between their ability to pay and the cost of
education. Due to budget constraints the FAO may provide the student
with less than the student's need (as determined by the FAO). This gap
is known as the unmet need.
Unsubsidized Loan
An unsubsidized loan is a loan for which the government does not pay
the interest. The borrower is responsible for the interest on an
unsubsidized loan from the date the loan is disbursed. Unsubsidized
loans are NOT based on financial need and may be used to finance the
family contribution.
See also "Subsidized Loan" above.
Dependent undergraduate students may borrow up to $2,625 during the
first year, up to $3,500 during the second year, and up to $5,500 per
year during the third, fourth, and fifth years, less any subsidized
loan amounts, for a maximum total of $23,000 for their subsidized and
unsubsidized loans.
Independent students and students whose parents are ineligible for the
PLUS are limited to $4,000 per year during the first two years and
$5,000 per year during third, fourth, and fifth years, for a maximum
total of $23,000, in addition to any subsidized loan amounts.
Graduate and professional students may borrow up to $10,000 per year,
in addition to any subsidized loan amounts. This yields a maximum total
of $73,000 for their undergraduate and graduate education combined,
in addition any subsidized loan amounts.
Untaxed Income
Contributions to IRAs, Keoghs, tax-sheltered annuities, and 401k
plans, as well as worker's compensation and welfare benefits.
Variable Interest
In a variable interest loan, the interest rate changes periodically.
For example, the interest rate might be pegged to the cost of
US Treasury Bills (e.g., T-Bill rate plus 3.1%) and be updated
monthly, quarterly, semi-annually, or annually.
Verification
Verification is a review process in which the FAO determines the
accuracy of the information provided on the student's financial aid
application. During the verification process the student and parent
will be required to submit documentation for the amounts listed (or
not listed) on the financial aid application. Such documentation may
include signed copies of the most recent Federal and State income
tax returns, proof of citizenship, proof of registration with
Selective Service, and copies of Social Security benefit statements
and W2 and 1099 forms, among other things.
Financial aid applications are randomly selected for verification, with
most schools verifying at least 1/3 of all applications. Some schools
undergo 100% verification.
Veteran
For the purpose of determining dependency status, a veteran is a
former member of the US Armed Forces (Army, Navy, Air Force, Marines,
or Coast Guard) who served on active duty and received an honorable
or medical discharge. ROTC students, members of the National Guard,
and cadets and midshipmen at one of the service academies are not
considered veterans.
W2 Form
Employers are required by the IRS to issue a W2 form for each
employee before February 28. The W2 form lists the employee's wages
and tax withheld.
Work Study
See Federal Work-Study.
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Subject: [20] Telephone Numbers
This section contains a list of useful financial aid telephone numbers.
** Financial Aid Applications:
College Scholarship Service (CSS)
Questions about Financial Aid PROFILE ................... 1-609-771-7725
TDD Number for the Hearing-Impaired ..................... 1-609-883-7051
Need Access Need Analysis Service .......................... 1-800-282-1550
Federal Student Aid Information Center (US Dept of Education)
Hotline ................................................ 1-800-4-FED-AID
1-800-433-3243
TDD Number for Hearing-Impaired ........................ 1-800-730-8913
Missing Student Aid Report (SAR) ....................... 1-319-337-5665
To Request Duplicate SARs .............................. 1-319-337-5665
Fraud/Waste/Abuse of Federal Student Aid Funds ............. 1-800-MIS-USED
Fraud/Waste/Abuse of Federal Student Aid Funds ............. 1-800-647-8733
Selective Service .......................................... 1-847-688-6888
Immigration and Naturalization Services (INS) .............. 1-415-705-4205
Internal Revenue Service (IRS) ............................. 1-800-829-1040
Social Security Administration ............................. 1-800-772-1213
California Student Aid Commission (Cal Grants) ............. 1-916-445-0880
California Student Aid Commission (Cal Grants - TDD) ....... 1-916-323-0437
PA Higher Education Assistance Agency (PHEAA) .............. 1-800-692-9435
PA Higher Education Assistance Agency (PHEAA) .............. 1-717-257-2800
State Student Assistance Commission of Indiana (SSACI) ..... 1-317-232-2350
National and Community Service Program (AmeriCorps) ........ 1-800-94-ACORPS
National and Community Service Program (AmeriCorps) ........ 1-800-942-2677
** Information Hotlines:
Federal Student Aid Hotline (US Dept of Education) ......... 1-800-4-FED-AID
Federal Student Aid Hotline (US Dept of Education) ......... 1-800-433-3243
Federal Student Aid Hotline (US Dept of Education - TDD) ... 1-800-730-8913
Career and Learning Line (CALL) ............................ 1-800-442-1171
Operated by the Higher Education Information Center at
the Boston Public Library for <strong>Massachusetts students only</strong>.
CALL offers free information about financial aid, college,
and careers.
The following telephone lines are answered by representatives
of the indicated educational financing organizations:
KapLoan (Educational Funding Company) .................... 1-888-KAP-LOAN
College Answer[sm] Service (Sallie Mae) .................. 1-800-239-4211
** Direct Loan Programs:
Direct Loans are serviced by the U.S. Department of Education.
Direct Loan Servicing Center ............................... 1-800-848-0979
Direct Loan Servicing Center (TDD) ......................... 1-800-848-0983
Direct Loan Servicing Center Consolidation Department ...... 1-800-848-0982
** Loan Programs:
Access Group ............................................... 1-800-282-1550
Bank of America ............................................ 1-800-344-8382
Bank of America (in Texas) ................................. 1-800-442-0567
Bank of America (in Idaho and Washington) .................. 1-800-535-4671
Bank of America (in Seattle) ............................... 1-206-358-7943
Bank of Boston (Alliance) .................................. 1-800-637-6007
Bank of Boston (Alliance) .................................. 1-617-434-8970
Bank One ................................................... 1-800-288-6150
Bank One ................................................... 1-304-526-4226
BayBanks Education Financing Programs ...................... 1-800-332-8374
Chase Manhattan Bank Educational Loans ..................... 1-800-645-8246
Chemical Bank Educational Loans ............................ 1-800-243-6226
Citibank ................................................... 1-800-692-8200 x144
Citibank ................................................... 1-800-846-1298 TDD
Commerce Bank (LC 813979) .................................. 1-800-666-3910
Connecticut Student Loan Foundation (CSLF) ................. 1-860-257-4001
ConSern Loans .............................................. 1-800-767-5626
Crestar Bank's Student Lending Division .................... 1-800-552-3006
EduServ Technologies ....................................... 1-800-445-4236
Extra Credit ............................................... 1-800-874-9390
First Union National Bank .................................. 1-800-955-8805
Fleet Bank Student Loan Programs ........................... 1-800-235-3385
Higher Education Services Corporation (HESC) ............... 1-800-642-6234
KeyBank USA ................................................ 1-800-KEY-LEND
KeyBank USA ................................................ 1-800-539-5363
Massachusetts Educational Loan Authority ................... 1-800-842-1531
Mellon Bank EduCheck ....................................... 1-800-323-7105
Nellie Mae (Excel and Share Loan Programs) ................. 1-617-849-3447
Nellie Mae (Excel and Share Loan Programs) ................. 1-800-634-9308
Norwest (Collegiate) ....................................... 1-800-658-3567
Sallie Mae (College Answer[sm]) ............................ 1-800-239-4211
Signet Bank ................................................ 1-800-434-1988
TERI Supplemental (The Educational Resources Institute) .... 1-800-255-8374
TERI Supplemental (The Educational Resources Institute) .... 1-800-255-TERI
Texas Guaranteed Student Loan Corporation (TGSLC) .......... 1-800-TG-LOANS
United Student Aid Funds (Option 4) ........................ 1-800-635-3785
** Loan Consolidation:
Manufacturers Hanover Trust ................................ 1-800-MHT-7722
Nellie Mae ................................................. 1-617-849-7708
Nellie Mae ................................................. 1-800-852-0603
PHEAA ...................................................... 1-800-692-7392
Sallie Mae ................................................. 1-800-524-9100
** Tuition Payment Plans:
Academic Management Services (AMS) ......................... 1-800-635-0120
EduServ Tuition Installment Plan (TIP) ..................... 1-800-445-4236
FACTS Tuition Management System ............................ 1-800-624-7092
Knight Insured Tuition Payment Plan ........................ 1-800-225-6783
The Tuition Plan, Inc. ..................................... 1-800-822-8764
** College Saving Programs:
CollegeSave CDs (College Board) ............................ 1-212-713-8000
CollegeSure CD (College Savings Bank) ...................... 1-800-888-2723
** State Prepaid Tuition Plans:
Alabama .................................................... 1-800-ALA-PACT
Alabama .................................................... 1-800-252-7228
Alaska ..................................................... 1-800-478-0003
Alaska ..................................................... 1-907-474-7469
Colorado ................................................... 1-800-478-5651
Connecticut ................................................ 1-860-566-2982
Florida .................................................... 1-800-552-GRAD (4723)
Florida .................................................... 1-904-488-8514
Indiana .................................................... 1-317-232-6386
Kentucky ................................................... 1-800-928-8926
Louisiana .................................................. 1-800-259-5626 x1012
Massachusetts .............................................. 1-617-261-9760
Massachusetts .............................................. 1-800-449-MEFA (6332)
Michigan ................................................... 1-800-MET-4KID
Mississippi ................................................ 1-601-359-2995
Mississippi ................................................ 1-601-359-3600
Mississippi ................................................ 1-888-308-1997
Ohio ....................................................... 1-800-589-OTTA (6882)
Ohio ....................................................... 1-800-AFFORD-IT (233-6734)
Pennsylvania ............................................... 1-800-440-4000
Tennessee .................................................. 1-888-486-BEST
Tennessee .................................................. 1-888-486-2378
Texas ...................................................... 1-512-483-6340
Texas ...................................................... 1-800-252-5555
Texas ...................................................... 1-800-445-GRAD
Texas ...................................................... 1-800-735-2988
Utah ....................................................... 1-800-418-2551
Virginia ................................................... 1-800-253-0737 TDD
Virginia ................................................... 1-888-567-0540
Wisconsin .................................................. 1-888-338-3789
Wyoming .................................................... 1-307-766-3214
** Miscellaneous:
National Merit Scholarship Corporation ..................... 1-708-866-5100
National and Community Service Program ..................... 1-800-942-2677
Better Business Bureau ..................................... 1-703-276-0100
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