Are you clueless about the financial aid process? Here is an overview of the financial aid basics you need to know.
The first and most important step in the financial aid process is to fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is the form you need to complete in order to see if you are eligible for any kind of federal financial aid. You should submit the FAFSA as soon as possible after January 1st of the year for which you need aid. Every college-bound student should submit the FAFSA. Even if you think your parents’ income is too high to qualify for aid or you plan on getting scholarship money, you should still fill out the FAFSA. Income is only one of the criteria on which financial aid is based; and although not every student will qualify for grants or need-based scholarships (gift aid), every student is at least eligible for participation in the Federal Student Loan Program (self-help aid). Furthermore, even if you plan on getting a lot of scholarship money, you never know when there might be more grant or loan money that could cover incidental qualifying expenses, such as room and board, textbooks, computers, etc.
You can fill out the FAFSA for free at www.fafsa.ed.gov. When you file the FAFSA online, you will need to register for a FSA ID number. You must reapply for financial aid each year by filling out a renewal FAFSA.
Please note: Some schools require other financial forms (in addition to the FAFSA), such as institution-specific forms or the CSS Profile. Schools using the Profile are mostly higher cost, highly selective institutions. Check with the schools you want to attend to see if they require financial forms in addition to the FAFSA.
The Student Aid Report (SAR) summarizes the information you report on your FAFSA. When you file the FAFSA online and provide a valid email address, you will receive an email within a few days of filing that contains a secure link so you can access your SAR on the Web. You can also check the status of your FAFSA and print a copy of your SAR at www.fafsa.ed.gov. If you file a paper FAFSA or do not provide a valid email address, you will receive a paper SAR in about three to four weeks after submitting the FAFSA. In whatever form you receive the SAR, it is crucial that you review it and make sure it is accurate and complete. If you find anything that needs to be corrected, you can make those changes on the paper SAR and mail it to the Central Processing Center, or you can log into your FAFSA at www.fafsa.ed.gov and make corrections online. The schools you listed on your FAFSA will receive your SAR information electronically. The financial aid office staff at your school(s) will review your SAR and use the information to determine if you’re eligible for aid. One other note: you may notice on your SAR that your application has been selected for verification. (If there is an asterisk next to your EFC, then you’re selected.) If you have been selected for FAFSA verification, read more information on what you need to do.
Once a financial aid administrator at your school(s) reviews your SAR, he will put together your financial aid package and send you an award notification. The award notification will include the financial calculation that determines the amount of aid you receive: Cost of Attendance (COA) minus Expected Family Contribution (EFC) = financial need. It will also list the financial aid awards that the college has determined you are eligible to receive. Financial aid awards may include:
- Scholarships. Scholarships are awarded to students based on financial need or to award them for special talents in academics, music, athletics, etc. They are offered through colleges, the community, and other organizations. Scholarships do not have to be paid back.
- Grants. Grants are awarded by the federal or state governments or by the school and are usually based on financial need. Grants do not have to be paid back.
- Federal Work-Study. Federal Work-Study is self-help aid and is awarded to students with financial need. Students can work part-time to earn this award money to help with the cost of attendance. Work-study jobs can be found on or off campus through the school’s Financial Aid Office.
- Student Loans. Student loans must be repaid. The Federal Perkins Loan is a low interest rate loan that aids students with a large financial need. As long as the student is enrolled in school, the federal government pays the interest on this loan. Financial aid officers at each college determine which students receive these loans and how much they receive. The Federal Subsidized Stafford Loan is a need-based, low-interest loan in which the government pays the interest while the student is in school and during deferment. The Federal Unsubsidized Stafford Loan is a non-need based, low-interest loan in which the student is responsible for paying interest. The Parent Loan for Undergraduate Students (PLUS) is non-need based loan available to parents of undergraduate students and is based on credit history. Private student loans are offered through organizations and banks. Rates, repayment plans, and borrowing limits vary for each organization or bank.
Once you receive the different financial aid award notifications from each of the schools to which you have applied, you need to compare the financial aid packages offered from each school. For more information on comparing the award notifications and for more thorough information on the different types of financial aid awards, please read Understanding the Financial Aid Award Notification. One you have decided on a school, you should take action by accepting the award package. Deadlines are usually within two weeks after receiving the award notification. If a deadline is missed, you may risk losing a scholarship, grant, or loan assistance. If you find that the college you want to attend offers less aid than your financial need, be sure to look into ways of filling that financial aid gap.
If you choose to accept a student loan, you must sign a Master Promissory Note (MPN). A Master Promissory Note is a legally binding contract in which by signing you agree to pay back the student loan(s) you borrow and agree to all terms and conditions included. Once you sign your MPN, a new one is not required for any loans (unless required by your school). You can sign a new MPN each year if you want to do so. You can electronically sign (e-sign) your MPN or complete a paper copy. The electronic process is the fastest and most efficient method of meeting the MPN signature requirement. To e-sign, you will need a PIN number assigned by the U.S. Department of Education. (If you filed the FAFSA online, you will use the same PIN number to e-sign the MPN. If you completed the paper version of the FAFSA, you should have been mailed a PIN number by the federal aid processor. If you forgot, do not have, or wish to change your PIN number, go to www.pin.ed.gov.) Your school will provide you with specific instructions on when and how to complete your MPN.
Loan Entrance Counseling
If you choose to accept a student loan, you must also complete entrance counseling. Loan entrance counseling applies only to first-time borrowers. Federal regulation requires that you complete an entrance counseling session before you get your loan (and an exit counseling session before you graduate or drop below half-time attendance). Counseling will show you how to manage your loans during and after college. Your school will provide you with instructions on when and how to complete your student loan counseling.