Federal Need-Based Financial Aid
Financial aid is a term that refers to any financial assistance given to students for any type of post-secondary education (four-year college, one-or-two year college, trade and technical schools). It is generally divided into two sub-groups -- Need-based financial aid and merit-based scholarships.
Need-Based Financial Aid
Need-based financial aid is financial assistance given to a student to attend any type of postsecondary institution. The need-based component means the student and family's financial status is measured by a formula called the Federal Methodology, which analyses a family's income and assets to determine its expected family contribution (EFC) toward the cost of college. Generally no academic requirements are attached to federal and state need-based financial aid. Need-based financial aid can come from the federal government, state government, colleges and universities, and private sources. It can be awarded in three forms: grants, which do not have to be repaid; loans, which do need to be repaid; and work-study, which provides income from a part-time job through the college the student is attending.
Federal Need-Based Aid
The federal government provides financial help to qualified students enrolled in eligible programs at participating colleges and universities to cover school expenses which include tuition and fees, room and board, supplies, and transportation. The federal government requires families to complete the FAFSA (Free Application for Federal Student Aid) during the student's second semester of senior year and EVERY year the student is in college.
Federal Grants
A grant from the federal government is a type of gift aid, it does not need to be repaid. The amount of the federal grant is based on the EFC, the cost of the college or university, and the student's enrollment status. Two types of federal grants are:
Pell Grants: These are designed for lower-income families to cover the cost of tuition and fees and room and board at any eligible college or university in the USA. For undergraduates only, Pell Grants currently range from $400 - $4310, depending on the EFC of the family and the enrollment status of the student.
Federal Supplemental Educational Opportunity Grants (FSEOG): FSEOGs are designed for undergraduates with exceptional financial need. These grants range from $100-$4000, depending on the student's application date, the funding level of the college, and the policies of the financial aid office. Colleges actually control to whom they give FSEOG and how much is awarded.
Academic Competitive Grants: These grants are for full-time undergraduates receiving Pell Grants who are enrolled in their first or second academic year of study. Grants up to $750 first year and up to $1300 second year are based on a rigorous secondary school program of study and have not been previously enrolled in an undergraduate program. Students in their second year of study must have a GPA of at least 3.0.
National Science and Mathematics Access to Retain Talent Grant (Smart Grant): Smart Grants are for undergraduates receiving Pell Grants who are enrolled in their third or fourth year of an eligible degree program. Such students majoring in physical, life or computer sciences; engineering; technology; math or a critical-need foreign language, and who have a GPA of at least 3.0 will receive up to $4000 for each of their third and fourth year.
Since grants are considered gift aid, they will not hurt a student's financial aid potential for the following year.
Federal Loans
A loan from the federal government is a type of financial aid that must be repaid with interest. For both undergraduate and graduate students, the maximum amount of loans depends on a student's year in school. Parents may also borrow money to help finance their undergraduate student's education. The following are four types of federal loans:
Perkins Loans: These low-interest student loans are for both undergraduate and graduate students with exceptional financial need. Student do not need to pay any principal while in school, and the government pays the interest during this time. Colleges decide who receives the loan and the loan is repaid to the school.
Subsidized Stafford Foans: These loans are awarded to half-to full-time students on the basis of financial need NOT MET by Pell Grants, FSEOGs or other financial aid. Students do not have to pay any principal while in school, and the U.S. Department of Education subsidizes (pays) the interest during this time.
Unsubsidized Stafford Loans: These loans are awarded to half-to full-time students on the basis of need. Students do not pay any principal while they are still in school, but they are charged interest from the time the loan is started until it is paid in full.
PLUS Loans: Plus loans are given to parents with good credit rating who want to borrow money to pay for their half-to full-time undergraduate student's education. The annual borrowing limit equals the student's cost of attendance less any other financial aid received. Families usually want students to take out student loans first, because PLUS loans require immediate repayment of both principal and interest.
Federal Work-Study
The Federal Work-Study program provides money for both undergraduate and graduate students with financial need, allowing them to earn money as a way of self-help for their education expenses. The majority of jobs that qualify for federal work-study are on campus and generally salaries start at minimum wage. The amount of hours scheduled is determined by student's level of need, w hen they apply, and the funding level of the college. Because money earned from work-study helps to meet this year's financial need, it will not hurt the student's potential for financial aid the following year.
