Financial Aid Awareness Month provides an opportunity to understand the numerous financing options available to alleviate the up-front cost of higher education, such as tuition and room-and-board, according to a recent press release.
For many students and families nationwide, affordability remains a high concern as they consider investing in a college degree. According to the National Center for Education Statistics, over 85% of students receive some form of financial aid; however, it is not always easy to access and understand all available options. Determining how to access and apply for financial aid can be overwhelming. At the heart of most tuition assistance options is the Free Application for Federal Student Aid (FAFSA), an online form in which families provide household size, income, and other facts used to determine eligibility for various financial aid programs.
Let’s take a look at some of the options available to ensure students and families understand the tools available to make the best financial decisions while pursuing higher education.
One of the most popular forms of financial aid comes in the form of government grants which can be awarded by federal or state governments, nonprofit organizations, and from schools directly. Grants do not need to be paid back and are typically given to students who demonstrate financial need. Students will be automatically considered for federal loans by completing the FAFSA form, and any qualifying options will be applied to your financial aid award annually. Additionally, students may be eligible for grants at the state level. Although state grants may require students to fill out forms outside of the FAFSA, it is wise to explore all options to reduce costs.
The Federal Work-Study Program allows students with financial need to work part-time to earn money that can be used to help pay for education-related expenses. When filing out the FAFSA form, students must indicate an interest in participating in the program. While this is often a great opportunity for students to gain professional experience, not all schools participate in the program and jobs are not guaranteed. Unlike grants which are automatically applied to aid letters, securing a work-study job is the responsibility of the student once they arrive on campus.
Perhaps the most well-known form of financial aid comes in the form of loans. Unlike grants, loans must be paid back and accrue interest overtime. Loans can either be federal or private, and the process for obtaining and repaying each loan greatly differs. Regardless of loan type, students and parents should have a clear understanding of each loan’s interest rate, the time in which they must repay the loan, deferment options, and other fees associated with payment.
Federal student loans are accounted for when students receive financial aid packages and are calculated based on your FAFSA. If you qualify, students will be offered two types of federal loans in financial aid packages: direct subsidized or direct unsubsidized loans. With a direct subsidized loan, the federal government pays the interest while you are in school, in the first six months after you leave school, and during deferment. If a student takes out a direct unsubsidized loan, they are responsible for always paying the interest.
Private loans are borrowed from a private lender – companies, banks, or credit unions – and require additional application processes. While private loans can help bridge gaps between other financial aid offerings and outstanding costs, students should always consider all federal student loan options before seeking out private ones. Because most private loans are credit-based, borrowers must show positive credit history. Additionally, interest rates are often higher than federal loans as they are fixed at a specific rate. There is less flexibility when it comes to repaying private loans and default on these loans comes with greater consequences.
Paying for a college education is among the most expensive investments a family will make, and it is important to remember that it does not come risk-free. Most financial aid offerings include clauses that require repayment if the student withdraws and fails to complete the semester. This Financial Aid Awareness Month, students and families should consider protecting their investment with tuition insurance. An unexpected – and uninsured – withdrawal can be costly as about 40% of student loan borrowers failed to complete their undergraduate degree. To learn more about GradGuard’s Tuition Insurance plans, visit www.gradguard.com/tuition.
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