07 Apr Financial Aid Programs- Who Gets What and How Much?
Federal Pell Grant: For undergraduates only. It is awarded on basis of financial need and there is no repayment. Awards range from a minimum of $400 to a maximum of $2,300 per year. The student must make satisfactory academic progress to continue grant. Half of grant is for tuition and fees. Less than half time students are now eligible. Approximately 33% of undergraduates receive Pell Grants. Apply, since rejection may qualify you for other programs.
SEOG (Federal Supplemental Educational Opportunity Grant): for undergraduates only. It is awarded to Pell eligible students. There is no repayment. The grant is for students with exceptional need. Maximum award is $4,000, depending on available funds and level of need. Approximately 8% of undergraduates receive SEOG. Grant is administered by college financial aid office.
Federal Stafford Loans: Federal Stafford Loans are low interest loans to undergraduate and graduate students enrolled at least half-time. Almost half of all federal aid for college is from FEDERAL STAFFORD LOANS. Students can receive subsidized and non-subsidized loans for the same period.
Federal Subsidized Stafford Loan: Awarded to students with financial need. Borrowers need not begin to repay until 6 months after leaving school. The government covers the interest in the interim.
Federal Unsubsidized Stafford Loan: Not awarded on the basis of need. Available to all students regardless of income. The terms are similar to Subsidized Stafford, except borrowers are responsible for paying all of the interest. Students may elect to defer interest and principal payments until they leave school.
Maximum amount students can borrow per year from all Stafford Loans is: $2,625 freshmen; $3,500 sophomores; $5,500 juniors and seniors; $18,500 (at least $10,000 of this amount must be in unsubsidized Stafford Loan) for graduate students. Aggregate loan limits for all Stafford Loans: $23,000 undergraduates and $138,500 ($65,000 in subsidized loans, $73,000 in unsubsidized loans) for graduate students.
Federal College Work Study (CWS): Need based, for undergraduates and graduates. The program is administered by the college financial aid office. Students work up to 20 hours per week with time and job set by college. The money earned is used to off-set expenses. At least 5% of CWS funds must be used to compensate students in community service. Institutional matching has been decreased to 25% Institutions may provide summer employment from succeeding years appropriations.
Federal Perkins Loan: Need based loan for undergraduates and graduate students. The loan is administered by the college financial aid office. The interest rate is 5%. Repayment begins nine months after completing school. Awards vary with annual loan limits: $3,000 undergraduate; $5,000 graduate student. Aggregate loan limits: $15,000 undergraduate; $30,000 graduate student. The minimum monthly payment is $40. Institutional matching is 25%. Loans may be forgiven in specific careers: Full-time special ed teachers; teachers of disabled children in public or non-profit schools; full-time teachers of math, science, foreign language; full-time nurses and medical technicians providing health care; full-time law enforcement or corrections officers; full-time staff members in Head Start program; full-time employees of non-profit family service agencies. Forbearance must be granted if borrowers debt burden is 20% of adjusted gross income.
Federal PLUS Loan: (Federal Parent Loan for Undergraduate Students). Not need based. Family income and assets do not reduce eligibility. Variable interest rates are based on 52-week treasury bills plus 3.1% with cap of 9%. Current rate to credit worthy is 8.98%. Parents may borrow up to full cost of education minus other aid (expected family contribution and unmet need). Parents with adverse credit may still qualify with a qualified co-borrower. A 3% origination fee and 1% guarantee fee are deducted from loan proceeds. The lender makes loan and payment begins 60 days after the last disbursement is made. The law states that you need not file a financial aid form to be eligible, however, some schools require you to do so.
Independent students are not eligible for PLUS Loan, but are eligible for additional funds through the Unsubsidized Stafford Loan Program.
Federal Consolidation Loan Program: The borrower is required to have $7,500 in loans outstanding to be eligible. The new consolidation repayment schedule follows:
* $7,500 – $9,999 12 years;
* $10,000 – $19,999 15 years;
* $20,000 – $39,999 20 years;
* $40,000 – $59,999 25 years;
* $60,000 or more 30 years.
A married couple, each having eligible student loans, can consolidate and be treated as if they were an individual.
Who Gets Financial Aid and How Much?
58% of full-time undergraduates and 68% of full-time graduate students receive some financial aid.
* Average Pell Award–$1,518 3,743,000 recipients
* Average SEOG Award–$559 991,000 recipients
* Average Stafford Loan–$3,061 5,278,000 recipients
* Average Work Study–$1,066 713,000 recipients
* Average Perkins Award $1,334 697,000 recipients
* Average PLUS Loan $4,531 342,000 recipients
Where does Financial Aid Come From?
Uncle Sam contributes the largest percentage of college aid. The figure was approximately 75% in 1993/94, but down from 81% in 1983/84. Try to get your share. 18% to 20% of all aid comes from colleges and independent sources. Work with the financial aid office. States contribute about 7% nationally.
Many colleges continue to have a short-fall of students. Financial aid packages are one way to attract better students. Shop around. Colleges will compete if they want you, especially against schools of similar academic ratings. The stronger the student, the more likely the chance of receiving a better financial aid package. Parents still pay the largest percent age of overall college costs, but the middle class and poorer households get a better break than previously.
Community Service Work Post Secondary Education
The Community Service Program involves the exchange of community service work in education, public health/safety or environment as partial to full payment or repayment for college or other post secondary education costs limited to $4,725 per year for two years. Participants will receive minimum wage stipends plus health and child care during the community service period. Currently, the bill has authorized spending levels of $300 million year one, $500 million year two and $700 million year three.
At the above funding levels, relatively few students will be able to take advantage of this program in the near future, but you should be aware of the possible opportunity.
Phase-in of Direct Colleges/Student Lending on Federal Loans
A Federal Student Loan Overhaul Program was passed by Congress to make the government the primary direct lender to students and parents through schools rather than going through banks and other commercial lenders. The Program began in 1994 and was designed to replace up to 60% of federal student loans made by 7,800 banks and thrifts currently lending over $15 billion to over 4 million students at 7,000 colleges and trade schools.
The Federal Direct Subsidized Stafford Loan, Federal Direct Unsubsidized Stafford Loan, and Federal Direct PLUS are included in the Direct Lending Program. From the borrowers point of view there are very few differences between the original process and the newer Direct Lending process. Interest rates and loan limits are basically the same. Repayment options may vary slightly.
This change could pose problems for the Federal Loan System. Banks argue that colleges and Department of Education are not able to handle the task. The Government believes it will save money now going to banks and provide lower rates and fees to student applicants. The 46 guaranty agencies that help administer the program along with Sallie Mae and the banks could all get hurt. Service could deteriorate and the consumer could be the loser. The Department of Education can draft colleges into the program. Large colleges may be able to handle it while small colleges could suffer. Time will tell. Be alert to the changes as they could prove advantageous.