29 Mar Understand the Different Types of Financial Aid
April is a huge time of year for many families of high school seniors. For those who have not already made up their minds, May 1 looms as the final decision day. By then, students will definitely have to opt for a college where they plan to spend the next four years. They are considering what they gleaned from the campus visit, thinking about the major they want to pursue, and feeling just a little giddy about the whole process.
Although it can be fun to contemplate the next big step in life, one thing students and parents must do is carefully evaluate the financial aid offers from each college before making that final decision. Review the letters you received from each school and make sure you really comprehend what is being offered. It helps to understand the different types of financial aid:
• Who is providing the aid? Financial support for a college education can be provided by the federal government, your state government, the college itself, or an outside private organization. Each might have specific requirements and criteria for making their award. Be sure you understand who is providing the aid, how many years it is available, and what the student has to do to continue receiving the aid.
• What type of aid is it? At first glance, it might appear that financial aid has covered all the costs of a particular college, and it seems like an obvious choice to make. But, look closely at the types of aid listed. If something is referred to as a scholarship or grant, then that money is provided outright without any expectation of being repaid. As long as the student meets the award’s criteria, that money should be available to help pay college costs. If you see something that is listed as work-study, that indicates the student will be required to work a certain number of hours to help cover expenses. That is not a bad thing, but it could cause time management problems for students who have trouble juggling their schedules.
• Is it a student loan? If it is, you will be expected to pay it back upon graduation or sooner, if you fail to meet academic requirements. The Federal Direct Loan Program includes Direct Subsidized Loans, Direct Unsubsidized Loans and Direct PLUS Loans. In cases of extreme financial need, you might also be eligible to participate in the Federal Perkins Loan Program. Estimate your earning power upon graduation and make sure you will be able to repay these loans, as the federal government is very tenacious in pursuing former students who still owe money.
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