Federal Student Aid

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Federal Student Aid

If you're enrolled in a two or four-year public or private institution, a career school, or a trade school, you may be eligible for federal student aid. Nearly all federal aid is need-based, and covers school expenses such as tuition and fees, books and supplies, room and board, and even your transportation expenses to school and back home.

Types of Federal Student Aid

In general, there are three types of student aid offered through the federal government:

Work Study Programs
Federal Loan Programs
Federal Grants

Additional Resources

In this publication, we're going to talk about each of these programs, so that you understand the differences between each type of aid, and the benefits each program has to offer.

Federal Work Study

Work study is self explanatory; basically the student would be paid to work around campus, with the money earned going towards educational expenses. Work study is not necessarily the same concept as college internships. Students need to be aware of how they get paid under these programs.

For example, some schools will take the money earned from a work study program and apply it directly to tuition cost. Others may direct the money into an account, which is then used to pay for the student's expenses.

Federal Student Loans

Just like a mortgage, a student loan is borrowed money that must be repaid with interest. Federal student aid, in the form of student loans, is normally part of the following three programs:

Federal Stafford Loans

Federal Stafford Loans are made available to students as part of two loan programs: the William D. Ford Federal Direct Loan Program (Direct Loan), and the Federal Family Education Loan (FFEL) Program. There are two forms of Stafford loans, only one of which is based on demonstrated financial need:

Subsidized Stafford Loans - This type of loan is awarded based on financial need, and no interest is charged until repayment of the loan begins.
Unsubsidized Stafford Loans - This loan is not based on demonstrated financial need, and interest accumulates while the student is still in school.

Federal PLUS Loans

Federal PLUS Loans are unsubsidized student loans that are made to parents. Once again, the Federal PLUS Loan program comes in two forms:

Direct PLUS Loan - The student's parents must complete a Direct PLUS Loan application, and promissory note, to determine eligibility for this loan. This application can be obtained from the school's financial aid office.
FFEL PLUS Loan - The student's parents must complete a PLUS Loan application to determine eligibility for this loan. Again, this application can be obtained from the school's financial aid office.

Federal Perkins Loans

Finally, we have Federal Perkins Loans, which are low-interest loans available to both undergraduate and graduate students with demonstrated financial need. With Perkins Loans, repayment is made to the school, not the Department of Education or the federal government.

Depending on when the student applies, the level of need that is demonstrated, and the level of the school's funding, the student may be able to:

Borrow up to $5,500 for each year of undergraduate study. The total amount the student can borrow as an undergraduate is $27,500.
Borrow up to $8,000 for each year of graduate or professional study. The total amount a student can borrow under this program is $60,000. This also includes any Federal Perkins Loans the student may have borrowed as an undergraduate.

Federal Grant Programs

Grants are a form of federal student aid that does not have to be repaid. Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOG) range from about $100 to $5,500. In most situations, grants are targeted to the undergraduate student, and like loans, the size of the grant is determined by need and enrollment status. These programs also take into consideration the cost of attendance.

There are a total of around ten requirements a student must meet to be eligible for federal student aid, but the three most important requirements are:

U.S. citizenship, with a valid Social Security number
Enrollment in an eligible program as a student seeking a degree, or certificate. If you're a male between the ages of 18 and 25, you also need to enroll with the Selective Service
Finally, the student must have a General Education Development certificate, or have earned a high school diploma

Applying for Federal Student Aid

There are three steps to follow when applying for Federal Student Aid:

First you must complete the Free Application for Federal Student Aid (FAFSA). You'll want to apply as early as possible because some states, and institutions of higher education, set deadlines very early in the calendar year. You can find a FAFSA online at http://www.studentaid.ed.gov/.
One to four weeks after you've submitted your FAFSA, the government will send a Student Aid Report or SAR. The SAR seeks to confirm the information reported on the FAFSA, and will list your Expected Family Contribution or EFC. The financial aid administrators at the schools you're applying to will use the EFC to determine your qualification for federal aid.
The final step in the process is a conversation with the financial aid administrators at the schools you're considering attending. The administrator will review your SAR, and prepare a formal letter that outlines the size, and forms, of federal financial aid that the school will offer to the student and parents. This document is known as the Award Letter.

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