Managing Student Loans

Each year many students sell themselves short by assuming that the college education they aspire to receive is prohibitively expensive. Other families make the basic error of simply not completing the FAFSA. This determines if the student will be entitled to any kind of financial aid, yet families may presume their income precludes aid and fail to submit the paperwork.

College financial aid is determined by the difference between the costs of attending college, and the expected family contribution. Where demonstrated financial need is established financial aid is available, providing that the parents of a dependent student are willing to provide details of their finances. Financial aid can vary greatly between colleges which make their own assessments, and often the top colleges represent the best deals due to the amount of financial aid awarded.

Financial aid is made up of various components, primarily grants, scholarships, loans and work study. The information on the FAFSA determines if the student is eligible for any aid in the form of federal grants, which are means based. Additionally individual states offer a variety of grants which tend to be awarded to student’s studying in state.

However there are a number of states which offer grants to student’s studying in other states. The individual colleges highlight these states in their information on state grants or the information can be obtained directly from the states education department. Grants are disbursed directly to the college, to be applied to tuition and living costs, rather than directly to the student.

In the majority of instances where a student qualifies for some kind of financial aid, they are awarded federal work study as a portion of their aid. This allows students to earn through part time work whilst in college, and the funds earned go directly to the student to help with the costs of living.

The amount earned is taxable income, and most colleges have a limit on how much a student is allowed to earn in each college year. Students awarded federal work study are not obligated to take it, but if they choose not to they will need to replace the amount of the aid award with other funding, such as loans.

Outside scholarships will be taken into consideration if a student is entitled to financial aid. They cannot be used to replace the expected family contribution but can be used to replace federal work study or a student’s own expected contribution, if colleges stipulate that a certain figure must be provided as self help. Generally outside scholarships will replace a portion of any institutional aid which a student may be eligible to receive, or student loans.

Federal student loans are actually considered to be financial aid even though borrowing and repayment are inevitable. Some federal loans are subsidized by the government which assumes the interest until the student has graduated. Increasingly some colleges are dispensing with student loans as part of their financial aid packages, and some have made a commitment to replace student loans with institutional grants and scholarships.

Institutional aid is either needs based or merit based. The Ivy League colleges have replaced all merit aid with needs based aid and those qualifying for financial aid can be offered extremely generous aid from these colleges. Some have even removed the need for the expected family contribution where the family income is low, thus demonstrating their total commitment to needs blind admissions.

This presents a wonderful opportunity for students to graduate without student loan debt and thus pursue post graduate education without the pressure of shouldering loans from undergraduate days.

The requirement for student self help varies between colleges with some expecting students to contribute a greater proportion of student earnings from summer jobs than others.

Some colleges, notably Berea College and the College of Ozarks, offer financial aid for all students in the form of work throughout the year in return for free tuition.

It should never be assumed that students will not be eligible for financial aid as many factors are used to determine the awards. Family income is the key component, but family size and the number of other children receiving a college education are taken into consideration. Depending on the individual college policies assets are evaluated in different ways, and some colleges do consider medical and other expenses.

No matter what the family circumstances, it is possible for a student who is academically qualified to consider the most expensive colleges to gain admittance and receive generous financial aid. A college should not be ruled out because of its price tag until its financial aid packages have been assessed.