When your child is ready for college, will you be ready to pay for it?
That information determines whether your child will qualify for federally funded loans and the amount you're expected to contribute to the annual cost of the education. You get a copy of the report, and so does each of the colleges to which your child applies.
You may have to file a separate application for state-sponsored aid, and some colleges require individual financial aid applications in addition to the federal form.
FACTORS THAT DETERMINE AID ELIGIBILITY:
- Family income
- Family's savings and investments
- Student's savings and investments
- Number of other students in the family also paying tuition
- Family expenses, both ordinary and unusual
FACTORS THAT INFLUENCE WHAT YOU GET:
- Financial resources of the college or university
- Needs of other students
- Special interest in your child
FOUR YEARS' WORTH
When a college offers a financial aid package, it's usually for one year at a time. The amount can be - and often is - less after the first year, even if the student does well. Ask the college to make a four-year commitment as long as your child meets academic requirements. You've got nothing to lose. Colleges are sometimes willing to negotiate.
LINING UP THE MONEY
The US Department of Education is the most important source of education loans. Student loans are made directly to applicants who complete the Free Application for Federal Student Aid (FAFSA), and may be either subsidized or unsubsidized. Subsidized loans require demonstration of financial need and offer lower rates. In addition, the student is not responsible for interest that accrues while he or she is enrolled at least half-time. Unsubsidized loans are not linked to financial need but have higher interest rates. Borrowers are responsible for all interest that accrues. There is also a Direct Loan program for parents, known as PLUS. For more information, go to www.studentaid.ed.gov.
SPREADING THE PAIN
- Unsubsidized loans are available regardless of family income, but subsidized loan awards are available if your family's income is below an amount that Congress sets
- Loans are provided by the federal government's Direct Loan program
- Interest rates are capped
- Repayment begins immediately
- Total loan available is equal to cost of college minus financial aid
- Interest on loan is usually tax deductible
- Can typically borrow up to 80% of home equity
- Information about college costs and financial aid is available in libraries, high school guidance offices, and online
- Financial aid offices publicize their own programs as well as government loans and work/study programs
- The US Department of Education has regional offices and a website (www.ed.gov) for information on scholarships, grants, and work programs
- High school guidance offices should know about local scholarships, and your employer, service club, or religious organization will know about the ones they sponsor