Financial Aid 101: The glossary you’ll need (Part 1)
By Lee Shulman Bierer Tribune News Service 30 Jan
Students want to know if they’ll be accepted, and parents want to know how they’re going to pay for college.
College has always been expensive but a generation or two ago, the cost of attendance wasn’t as close as it is now to many parents’ annual salary. College prices keep escalating and so talking about how to afford college has become a necessary dinner table conversation.
Figuring out how much a college costs isn’t so simple. Yes, every college posts its “Cost of Attendance” – the sum of its tuition, room/board and student fees – on their website. But, the truth is most families don’t pay “retail.” The sticker price, much like airline tickets, can vary widely. Some students earn scholarships, many receive grants or work-study employment that defrays these costs and many more are offered loans through the college or university.
The important thing is to determine your family’s debt tolerance. Exactly how much money are you as parents willing to borrow to finance your child’s education? How much debt should they be taking on? What are their employment expectations after graduation when this debt will become due?
Many families want their children to have some “skin in the game” i.e., take some measure of financial responsibility for their education, in the belief that this will make them take their classes and grades more seriously.
Paying for college is difficult enough. The fact that financial aid offices have a language all their own doesn’t make it any easier.
Today’s column (A-C) and my columns for the next several weeks are basic financial aid primers. I suggest reviewing the following glossary of terms before you complete the FAFSA.
One of my favorite books on this subject is the annualPaying for College Without Going Brokeby Kalman Chany and The Princeton Review.The Complete Idiot’s Guide for Financial Aid for College,College Financial Aid for Dummiesand Princeton Review’sColleges that Pay You Backare also great resources.
Accrued interest:Interest on a loan that is not paid during the period of the loan but accumulates and is paid in installments at a later time.
Aid package/Award letter:A combination of financial aid (scholarships, grants, loans, and/or work-study) determined by the financial aid office of a college.
Alternative loan program (ALP):Loans used to supplement the fund students need to attend college.
Base year:For need-analysis purposes, the base year is the calendar year preceding the award year. (Award year is July 1 – June 30)
Co-borrower:A person who signs a promissory note in addition to the borrower and is responsible for the obligation if the borrower does not pay.
College Aid Sources for Higher Education:A free financial aid service offered bySallie Mae.
College Scholarship Service (CSS):This is the customized financial aid application form required at certain colleges to determine eligibility for institutional aid. An arm of theCollege Boardand one of the agencies that processes financial aid information and applications. The CSS PROFILE considers: home ownership, K-12 private school tuition, regional cost-of-living differences, etc.
Cost of Attendance (COA):The total cost of attending a post-secondary institution for one academic year.
Financial Aid 101: The glossary you’ll need (Part 2)
LEE SHULMAN BIERER Tribune News Service February 6, 2018
Last week, I started putting together afinancial aid primerfor families interested in the intricacies involved in paying for college. While many students won’t have to pay full sticker price for their college education, most families will need to evaluate the practicality of taking out loans and graduating with debt.
It’s 2018 and Americans are more burdened by student loan debt than ever. According toStudent Loan Hero, “Americans owe over $1.48 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year.”
With numbers that high, it’s incumbent upon everyone to understand the relative value of their education and have an open discussion about the practicality of how a student’s education will provide a return on this investment.
Deferment of a loan:A period of postponement during which the repayment of loan principal is suspended because the borrower meets one or more deferment requirements.
Demonstrated need:The difference between your Expected Family Contribution (see below) and the total cost of attendance.
Direct PLUS loan:Federal loans available to parents or to graduate/professional students. The interest rate is higher than other loans available to undergraduate students, and borrowing limits are much higher. They’re also frequently called Parent PLUS loans, and they’re the only federal student loans that require a credit check.
Expected Family Contribution (EFC):A formula that estimates how much of a college’s price tag you can, in theory at least, afford to pay. The FAFSA formula takes several factors into account to determine a family’s EFC: annual income, certain assets, family size, parental age (the older the parent the larger the allocation toward retirement) and reasonable non-discretionary expenses, as well as the number of students in the household attending college currently and/or who will be attending college in the near future.
The EFC is a need-analysis, i.e., the formula used to determine a student’s need for financial assistance for college expenses.
Your EFC will be calculated once you have completed the FAFSA. It’s important to note that most colleges do not make up the difference between your EFC and the Cost of Attendance with grants. Loans are frequently part of the financial package. If your EFC is greater than the amount you have saved or greater than what you had planned to spend, you have lots of company.
FAFSA:Free Application for Federal Student Aid.Everyone, repeat, everyone should complete this form. It is simple, and you don’t need to hire anyone to fill it out for you. The FAFSA will ask questions about your income and assets, not including retirement plans; your child’s income and assets in their name; the size of your household and the number of children in the household attending college.
FAFSA forecaster:Filling out theFAFSA forecasterallows you to begin exploring financial aid opportunities such as grants and scholarships before a student’s senior year in high school. After completing these forms, you can transition to the FAFSA form, and it will automatically populate with your information.
Financial Aid 101: The glossary you’ll need (Part 3)
LEE SHULMAN BIERER Tribune News Service Feb. 12, 2018
Every parent’s goal is to pay the least amount of money for the best quality education for their children. Understanding the alphabet soup of financial aid and knowing how to maximize your financial aid eligibility should be your first step in the process.
Kal Chany, author of “Paying for College Without Going Broke,” says, “The most aid goes to those who are savviest about applying for it, not necessarily those who are neediest.”
Below is the final installment of this year’s financial aid glossary:
Federal Direct Loan programs:Four types of loans to student and parent borrowers:
1. Subsidized Stafford loans:Federally financed low-interest loans are only for undergraduate students and are awarded based on financial need. Interest doesn’t start accruing until after leaving college. Also known as a direct subsidized loan, these federal loans have slightly better terms than the similar-sounding unsubsidized Stafford loans.
2. Unsubsidized Stafford loans:Also known as a direct unsubsidized loan, these federal loans are available to undergraduate or graduate students, and there is no financial need requirement, so anyone can use them. Historically, interest rates on unsubsidized loans were slightly higher than those for subsidized loans, though the rates have been equal in recent years. Still, unlike subsidized loans, interest on unsubsidized loans start adding up from the day you take out the loan.
3. PLUS loans:Loans for parents borrowing for the education of their dependents
4. Consolidation loans:Loans arranged through the U.S. Department of Education’s Direct Loan Servicing Center designed to combine Title IV education loans into a single loan with one monthly payment.
Grants/gift/grant aid/scholarships:Financial aid, generally in the form of a grant or scholarship, that the student is not required to repay.
Merit aid/non-need-based aid:This is money awarded without regard to financial need. It can be based on academic achievement (grades and test scores), artistic or athletic abilities, leadership skills, community service or any other characteristics. These are generally scholarships that do not need to be repaid and come from private organizations, foundations, your state or funded directly by the college or university.
Net price:Theamount you’ll actually pay for a collegeafter tuition discounts, scholarships and grants are accounted for. For private colleges, this is usually far less that the advertised price. Colleges will tell you that their net price is the cost of attendance minus grants or scholarships AND loans, so it makes the price more attractive. However, loans, as we know, must be repaid, so a more accurate net price is a simple cost of attendance minus grants or scholarships.
Net price calculator
A net price calculator is on every college website – typically under either the financial aid or admissions tabs. The net price calculator is a relatively new planning tool. Although it is not perfect, it will provide families with a fairly reliable estimate of what your net price will be at each college or university on your list.
Pell grant:A need-based grant program for undergraduate students
Perkins Loan:Federal loans that are reserved for low-income students. The interest rate is relatively low, and the time before a first payment is due is longer than with other loan programs.
Student Aid Report (SAR):A report sent to a student by the federal government summarizing financial and other information reported on the FAFSA, includes the Expected Family Contribution (EFC).
Tax credit:The amount subtracted from your federal income taxes dollar-for-dollar for the cost of education. Taxes must be owed for the given tax year, and a tax return must be filed to receive any tax credit.
Uniform Gifts to Minors Act:Legislation that introduced a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.
Work study:A program in which students are given a job on campus to help pay for college bills. There’s the Federal Work Study program, and some colleges also have their own programs.
Bierer is an independent college adviser based in Charlotte. Send questions to:;www.collegeadmissionsstrategies.com