Vicki Beam: College Funding: Grants, Loans, and Work-Study | Business
Families planning their Spring Break trip can also plan how to pay for their college education. To date, many high school students have received their financial aid grant letters for the 2021-2022 school year. The award letter usually includes all the assistance offered – including scholarships, grants, work studies, and loans.
Most students and parents are just interested in free money – however, some students may only receive loan offers as part of their financial aid. Many families are surprised to learn that student and parent loans are types of financial assistance. Help letters are rarely in the same format at every school, making it difficult to understand and compare offers.
Gift aid comes in the form of a scholarship or grant – and is free money that reduces the financial obligation. Keep in mind that some schools will reduce the aid they offer when your student wins private scholarships, others will not change their offer.
It is important to know if your aid will be reduced if you have private scholarships – it could make a big difference in the net cost of college. Many of the local exchanges will not announce the winners until April or May.
Study work is a way for students to earn money to help offset the cost of college. The amount earned is paid directly to the student and is generally used for living expenses. Not all schools participate in the study of work and jobs are limited. It is important to accept the price early and apply for jobs as soon as they are posted. Most students prefer to have a job related to their study program.
Income from work studies is not counted in the FAFSA for subsequent years (free application for federal student aid).
There are several forms of loans available to students and their parents. After the FAFSA is completed, students will be offered a Direct Stafford Loan – offered by the federal government. Freshmen can borrow $ 5,500, sophomores are offered $ 6,500, and juniors and seniors are eligible for $ 7,500 each year.
Each student can borrow a total of $ 31,000 for their undergraduate degree – so there is $ 4,000 available if it takes more than four years to graduate. The current Stafford loan interest rate is 2.75% – and 2020-2021 loan rates have yet to be announced. There is also a loan fee that is deducted from the disbursement – the current fee is 1.057 percent.
There is currently an automatic 0% temporary interest rate and administrative forbearance following the COVID-19 emergency for students who currently have direct loans. To provide relief for student borrowers during the COVID-19 emergency, interest is temporarily set at 0% on federal student loans.
Additionally, federal student loan borrowers have been automatically placed on administrative forbearance, allowing you to temporarily stop making your monthly loan payments. This 0% interest and the suspension of payments will last from March 13, 2020 until at least September 30, 2021, but you can still make payments if you wish.
Students may also be eligible for private loans offered by a bank, credit union, state agency, or school. The lender may require an established credit report, and a student often needs a co-signer.
Private loans generally do not offer the same benefits as federal loans – including deferral, consolidation, and loan cancellation.
The Parent Plus loan is available to parents once the FAFSA has been completed. The Plus loan is credit-based – so a student may be eligible to borrow additional unsubsidized loans if their parents are not approved for a Plus loan.
The maximum amount available to borrow is the total cost of participation less any other assistance granted. The current interest rate is 5.3%. The loan fee for Loan Plus is currently 4.228%.
Once you have received your assistance award letters, it is important to compare them and determine the total amount of your personal expenses.
Now may be the time to become a negotiator. Contact the school of your choice if you received a better offer from another school. They may re-evaluate your price package.
It is also important to communicate to the school any changes in your financial situation, especially since the financial aid applications used the 2019 tax returns. Many families have been financially affected by COVID.
May 1 is the deadline for committing to your school – so there is still plenty of time to determine which school is the most affordable for you.
Take advantage of Michigan College Planning College Planning Workshops to learn more about how to reduce stress, save time, and potentially money during the college planning process.
The workshops are informative and include steps you can take now to make sure you fully understand the cost of attending and how you can afford to attend college. If you are unable to attend a workshop, please feel free to call Michigan College Planning with your questions.