Paying the Bill : What Goes into a Financial Aid Package?

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The financial aid that a student typically receives from a college consists of different kinds of assistance from federal, state, and college-based resources. The particular combination you will receive to meet your need is known as your financial aid package. Need-based financial aid packages usually have three parts. A typical package has grant funds, work-study funding, and student loans. Grants are considered gift aid, while work-study funding and student loans are often referred to as self-help.

Grants

Grants are awards you don’t have to repay. They are tax-free when used to cover the cost of tuition, fees, books, and supplies. There are no special conditions to receiving a grant other than remaining in good academic standing. (Grants can also be awarded for reasons other than need). Need-based grants come from three primary sources: the federal government, state governments, and college resources. Currently, the federal government has four major need-based grant programs:

• Pell Grants ranged from $890 to $4,731 a year for 2008–09 depending on need. For 2009–10, the maximum award will total $5,350. In recent years, about 90 percent of Pell Grant recipients have had family incomes below $40,000.
• Federal Supplemental Educational Opportunity Grants (FSEOG), currently ranging from $100 to $4,000 per year, are designed for students with exceptionally high need. Priority is given to Pell Grant recipients.
• Academic Competitiveness Grants (ACG) are additional grant money for Pell Grant recipients who have completed a “rigorous high school curriculum.” The grant is $750 for freshmen and $1,300 for sophomores (as long as they maintain at least a 3.0 GPA).
• National Science and Mathematics Access to Retain Talent Grants (SMART) are additional grants of $4,000 per year awarded to Pell Grant recipients who are juniors or seniors, have a cumulative GPA of at least a 3.0, and are majoring in engineering, mathematics, physical science, biological science, computer science, technology, or certain limited “critical foreign languages.”

Work-Study

Work-study programs provide part-time jobs to students who can then apply their earnings to tuition or living expenses. The earnings are not included in the EFC calculation. Work-study jobs are usually on or near campus and vary in their time commitment. Most work-study programs are subsidized by the federal government, which provides matching funds to colleges to pay for them. The federal program encourages work that performs a community service and work related to a student’s area of study, although not all jobs meet one of those criteria. Students are paid at least the minimum wage, and freshmen typically work about ten hours a week when classes are in session, a load that is usually manageable.

Loans

Loans are borrowed money that must be repaid with interest. To qualify as financial aid, a loan must have an interest rate below the current commercial rate and have favorable repayment terms. Financial aid loans may be taken out by students or parents, and may be guaranteed and often subsidized by the federal or state government. When a loan is subsidized, interest charges and repayment do not begin until six months after the student graduates, leaves school, or drops below half-time enrollment. The repayment period, once it starts, is usually ten years. There are several federal loan programs: