There are two types of `Financial Aid' - Merit Based and Need Based.
`Merit Based' is awarded based on the student's academic, athletic, musical or artistic prowess. `Need Based' is based on the financial condition of the student and family.
The FAFSA (Free Application for Federal Student Aid) form is being filled out by parents and students as we speak. The form asks for financial information, much of which comes from the income tax forms.( www.fafsa.ed.gov )
From all the information the FAFSA comes up with a result called "EFC" which is the "Estimated Family Contribution". This is what they calculate the family can afford to pay (not necessarily wants to pay) for a college education.
What Federal Programs are Common?
Much of it is in the form of loans
· Stafford Loan - most popular. Current interest is fixed at 3.86% for undergraduates and 5.41% for grad school. Some are subsidized which means the government pays the interest while the student is still in college.
· Perkins Loan - available to those with highest need. Rate is fixed at 5%.
· PLUS Loan - fixed at 6.41%. A separate application is needed and it is loaned to the parent and student.
What About Aid from Colleges?
They only have a limited amount to give each year so it is best to apply early. The colleges allow for special circumstances, so be sure to let them know if a parent just lost a job or some other item is different from last year.
Be sure to compare awards. Some award letters look great but contain loans that must be repaid or assume the student will work on campus for many hours.
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