personal finance chapter 3

The SECOND form of financial aid you should accept is....

Work-Study

Jackie is creating a budget for her freshman year of college and thinks she can use the same budget for the next three years of her college career. What do you tell her?

"This is a bad idea, because your income and expenses in each year will fluctuate. Your budget needs to reflect these annual changes."

Which of the following statements are FALSE about the value of a college education? (Check all that apply)

- A high school graduate can expect to earn about the same as a college graduate. - A college graduate can expect to earn, on average, about $40,000 more than a high school graduate over a career. - College is only valuable if you want to increase how much you earn.

Which of the following statements about applying for grants and scholarships is False? (Check all that apply)

- Colleges only offer merit-based (based on your accomplishments) scholarships and grants. - Pell Grants are awarded based on a student's academic performance. - While the FAFSA is required for federal loans or grants, you don't need to complete it for university, community, or professionally sponsored scholarships.

While researching college scholarships to apply for, you see an ad that says, "Enter a few pieces of information, pay $39.99 per month, and we guarantee to win you a scholarship. You don't even have to write an essay! Sign up today with just your name, social security number, and an email address!" How should you proceed?

Don't sign up, because you should not pay money to win scholarships, and you should never enter your social security number into unknown websites.

True or False: In terms of student loans, you should apply for and accept private student loans instead of federal student loans.

False

True or False: You should borrow all of the financial aid your college offers you in your financial aid offer, even if you don't need it all.

False

True or False: You should borrow as much money as you can through private student loans, and then take out federal student loans.

False

Which of the following is an advantage of a Federal Student Loan over a Private Student Loan?

Federal student loans generally have more flexible and affordable repayment options compared to private loans.

Sandra is in the second semester of her freshman year and is revisiting her budget to see if there are any areas she can reduce spending in to save more money. Sandra lives on campus, has a roommate, is signed up for the basic meal plan, and lives about a 2 hour car ride away from her family. Which of the following would be the most realistic option for Sandra to follow in her second semester to maximize her savings?

Give her used car back to her family so that she doesn't have to pay $80/month for gas, $102/month for car insurance, and other auto and maintenance fees. Although it is less convenient, she can take public transportation whenever she wants to go home.

Janet's family earns about $60,000 per year. She has been accepted to State U and Greenlawn College and is comparing their financial aid packages. State U has a sticker price of $28,000 and a net price of $12,000. Greenlawn College has a sticker price of $60,000 and a net price of $9,000. Which statement below is TRUE?

Greenlawn College is providing Janelle with more grants and scholarships.

When Eddie receives his Student Aid Report, it lists an Expected Family Contribution (EFC) of $9000 for the year. His family had only budgeted to give him $2000, so they are $7000 short. Which of the following is/are option(s) that Eddie and his family can take? I) Eddie can call the financial aid office, explain the situation, and ask them to review his materials again. II) His parents can take out a federal Direct PLUS Loan for the other $7000. III) Eddie can apply for scholarships or grants from other organizations besides the college. IV) His parents can take out a federal student loan in their name for the other $7,000.

I, II, III only

Kaden's tuition, room & board, and fees for freshman year total $26,000. Kaden has estimated an additional $2,000 for other expenses. Using scholarships, grants, and federal student loans, his financial aid package is $30,000. What option below is both realistic and financially responsible?

Kaden should accept only what he needs from his financial aid award. If he decides to accept less, the best option for him is to decrease the amount he is taking out in federal student loans.

Anita is about to start her first year of college. She knows that while it may seem early, it's a good idea to think about ways she can minimize her total student loan debt while she is still in college. Which of the following steps will be MOST effective in helping her minimize her student loan debt and prepare for loan repayment once she graduates?

Make as many interest payments as possible while she is still in school to minimize her total debt after graduation.

If you are struggling to make your student loan payment, which of the following is the BEST course of action to take?

Notify her student loan servicer immediately so she can discuss what options are available to her.

True or False: When discussing the return on investment of paying for college, the return on investment is your increased earnings from attending college.

True

Which of the following is NOT needed when filling out your FAFSA (Free Application for Federal Student Aid) online?

Proof of Employment

The FIRST form of financial aid you should accept is...

Scholarships and Grants

If you do not choose a specific repayment plan for your federal student loans, you are automatically put on the __________________________________, which puts you on the track to pay back your loans in ______ years. If you are having trouble making your student loan payments, you can change the repayment plan you have. Or, if you need to, you can apply to STOP making payments towards your loans for a specific amount of time through two programs: deferment and forbearance. ___________________ is preferable to ___________________ because interest does not accrue on your subsidized loans.

Standard Repayment Plan, 10, Deferment, Forbearance

What is the formula used to calculate net price of a college?

Sticker Price - (Grants + Scholarships)

What is the relationship between the FAFSA, a Student Aid Report (SAR), and a Financial Aid Package?

The answers you submitted in your FAFSA are reported in your SAR. Schools then use your SAR to create a Financial Aid Package for you.

If Tom accepts all of the aid he is being offered in his financial aid award, when and how can he expect to receive the money?

The funds will first go to the college to cover Tom's total cost of attendance. If there are any leftover funds, they will go to Tom into an account he specifies, such as a bank account.

True or False: For a subsidized federal student loan, the federal government makes the interest payments on me while you are in college, and you make the interest payments on me after you graduate.

True

Tom just received the following financial aid award letter from a school. Which of the following statements is TRUE?

After taking grants and loans into account, Tom still needs to come up with $1,510 to cover the cost of attendance.

Shelley has $30,000 of federal student loan debt and chooses to make a monthly payment of $200. Bob also has $30,000 in federal student loan debt and chooses to make a monthly payment of $350. Assuming both loans carry the same interest rate, which of the following statements is TRUE?

Bob will pay LESS in interest over the term of his loan.

True or False: When investing in a college education, the investment is the cost of your education and the time spent pursuing your degree.

True

True or False: When making your student loan payment, your monthly loan payment is first applied to any accrued interest then the remaining portion of the payment is then allocated towards paying down the principal balance of the loan.

True

True or False: You should generally limit your borrowing to what you expect to earn as a starting salary when you graduate from college, and avoid private student loans.

True