Loans and Financial Aid

Major difference between private loans and federal loans

- Private loans require a credit check. - Interest rates on federal loans are fixed. The interest rates on private student loans can be variable or fixed and are usually higher. - Undergraduate borrowers who can demonstrate financial need could receive a federal subsidized loan, meaning the government pays the interest until you graduate. Private loans are never subsidized. You pay all the interest. - Federal loans offer flexible repayment options and loan forgiveness programs. Private loans have few repayment options and no loan forgiveness programs. - Federal loans don't have to be repaid until you graduate or drop below half-time status as a student. Many private loans ask for repayment while you're still in school.

Tuition

College tuition is the price for a full-time load of classes and does not include room and board, textbooks, or other fees. Colleges often calculate tuition based on the cost of one credit, or "unit." For example, a college may charge $350 per credit for an undergraduate class. Many times colleges will simplify this by providing a flat fee for tuition; you're often required to take a minimum amount of credits and cannot exceed a maximum amount of credits.

Room and Board

Everyone needs to sleep and eat. If you plan to do it on campus, those fees are part of your total cost of attendance.

FAFSA (Free Application for Federal Student Aid)

Filling out the FAFSA is one of the first steps in the financial aid process, and determines the amount that you or your family will be contributing to your post secondary education. The results of the FAFSA determine student grants, work-study, and loan amounts.

Loans

If scholarships and grants don't cover the entire cost of your tuition, you may have to take out a student loan to make up the difference.

Unsubsidized Stafford Loans

If you have an unsubsidized loan, you're responsible for paying off all the interest. In 2017, interest rates were fixed at 3.76% while you're in school, but payments are typically deferred — or postponed — until after you graduate. All students are eligible for this type of loan. Your annual Stafford Loan limit for unsubsidized loans ranges from $5,500 to $12,500, depending on your year in school and whether you are claimed as a dependent on someone's tax return. You are eligible for a larger loan if you are financially independent. If you're financially dependent but your parents are ineligible for Parent PLUS loans, you're permitted the same maximum loans as if you were independent.

Subsidized Stafford Loans

If your loan is subsidized, you won't be responsible for making any payments until after you graduate. Your interest rate typically should be 3.76% in 2017-2018 school year--interest rates vary from year to year but are typically close to Prime Rate. The government pays your interest for you while you're in school. Subsidized loans are reserved for students who can demonstrate a financial hardship. Most go to students whose families' annual income is less than $50,000. If you're an undergraduate, the maximum annual amount of a subsidized loan depends on your year in school. Freshmen can borrow up to $3,500, Sophomores $4,500, and Juniors and Seniors up to $5,500 in subsidized loans. You cannot accrue more than $23,000 in subsidized Stafford Loans throughout your undergraduate studies.

Stafford Loans

Money for these loans comes directly from the federal government in a program called the Federal Direct Student Loan Program (FDSLP). There are two types of Stafford Loans: subsidized and unsubsidized. The type helps determine your interest rate and maximum loan amount.

Private Sector Jobs

Often do place value, sometimes A LOT of value on the university you attend. For example, an engineering degree from MIT, Harvey Mudd College, or CALTECH will get you a starting salary of: MIT 81,500 Harvey Mudd 81,00 CalTech 78,800 However, the average starting salary for engineering is 59,000. For the private sector, university prestige can make a huge difference in starting pay. It may be worth it to take on more debt if the pay is much higher.

Plus Loan

Parent PLUS loans are for parents of dependent undergraduate students, and Grad PLUS loans are for graduate students themselves. As with other education loans, PLUS loans are funded directly by the federal government. But unlike traditional student loans, they have no maximum amounts and can be used to cover any education costs not covered by other financial aid. They have a fixed interest rate of 7% for loans made before July 2018. The interest rate is higher than Stafford Loans which are typically around Prime Rate. PLUS loans are only available to the biological or adoptive parents of undergraduate college students or for students enrolled in graduate or professional schools. That means legal guardians, foster parents. grandparents, aunts, uncles and other relatives aren't eligible to apply for a loan to benefit the student. Unlike most conventional loans, PLUS loans don't set minimum credit scores or debt-to-income ratio for approval. Nevertheless, borrowers need to have solid credit histories. Students must attend school at least half time to receive a loan. In addition, male students must be registered with Selective Service and students and parents must be U.S. citizens, permanent residents or eligible non-citizens. Students whose parents are rejected for a PLUS loan become eligible for unsubsidized direct loans. Limits are placed on how much the student can borrow while pursuing a degree.

Private Loans

Private education loans more closely resemble personal loans than student and parent loans. The loans are granted by credit unions and banks, and your eligibility and interest rate depend on your credit history. These should be considered an option of last resort.

Public Sector Jobs

Tend to place much less value on the prestige of the university you attend, so it's usually best to attend the school that offers the least expense after grants and scholarships.

Maximum Recommended Loan Amounts

The Consumer Financial Protection Bureau recommends you borrow no more than your first year's salary. I would personally recommend you lower that amount if you are going into a field where pay tends to not increase much from year to year. Most public service and government jobs would fall into this category.

Work-study / Work Award

The Federal Work Study program provides funds to eligible students (see FAFSA above) for part-time employment to help finance the costs of postsecondary education. In most cases, the school or employer has to pay up to 50 percent of the student's wages, with the federal government covering the rest. You could be employed by the college itself; or by a federal, state, or local public agency; a private nonprofit organization; or a private for-profit organization. NOTE - if you find an employer who offers tuition reimbursement for part-time work, you may be better off using that as an option. Work Study jobs ARE NOT GUARANTEED - you have to apply and find a job. Benefits -usually a ridiculously easy job that gives you time to study.

Perkins Loan

The federal Perkins loan program was not renewed in 2017. Any information you read online about the Perkins loan program does not apply to you; the program is closed to new applicants. It could be reopened, but this would require new legislation to be proposed and approved.

Federal Student Aid

The largest form of student aid in the country, federal aid programs come in the form of government grants, loans, and work-study assistance. You must fill out the FAFSA to gain access to these.

Scholarships

There really isn't much difference between a scholarship and a grant, though the general consensus is that scholarships are primarily awarded for academic merit (good grades) or for something you have accomplished (volunteer work or a specific project); however, there are many need-based scholarships out there, as well. Like grants, scholarships don't have to be repaid.

Financial Need

This is the amount of a student's total cost of attendance that isn't covered by the expected family contribution or outside grants and scholarships. A student must demonstrate financial need via the FAFSA to be eligible for need-based financial assistance programs. At many colleges, family income below 50,000 counts as low income, 30,000 definitely counts as low income.

Tuition Reimbursement

Tuition reimbursement, also sometimes called "tuition assistance," is increasing in popularity. Some employers will refund you the cost of your tuition if you're studying a work-related area. Tuition reimbursement can cover as little as one or two courses, or can cover up to the entire cost of your education. When picking a part-time job prior to college, look for an employer that has this program. Be careful to read the fine print--some companies only offer tuition reimbursement for a specific online university or for a major related to their business. It usually takes a year of work to qualify for tuition reimbursement. Some nationwide employers will also allow you to transfer your job from Burleson if you move for university. This guarantees you a job in your new city and the same tuition reimbursement status.

Maximum Federal Loan Amounts

Undergraduates can only borrow $57,500 in total and no more than $23,000 of that can be a subsidized loan.

Grants

Unlike loans, grants—which can come from the state or federal government, from the college itself, or from private sources—provide money for college that doesn't have to be paid back. Many grants determine eligibility by looking at your FAFSA results.