Remember all those times in the last few years when you wanted to kick your parents out of the house and just live your own life? Well guess what? You’re on your own now, so now what? Here’s a piece of motherly advice. Don’t screw up! The thing you are now messing with is your life. So let’s talk about one of the most important decisions, one of the first decisions you are going to make: your college or technical school education and how to finance it.
The first item of business is deciding if right now is the right time for you to go to college. If you don’t have any idea what you want to do with your life, and just want to party, this might not be the best time for you to go to school. First-time college students are notorious for dropping out in the middle of the first or second semester. You don’t want to do that. Why not? Because those who drop out in few weeks or months generally end up owing for all or part of the loan funds they received, and may even owe grant funds back to the government-and with nothing to show for it, not even a few credits.
But let’s assume that you are a levelheaded individual who knows what you want to study, and maybe even what you want to do in life. If that is the case, read on, as there are some serious matters you need to consider about your financial future.
The federal government – via the U.S. Department of Education-is currently the largest sources of funding for college students. The best way to learn about the Department’s programs is to call the Federal Student Aid Information Center (1-800-4-FED-AID or 1-800-433-3243) and order Funding Education Beyond High School: The Guide to Federal Student Aid, a free booklet. If you’re someplace where you can’t call a toll-free number, then call 1-319-337-5665, but this will cost you (though no more than any other long distance call. You can also write to
The Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044-0084
Or you can check out federal aid information at www.studentaid.ed.gov.
If you plan to go to school in the near future, you may as well request the Free Application for Federal Student Aid (FAFSA) when you write or call. Like the title says, it’s free: you should never pay anyone to help you fill out or submit a FAFSA. You can also fill out the FAFSA online at www.fafsa.ed.gov.
Online is the way to go if you’re in a hurry; you’ll get a response back in a few days rather than in a few weeks. Applying online is becoming the norm.
However you do it, fill out the FAFSA as soon as possible. Schools and state aid agencies have deadlines you must meet to be eligible for state aid or for certain kinds of aid the school controls. (State agencies receive information when you list your state of residence on the FAFSA.)
For example, if you want to start school in September 2006, you should fill out the 2006-07 FAFSA as soon after January 1, 2006 as you can. (You can’t fill out that year’s application before then.) As you may have guessed, the FAFSA asks for information about your and your parents’ incomes. If your parents (or you) don’t have your taxes done, estimate your income numbers and send the FAFSA in. You’ll be glad you did and you can correct your numbers later.
What happens after you submit your FAFSA? The Department calculates your eligibility for aid and sends this information to the financial aid office of each school you listed on the FAFSA. (Each school that participates in the Department’s programs has a financial aid administrator – at least one – who determines what kind of aid you’ll get.)
Just filling out a FAFSA generally isn’t enough to get aid. Naturally, you need to be admitted to that school, but you may also have to fill out an aid form your school provides. If you have questions, contact your school.
After you’ve submitted the FAFSA and done whatever else the school wants, that’s when they’ll finally show you -or at least tell you about-the money. Generally, the school will send you an award letter, telling you what kinds and how much aid you’ll get.) Knowing how much college costs, the financial aid administrator will try first to award you as many grants as you can get. Just in case there’s any question, grants are FREE MONEY YOU DON’T HAVE TO PAY BACK. If your FAFSA results say you have enough financial need (and you take enough hours, etc.), you’ll get a Federal Pell Grant. The maximum award during the 2006-07 award year is $4,050. If you apply early enough and your school has enough funds, you may also get a Federal Supplementary Education Opportunity Grant (FSEOG). The maximum amount is $4000. But since the school determines your eligibility for this award, there’s no guaranty you’ll get that.
Not a grant, but also helpful, is Federal-Work Study (FWS). As the name implies, you work for these funds. The school grants you a job and you get an hourly wage, rather than a lump sum award. The amount you get depends on your award-and how many hours you work.
There are two new federal grants available for the first time during the 2006-07 school year. They are available to first-year students (freshmen) who graduated from high school in January 2006 or for second year students (sophomores) who graduated in January 2005.
An Academic Competitiveness Grant will give up to $750 for first year students, or up to $1,300 to second year students who are eligible for Federal Pell Grants and who successfully finished a “rigorous high school program.” The student’s state or local education agency determines just how rigorous this program was. Second year students must also have had a Grade Point Average (GPA) of at least 3.0.
The second new award, the National SMART Grant, will provide up to $4,000 for each of your third and fourth years of study as an undergraduate student-if you are majoring in certain areas. Note that SMART here stands for “Science and Mathematics Access to Retain Talent”: So naturally, students who major in physical, life, or computer sciences, math, technology or engineering will be eligible. A student can also qualify if he or she majors in a foreign language considered critical to national security. The student must also have a 3.0 GPA in the courses he or she takes to complete his or her major.
Note that these last two are new, and some details are probably still being worked out. So, again, ask your school’s financial aid administrator if you have questions.
Regarding scholarships: scholarships were never a big part of the U.S. Department of Education’s picture but that doesn’t mean there isn’t value here. In fact for most students who wont qualify for grants, this is the main source of money for school that will not have to be paid back.
Most of us are familiar with scholarships for academic achievement, athletic performance, or outstanding skill in the performance arts. However there are hundreds if not thousands of scholarships out there for many different kinds of talents, and also for people of certain ethnicity, geographic location, or for students studying a specific major. For instance you might find a loan for sons of Irish firefighters, or For Latvian students living in Appalachia who will be studying bioengineering.
Go to your guidance counselor, but don’t stop there! Remember you are on a quest for FREE MONEY;. Search the Internet, inquire at church groups, ethnic associations, rotary clubs, and trade unions; leave no stone unturned. Think about what makes you unique, and follow that lead.
Here are some links to get started on a general search.
But of course grants and scholarships are probably not going to cover the entire cost of your education, which brings us to the dreaded student loan, which must be paid back. Sounds basic, but you’d be surprised at the number of people who’ve signed a promissory note – the legal contract that gets you a loan – who thought it was a grant.
First of all you need to understand that a student loan, like any loan, is a calculated risk. You’re taking a risk that you’re going to be able to pay it back. It’s a risk that pays off well for most people, because those who go to college usually earn more, much more, than those who don’t. But it’s still a risk. So don’t borrow any more than you need.
You also need to know how interest works. A typical freshman receives a Stafford Loan for $2,625. Now interest rates have been low in recent years. For example, it was 5.3 percent during the 2005-06 fiscal year (from the end of June through July 1.) But generally rates are higher, and are slowly climbing back up to their more usual 7 and 8 percent rates.
So let’s say you took out a $2,625 Stafford and must repay it at 7 percent. Because interest accrues at a simple annual rate, this loan will accrue about $174 in interest per year. (Multiply this by the 7, 8, or 9 more loans an undergrad typically borrowers.) If no payments are made that year, your loan will grow from $2,625 to almost $2,800.
If you have to get loans, Federal Perkins Loans are the best. These have historically had the lowest interest rates (5 percent for many years). They can also be canceled for more reasons than Stafford Loans can. But the most you can get per year is $4,000 as an undergrad. Whether you get them at all depends on your financial need and the school’s funds for this program. Because this program depends much on the school’s policies, be sure to file your FAFSA early if you want this loan.
But most students have to take out Staffords. If your school participates in the William D. Ford Direct Loan program, you’ll borrow Direct Stafford Loans directly from the U.S. Department of Education. If your school doesn’t participate, you’ll borrow a Federal Family Education Loan (FFEL) Stafford Loan from a commercial lender. (As far as the borrower is concerned, the loan terms are similar.)
Your financial aid administrator will start by giving you a subsidized Stafford Loan. These are best, because the government pays the interest on subsidized federal student loans while you are in school and during authorized deferments. For unsubsidized Staffords, you must pay all interest from the day the loan is disbursed (paid out), though you won’t have to start making payments until after you finish your education.
As mentioned previously, a freshman can typically get a $2,625 subsidized loan. If needed, he or she may be able to borrow $4,000 in unsubsidized loans. (The amount you can borrow goes up every year.) If that isn’t enough to cover your expenses, your parent may be able to borrow a PLUS Loan on top of that. The amount your parents can borrow is your cost of attendance (as determined by your school) minus the other loans, grants and scholarships you’ve already received.
Every year, millions of Americans have to take out a loan of some kind to complete their higher educations. But be wise. Understand interest, and get the best package you can.
And while you are on your way don’t forget to hit up the relatives, as they may be willing to give private loans with much lower interest, or no interest at all. And if all your relatives are deadbeats be the first to kick butt and take names. Get a job, work your fingers to the bones, and show them all what you are made of. The best revenge is success.
So lets sum all this up:
· Grants are need based and do not have to be paid back
· Scholarships are based on achievement or other qualifying factors and also do not need to be paid back.
· Do not expect that Grants and Scholarships to cover everything, most people do need to take out some form of student loan to complete their education.
· You will have to pay your student loan back even if you do not get the job you want. You will have to pay your student loan back even if you do not make the amount of money you expected. You will have to pay your student loan back even if you do not complete your education.
The ball is in your court now. The next step is to do some research. You are going to have to do some legwork. Remember it’s YOUR future that you are creating. These choices are going to create a big part of the foundation for what house you are able to buy, what car you can afford, and what clothes you will be able to wear. But you don’t need to be afraid, just motivated and well informed. If you know what you are facing, you will be up to the challenge.
Whatever your course, whatever your lot in life. You WILL get out of it what you put into it. And that’s a good thing- so good luck and go to it!