Federal Financial Aid Programs
On August 2, 2011, Congress passed the Budget Control Act of 2011, which put into place automatic federal budget cuts, known as a “sequester,” to take effect if Congress failed to enact legislation to reduce the federal deficit by March 1, 2013. Because Congress did not act, these budget cuts are now in effect and may have some bearing on the programs outlined below. Visit http://studentaid.ed.gov for updated information.
The Pell Grant is designed to help lower-income students pay their expenses for postsecondary education. The maximum Pell Grant award for the academic year 2013–2014 is $5,645. Both eligibility for a grant and the maximum amount a student might receive are determined by the family’s financial circumstances and the Expected Family Contribution (EFC). A grant, however, may not exceed one half of the total cost at the institution that the student wishes to attend.
There is no separate application for the Pell Grant. The Free Application for Federal Student Aid (FAFSA) is the only application necessary for this grant.
Part-time students are also eligible for Pell Grants, but the award would be reduced according to the amount of time the student is attending school (that is, half-time students would receive half of their grant).
Once the EFC has been established, it is sent to the colleges the student indicated on the FAFSA. The financial aid officer will use the information on the Student Aid Report (SAR) to determine if the student is eligible for a Pell Grant and the exact dollar amount of the grant at that particular institution.
Pell Grants may be used at colleges, vocational, technical, and business schools, and hospital schools of nursing, both public and private, profit and nonprofit.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant Program is available to students who are currently completing coursework necessary to begin a career in teaching; or those who plan to complete coursework necessary to begin a career in teaching. In order to be eligible for awards of up to $4,000 per year, the candidate must have at least a 3.25 GPA for each payment period. Upon graduation, the student must teach full-time for at least four years within eight years of completing their program, in a school designated as Title I by the U.S. Department of Education, in a high needs subject area. If the grant recipient fails to complete the service obligation, the award will be converted to a Federal Direct Unsubsidized Stafford Loan.
Iraq and Afghanistan Service Grant
A student who is not eligible for a Pell Grant but whose parent or guardian was a member of the U.S. Armed Forces and died as a result of service performed in Iraq or Afghanistan after September 11, 2001 may be eligible to receive the Iraq and Afghanistan Service Grant. The grant recipient must be under 24 years old or enrolled in college at least part-time at the time of the parent’s or guardian’s death.
The grant award is equal to the amount of a maximum Pell Grant for the award year – not to exceed the cost of attendance for that award year.
Students and parents should note that the Heath Care and Education Reconciliation Act of 2010 mandates that all schools process loans through the Federal Direct Loan Program (FDLP).
All federal student loans are now made directly through the U.S. Department of Education.
You must complete the FAFSA (Free Application for Federal Student Aid) for Stafford and/or graduate student PLUS loans. Borrowers will have to complete a Master Promissory Note (MPN). Borrowers already in school will have to complete a new MPN. You will accept or decline your federal student loans through your school, which works directly with the federal government. For parents interested in a PLUS loan, completing the PLUS Loan Information Form will initiate the application process.
Contact your school’s financial aid office for detailed information.
Federal Stafford Student Loan
The Federal Stafford Student Loan Program is a long-term, low-interest loan that is operated through the federal government. The loans are available as either subsidized or unsubsidized. To receive a subsidized loan, on which the federal government pays the interest while the student is in school, the borrower must demonstrate financial need. Financial need is not a consideration for securing an unsubsidized loan, for which the borrower pays all the interest. The current maximum amount a dependent student may borrow per year on a subsidized loan ranges from $3,500 to $5,500 per year (plus a maximum of $2,000 in unsubsidized loans) depending on grade level. Independent students may be eligible to borrow higher amounts.
Information provided on the FAFSA will determine the student’s eligibility for these loans.
A subsidized Stafford Student Loan cannot exceed the financial need for which it is intended (cost of attendance, minus other financial aid, minus the family contribution).
All students receiving Federal Stafford Loan incur a fee of 1.051 percent, which may be subtracted from the loan at the time the money is disbursed.
Students are granted a six-month grace period after leaving college before the first loan payment is due. However, if you receive a Direct Subsidized Loan that is first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance.
Deferment of loan repayment may be allowed for certain circumstances. Visit www.studentaid.ed.gov for details.
The repayment period for Stafford Loans depends on the amount of the loan and the payment schedule selected. Standard repayment is 10 years; however, it may be extended up to 30 years. A $50 minimum monthly payment is required on all loans. Loans may be repaid early without penalties.
The interest rate for both the subsidized and unsubsidized Stafford Loans first disbursed to undergraduate students on or between July 1, 2013 and June 30, 2014 is fixed at 3.86 percent.
Parents Loan for Undergraduate Students (PLUS)
The PLUS loan allows parents to borrow an amount equal to the difference between the student’s cost of attendance (room, board, tuition and fees) and the amount of financial aid the student receives. Currently, PLUS Loans have a fixed interest rate of 6.41 percent.
Repayment of principal and interest must begin within 60 days after parents receive full disbursement of the loan. The interest is not subsidized while the student is in school, unlike the subsidized Stafford and Perkins loans. The PLUS loan charges loan fees of 4.204 percent, deducted from each disbursement check. Some repayment options give discounts for on-time or electronic payments.