Let’s start with the basics.
The federal government provides more than $60 billion per year in grants, loans, and work programs that provide access to college for millions of eligible students. The trick is knowing how to qualify for them. This chapter describes the individual federal student financial aid programs, with a particular focus on need-based assistance available through the U.S. Department of Education, the U.S. Department of Health and Human Services, and the U.S. Department of the Interior. You will also find out about state, institutional, and private sources of aid.
Need-based aid is the major portion of assistance available for higher education. When you don’t have sufficient resources to pay for your child’s education beyond high school, you are considered to have financial need. Although financial need is the main requirement for need-based aid, you must meet other eligibility criteria as well. To determine if you have sufficient financial resources to meet college costs, financial data is collected and analyzed according to a standard set of calculations. This need assessment, or need analysis as it is generally called, results in an Expected Family Contribution (EFC). The EFC represents the resources, in dollars, that a student and his or her family are expected to contribute toward educational expenses for a given year.
The Need Equation
For purposes of student financial aid, need is expressed as an equation, using two components:
Cost of Attendance (COA)
- Expected Family Contribution (EFC)
= Financial Need
The EFC is calculated through a process known as need analysis. The cost of attendance (COA) is determined by each individual school, so it varies. In general, the cost of attendance at any school includes the following items:
Tuition and fees
Books and supplies
A school may also include the costs associated with borrowing educational loans, study abroad, the purchase of a personal computer, participation in a cooperative education program, and a disability, if applicable.
Schools that participate in the federal student aid programs are required to make certain types of information available to prospective students. You need to carefully examine the published costs to make sure they are realistic and to make sure these costs are reasonable for you given your child’s eventual career goals.
The type of school your child chooses (public, private, vocational, trade, or technical; two-year or four-year; graduate/professional, local community college, or distant residential school) can have a significant influence on cost and also on the types and sources of aid available to help finance that cost. While costs may vary from school to school, the EFC usually does not. Generally speaking, financial need increases when the cost of attendance is higher.
Programs Administered by the U.S. Department of Education
The majority of federal student assistance programs were initiated or consolidated by the Higher Education Act (HEA) of 1965 and are administered by the U.S. Department of Education. The most common programs are:
• Federal Pell Grant
• Federal Supplemental Educational Opportunity Grant (FSEOG)
• Federal Perkins Loan
• Federal Work-Study (FWS)
• Federal Family Education Loan (FFEL) Program
• Federal Stafford Loan (subsidized and unsubsidized)
• Federal PLUS loans (Parent Loan for Undergraduate Students)
• William D. Ford Federal Direct Loan Program
• Federal Direct Subsidized and Direct Unsubsidized Loans
The Federal Pell Grant, FSEOG, Federal Perkins Loan, Federal Work-Study, Federal Subsidized Stafford, and Direct Subsidized Loan Programs are need-based. Simply stated, this means that when determining eligibility for funds from these programs, your Expected Family Contribution (EFC) is considered. Federal Unsubsidized Stafford and Direct Unsubsidized Loans, which are discussed in detail later in this chapter, are sometimes referred to as non-need-based programs since your EFC is not considered when determining eligibility for funds from these programs. The William D. Ford Federal Direct Loan Program, commonly referred to as the Direct Loan Program, is a relative newcomer to the financial aid scene. Depending on which program the school participates in (some schools participate in both), you will borrow from either the Federal Family Education Loan Program or Direct Loan Program for a given period of enrollment but never from both programs at the same time.
General Information and Eligibility Criteria
In addition to demonstrating need, there are other eligibility criteria that must be met to receive money from these Title IV student assistance programs. Basic eligibility requirements include:
1. The student must be a U.S. citizen or eligible noncitizen.
U.S. citizen means: citizen of one of the fifty states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, or the Northern Mariana Islands. An eligible noncitizen includes U.S. nationals; U.S. permanent residents who have an I-151, I-551, or I-551C (Alien Registration Receipt Card); or a person who has an Arrival—Departure Record (I-94) from the BCIS (Bureau of Citizenship and Immigration Services, formerly known as the Immigration and Naturalization Service or INS) with one of the following designations: Refuge, Asylum Granted, Indefinite Parole, Humanitarian Parole, Cuban-Haitian Entrant, or Conditional Entrant (valid only if issued before April 1, 1980).
2. The student must be enrolled or accepted for enrollment in an eligible degree or certificate program, or other program leading to a recognized education credential, at an eligible postsecondary institution.
Not all postsecondary schools are approved by the Department of Education to participate in student financial aid programs, either by choice or by exclusion.
In addition, your child must be admitted to the school for the purpose of obtaining a degree, certificate, or other recognized education credential. Students enrolled in a program leading to teacher certification from a state may also receive Federal Pell Grants, FWS, Federal Perkins Loans, and FFEL or Direct Loans.
3. The student must not be simultaneously enrolled in secondary school.
This criterion has implications for high school students who are completing all or part of their senior year course work at a local college.
4. The student must have a high school diploma or its recognized equivalent or have the ability to benefit from the course of study.
If your child does not have a high school diploma or its recognized equivalent (usually a graduate equivalency diploma or a state certificate), he or she must demonstrate the ability to benefit from the training or education. This is accomplished by receiving a passing score on an independently administered test approved by the Department of Education.
If your child excelled academically but did not complete high school and is now seeking to enroll in an educational program leading to at least an associate degree or its equivalent, he or she may, under some circumstances, be eligible for Title IV assistance. The school’s formalized, written policy for admitting such students must be met and documentation must be provided to the school to show academic excellence in high school.
If your child completed secondary education in a homeschool setting, he or she is eligible for Title IV aid as long as the homeschool setting is treated as a home school or private school under state law.
5. The student must provide a valid and verifiable Social Security Number.
Through the use of a database match, all federal financial aid applicants will have their Social Security Numbers verified by the Social Security Administration as part of the application process. The student’s Social Security Number, first and last names, and date of birth are compared with the Social Security Administration’s records. Students who fail this match must provide verification of their Social Security Number to the school to receive any federal student aid.
If your child uses a name that differs from Social Security records, the Social Security Administration must be notified of a name change well in advance of applying for federal student aid to avoid unnecessary delays and confusion.
6. The student must check with the school you plan to attend to determine if a Financial Aid Transcript (FAT) is needed.
Applicants for federal student aid used to be required to provide a paper Financial Aid Transcript (FAT) from each college or university they had previously attended. FATs provided information about financial aid history and were used to monitor certain aspects of eligibility for federal aid. In most cases today, schools are now able to obtain the necessary FAT information electronically from a database maintained by the Department of Education called the National Student Loan Data System (NSLDS). The new school must receive the required financial aid history information; if the school requests a paper FAT, you must comply with this request.
7. The student must sign a Statement of Educational Purpose stating that all federal funds received will be used solely for educational expenses.
All recipients of federal financial aid must sign a statement promising to use any funds received from the federal programs to pay for educational costs at the schools they will attend. Be aware that any federal financial aid money received is to be used to pay for tuition and fees, books and supplies, reasonable living and personal expenses, and other expenses incurred as a direct result of pursuing a postsecondary education. This requirement is satisfied simply by completing and signing the federal aid application (FAFSA), which incorporates the Statement of Educational Purpose in the signature section.
8. The student must, if required, be registered with the Selective Service.
Upon turning 18, all males must register with the Selective Service. This includes U.S. citizens as well as permanent residents and other eligible noncitizens.
9. The student must not have had federal benefits suspended or terminated as a result of a drug offense conviction.
As a result of the Reauthorization Act of 1998, federal student aid eligibility will be suspended for any individual convicted of violating any federal or state drug possession or sale law.
10. The student must maintain satisfactory academic progress in the program of study.
Satisfactory academic progress standards vary from school to school. Generally speaking, though, to receive federal aid your child must maintain a minimum grade point average and pass a minimum number of units or clock hours each academic term.
11. The student must not be in default on a previous federal educational loan, owe an overpayment on a previous federal educational grant or loan, nor borrow in excess of federal student loan limits.
If your child is in default or owes an overpayment, eligibility may be regained by paying the debt or making arrangements for payment that are satisfactory to the holder of the debt.
12. The student must meet additional program-specific criteria.
The following sections describe in detail the student aid programs administered by the U.S. Department of Education. A summary chart of these programs appears on pages 54–55.
Federal Pell Grant Program
The Federal Pell Grant is the second-largest federal student aid program and provides grant assistance to students who have not yet earned a bachelor’s or first-professional degree. The intent of the program is to assist the neediest students. Federal Pell Grants may be received by being enrolled full-time, half-time, or even less than half-time. One of the unique features of the Federal Pell Grant is that it is portable, meaning that its receipt is not dependent upon the availability of funds at a particular school.
The financial aid administrator calculates the actual award amount based upon your EFC, cost of attendance, and enrollment status. Because the cost of attendance and enrollment status can vary from school to school, so too can your Federal Pell Grant award.
The Campus-Based Programs
There are three campus-based programs:
1. Federal Supplemental Educational Opportunity Grants
2. Federal Work-Study
3. Federal Perkins Loans
The Department of Education allocates these funds to participating schools to award to eligible financial aid applicants. Unlike the Federal Pell Grant Program, receiving aid from these campus-based programs depends upon the availability of funds at a particular school. This means that campus-based awards cannot be transported from one school to another. The types and amount of funds awarded from the campus-based programs may vary from school to school, even if your EFC remains the same and the cost of attendance is similar.
Like the Federal Pell Grant, a student is eligible for campus-based funds if enrolled full-time, half-time, or even less than half-time, although the amount available to students enrolled less than half-time is generally more limited. Note that campus-based funds are subject to change even after your child begins attending the school, particularly if additional outside funding is received, such as a private scholarship.
Federal Supplemental Educational Opportunity Grant (FSEOG) Program
The Federal Supplemental Educational Opportunity Grant Program provides grant funds for exceptionally needy undergraduate students who have not yet earned a bachelor’s or first-professional degree. Priority is given to students who are eligible for a Federal Pell Grant and who have the lowest Expected Family Contribution as determined by the school. The minimum annual FSEOG award that may be received from a school is $100 and the maximum is $4000. The minimum award may be prorated if your child is enrolled for less than a full academic year; if enrolled in approved study-abroad programs, your child can receive up to $4400 a year. Like the Federal Pell Grant Program, FSEOG is gift aid, meaning that it does not have to be earned or repaid. However, unlike Federal Pell Grants, the actual amount awarded is subject to the availability of funds at the school your child chooses to attend.
Federal Work-Study Program (FWS)
The Federal Work-Study Program provides jobs for students who need earnings to meet a portion of their educational expenses. Both undergraduate and graduate students are eligible to receive FWS assistance. The federal government provides funds that pay up to 75 percent of your wages, and the school or other employer pays the rest.
The number of hours that a student must work each week varies from school to school and from student to student. This is related to the amount of the work-study award, the hourly pay rate, or the amount of time the student is available to work.
Unlike the other federal student aid programs, there are no limits on the amount that the school may award as long as the amount awarded and your other resources do not exceed your need. To ensure that the number of hours worked is not so great as to interfere with your child’s academic studies, schools usually have a policy regarding reasonable work-study award amounts. Although students normally earn their FWS awards by working during the academic year, some schools allow part or all of the awards to be earned during the summer or school breaks. Employment can be on campus or off campus. An employer can be the school itself, the state, a local public or federal agency (except the Department of Education), or a private nonprofit or for-profit organization. Federal Work-Study employees must be paid an amount that is at least equal to the current federal minimum wage. The type of work performed as a work-study student varies. Food service worker and clerical assistant positions are fairly common, especially for students with no prior work experience. Lab assistants, library aides, and other more specialized positions are also usually available. Some schools place FWS recipients in specific jobs while others simply post FWS openings and allow the placement process to be competitive.
Federal Perkins Loan Program
The Federal Perkins Loan Program, the oldest loan program administered by the Department of Education, is a source of low-interest loans (currently 5 percent) for undergraduate, graduate, and professional students. No interest is charged as long as your child is enrolled in school at least half-time. Schools are required to give priority to students with exceptional financial need when awarding Federal Perkins Loans. Undergraduate students can borrow as much as $4000 each year and up to an aggregate maximum of $20,000 for undergraduate study. Students who participate in an approved study-abroad program can also receive a Federal Perkins Loan. In fact, your child may be eligible to borrow annual and aggregate loan maximums that exceed the amounts noted above by as much as 20 percent.
Repayment of a Federal Perkins Loan begins either nine months after graduation or after a student ceases to be enrolled at least half-time. This is called a grace period. Depending upon the amount borrowed, there is a maximum of ten years to repay the loan. Borrowers who qualify because of low income may be granted an additional ten years to repay their loan. There is no penalty for prepaying all or part of a Federal Perkins Loan.
Repayment can be postponed or interrupted for specified periods of time if certain conditions are met. The postponement of repayment is commonly referred to as a deferment. All loans are deferred while your child is enrolled at least half-time at an eligible school. Some deferments carry very specific conditions and some have limits on their length. Interest does not accrue during periods of deferment, and after each deferment period you are entitled to another six-month grace period before repayment resumes. In addition, periods of deferment do not count toward the normal ten-year maximum for repayment. Under other, more limited, conditions, you may be eligible to have all or part of your Perkins Loan canceled. See your financial aid administrator for more details on deferments and cancellations.
Federal Family Education Loan (FFEL) Program
The Federal Family Education Loan (FFEL) Program is a set of guaranteed federal student loan programs that include the Federal Subsidized Stafford Loan and Federal Unsubsidized Stafford Loan. These are long-term, low-interest loans available to students attending eligible colleges and universities. Under limited circumstances, these loans may also be used for attendance at eligible foreign schools. The FFEL Program also includes the PLUS Loan, which is available to parents for paying their children’s tuition.
The source of funds for the Federal Family Education Loan Program is private capital from banks, savings and loan associations, credit unions, and other lending institutions. In some cases, schools, state agencies, and private nonprofit agencies may also be lenders. The FFEL Program is administered by guaranty agencies that insure lenders, with the backing of the federal government, against loss if a borrower defaults on the loan or is unable to repay it. You can obtain detailed loan information from your child’s school.
The Federal Stafford Loan Program is the largest source of low-interest loans to students administered by the U.S. Department of Education. Federal Stafford Loans are available to both undergraduate and graduate students. Loans made under this program can be subsidized, unsubsidized, or a combination of both. Because the concepts of subsidized and unsubsidized loans may be new to you, it is discussed below in more detail.
Parent Loans for Undergraduate Students (PLUS) loans are for parents of dependent students and are designed to help families with cash-flow problems. There is no needs test to qualify, and the loans are made by FFEL lenders or directly by the Department of Education. The loan has a variable interest rate that cannot exceed 9 percent, and there is no specific yearly limit; parents can borrow up to the cost of their child’s education, less other financial aid received. Repayment begins 60 days after the money is advanced. A 4 percent fee is subtracted from the proceeds. Parent borrowers must generally have a good credit record to qualify for PLUS loans. The PLUS loan is processed under either the Direct or the FFEL system, depending on the type of loan program for which the college has contracted.
Federal Subsidized Stafford Loans
A subsidized loan means that the federal government pays the interest to the lender while a student is in school and during other periods when they are not required to make payments. Because the government is paying the interest during periods of enrollment, students are not responsible for paying the interest and interest does not accrue until repayment begins. Once in repayment, the student is then responsible for paying the interest on the loan as well as the principal amount borrowed.
To receive a Federal Subsidized Stafford Loan, need must be demonstrated under the federal need formula. In other words, when your EFC is subtracted from the cost of attendance, the result must be greater than zero for you to be eligible to borrow a Federal Subsidized Stafford Loan. Borrowing is further limited by other aid your child has been awarded, as well as the annual maximum loan limits applicable to the program, which will be discussed shortly.
Federal Unsubsidized Stafford Loans
Unsubsidized loans provide assistance to students who may not demonstrate need according to the need formula discussed earlier but who would benefit from having access to a low-interest federal student loan program. An unsubsidized loan means that the federal government does not pay the interest on your child’s behalf. Instead, all of the interest that accrues is paid throughout the life of the loan, including interest that accrues while your child is enrolled in school.
Interest that accrues while your child is enrolled in school can be paid in one of two ways:
1. Pay the interest as it accrues.
2. Have the interest capitalized (interest is added to the loan principal and must be repaid when your child leaves school).
The other major difference with an unsubsidized loan is that the EFC is not considered when determining eligibility. This is why unsubsidized loans are often referred to as non-need-based. Eligibility for an unsubsidized loan is determined using an alternate need formula, which requires the school to subtract any estimated financial assistance, including any Federal Subsidized Stafford Loan eligibility, from your cost of attendance. The result of this equation is the maximum amount that you may borrow from the Federal Unsubsidized Stafford Loan Program. However, in no case may the amount borrowed exceed the annual loan maximums discussed later in this section.
This difference in the definition of need means that unlike the Federal Subsidized Stafford Loan, a Federal Unsubsidized Stafford Loan may be used to replace the EFC, provided it has not already been replaced by some other form of aid.
Many students are eligible to borrow a combination of subsidized and unsubsidized Federal Stafford Loans. Eligibility for a Federal Subsidized Stafford Loan must always be determined before borrowing a Federal Unsubsidized Stafford Loan to ensure that the least costly, and thus most desirable, loans are borrowed first. If eligibility for a Federal Unsubsidized Stafford Loan remains, you may borrow that as well, as long as annual loan limits are not exceeded.
In addition to the general eligibility requirements listed at the beginning of this chapter, to be eligible to receive a Federal Stafford Loan your child must:
• be enrolled or accepted for enrollment on at least a half-time basis;
• obtain a determination of eligibility or ineligibility for a Federal Pell Grant;
• be enrolled in a school with an acceptable loan default rate among its previous borrowers.
Many schools automatically include a Federal Stafford Loan as part of their financial aid package and notify you exactly how much may be borrowed from that program. Be mindful that, unlike the Federal Pell Grant and campus-based programs, to receive a Federal Stafford Loan an additional loan application may need to be completed (in addition to the FAFSA). Check with your child’s school to find out if they need to complete this application. If a Federal Stafford Loan is offered, the school usually sends the application form along with the official notification of financial assistance. You also can obtain Federal Stafford Loan applications from participating lenders.
In most cases, the Federal Stafford Loan application should be completed and returned to the school for certification of enrollment, cost of attendance, EFC, and documentation of other financial aid awarded. Although some schools return the application to you so that you can submit it to a particular lender, most will forward the application directly to the lender indicated on your application.
Annual Federal Stafford Loan Limits
The total combined amounts that may be borrowed in subsidized and unsubsidized Stafford Loans may not exceed the annual loan limits, which are specified in law and regulation. The maximum amounts that may be borrowed are:
• $2625 per year for first-year undergraduate students
• $3500 per year for second-year undergraduate students
• $5500 per year for the remaining years of undergraduate study
• $8500 per year for graduate and professional students
Aggregate Stafford Loan Limits
All students are limited in the total amount they can borrow from the Federal Stafford Loan Program during their undergraduate and graduate academic careers. These borrowing limits are referred to as aggregate loan maximums and will vary depending on whether your child is an undergraduate or graduate student.
Dependent undergraduate students may borrow $23,000 in subsidized and unsubsidized loans. Dependent undergraduate students whose parents do not qualify for PLUS Loans may borrow $23,000 from the Federal Subsidized Stafford Program and $46,000 from the Federal Unsubsidized Stafford Loan Program, less any amounts borrowed from the Federal Subsidized Stafford Loan Program.
The interest rate charged on Federal Subsidized Stafford Loans when in the repayment period is variable and is determined each year on June 1. The maximum interest rate may not exceed 8.25 percent. The same terms and conditions apply to Federal Unsubsidized Stafford Loans, except that your child is responsible for the interest while enrolled and during the repayment period.
Other Costs Associated with Borrowing
Lenders are authorized to charge origination fees of up to 3 percent of the principal amount of the loan. In addition, an insurance premium must be paid that by law cannot exceed 1 percent of the principal amount of the loan. These fees may be deducted from loan proceeds by the lender. Check with your lender.
Loan Counseling Requirement
To ensure that your child is familiar with the terms and responsibilities of borrowing and that he or she fully understands that the loan must be repaid, your child is required to have loan counseling before receiving any of your Federal Stafford Loan funds. Once the loan counseling requirement is satisfied, the school either uses the loan funds to offset charges for tuition, fees, and room and board or will give the loan proceeds directly to your child. The funds may be used to buy books or pay for other costs incidental to attending the school.
Payment of loan principal, and, in the case of subsidized loans, interest, does not begin until six months after your child graduates or ceases to be enrolled at least half-time. The loans must be repaid within ten years of the date repayment begins, excluding periods of deferment and forbearance.
Deferments allow borrowers who meet certain criteria to postpone or interrupt repayment. The deferments available to Federal Stafford Loan are similar to those found in the Federal Perkins Loan Program but, unlike the Federal Perkins Loan Program, there is only one grace period. See your financial aid administrator or lender for more information about deferments.
Cancellation and Loan Forgiveness
Cancellation of a Federal Stafford Loan is available in the event of your child’s death or permanent and total disability. In addition, a portion of the loans may be forgiven by your child’s participation in some national and community service programs. Ask your financial aid administrator or lender for more details on loan cancellation and forgiveness options.
Summary Information on Undergraduate Student Aid Programs Administered by the U.S. Department of Education
Program Description Annual/Aggregate Eligibility Repayment Required
Federal Pell Grant Grant program Annual minimum and maximum vary; for 2003–2004, maximum $4050; no aggregate Students without first baccalaureate or professional degree No
Federal Supplemental Educational Opportunity Grant (FSEOG) Campus-based grant program; funds awarded by institution $100 annual minimum; $4000 annual maximum; no aggregate (students on approved study-abroad programs may receive up to $4400) Students without baccalaureate or first professional degree; first to students with exceptional financial need; priority to Federal Pell Grant recipients No
Federal Work-Study (FWS) Campus-based employment program; funds awarded by institution N/A Undergraduate students No
Federal Perkins Loan Campus-based loan program; funds $4000/year for a maximum of $20,000. Awarded by institution; Study Abroad Students: 5% interest may be eligible to borrow annual and aggregate loan maximums that exceed the above- noted amounts by as much as 20% First to students with exceptional financial need; must have determination of eligibility/ineligibility for Federal Pell Grant Yes; begins 9 months after cessation of at least half-time enrollment; deferment possible; cancellation provisions
Federal Stafford Loan (subsidized and unsubsidized) Federal Family Education Loan; funds from private capital; maximum of 8.25% interest $2625/1st year; $3500/2nd year; $5500/each remaining year at undergraduate level; annual maximums prorated for programs and remaining periods of enrollment; total undergraduate maximum, $23,000 Students enrolled at least half-time must have determination of eligibility for Federal Pell Grant; must determine eligibility for Federal Subsidized Stafford before applying for Federal Unsubsidized Stafford Yes; begins 6 months; after cessation; of at least half-time enrollment; deferment possible; no interest subsidy on unsubsidized loan
Additional Unsubsidized Federal Stafford Loan— (additional eligibility for independent undergraduates and certain dependent undergraduates) Federal Family Education Loan; funds from private capital; maximum of 8.25% interest $6625/1st or 2nd year undergraduates; $7500/each remaining year at undergraduate level; annual maximums prorated for programs or remaining periods of enrollment; total undergraduate maximum, $46,000 undergraduate aggregate, less amounts borrowed in Subsidized Stafford Independent students and dependent students whose parents are unable to borrow a Federal PLUS; must have determination of eligibility for Federal Pell Grant; must determine eligibility for Federal Subsidized Stafford before applying for Federal Unsubsidized Stafford Yes; same as Federal Stafford Loan
Federal PLUS Loan Federal Family Education Loan; funds from private capital; maximum of 9% interest No annual or aggregate amounts, except parents may not borrow more than the difference between cost of attendance and estimated financial assistance Parents of eligible dependent undergraduates who are enrolled at least half-time; no adverse credit history Yes; begins 60 days after final disbursement; deferment possible
Direct Subsidized/Direct Unsubsidized Loan William D. Ford Federal Direct Loan; funds awarded by the institution at participating schools; maximum of 8.25% interest $2625/1st year; $3500/2nd year; $5500/each remaining year at undergraduate level. Annual maximums prorated for programs or remaining periods of enrollment; total undergraduate maximum, $23,000 Undergraduate students; enrolled at least half-time; must have determination of eligibility for Federal Pell Grant; must determine eligibility for Direct Subsidized Loan before applying for Direct Unsubsidized Loan; must be attending a participating school Yes; begins 6 months after cessation of at least l half-time enrollment; deferments possible; no interest subsidy on unsubsidized loan
Additional Direct Unsubsidized Loan— (additional eligibility for independent undergraduates and certain dependent undergraduates) William D. Ford Federal Direct Loan; funds awarded by maximum of 8.25% interest $6625/1st or2nd year undergraduates; the institution; $7500/each remaining year at undergraduate level; annual maximums prorated for programs or remaining periods of enrollment; total undergraduate maximum, $46,000, less amounts borrowed in subsidized Direct Loan Independent students and dependent students whose parents are unable to secure a PLUS Loan; must be attending a participating school Yes; same as above
Direct Plus Loan William D. Ford Federal Direct Loan; funds awarded by the institution at participating schools; maximum of 9% interest No annual or aggregate amounts, except cannot borrow more than the difference between cost of attendance and estimated financial assistance at participating school Parents of eligible dependent undergraduates who are enrolled at least half-time; no adverse credit history; student must be attending Yes; begins 60 days after final disbursement; deferment possible
William D. Ford Federal Direct Loan Program
This program includes Direct Subsidized and Direct Unsubsidized loans. You may also hear the various programs referred to as the Direct Subsidized Stafford Loan or the Direct Unsubsidized Stafford Loan. The federal government launched the William D. Ford Federal Direct Loan Program in 1994. The terms and conditions of loans made under the Direct Loan Program are nearly identical to those made under the FFEL Program except for the source of loan funds, some aspects of the application process, and the administrative details of the repayment process. Most schools participate in one program or the other.
Federal Direct Subsidized and Direct Unsubsidized Loan Program
Just as the Federal Stafford Loan Program offers both subsidized and unsubsidized student loans, so does the Direct Loan Program. Technically, Direct Subsidized and Direct Unsubsidized Loans are exactly the same as subsidized and unsubsidized Federal Stafford Loans. For instance, to receive a Direct Subsidized or Direct Unsubsidized Loan, you must complete and submit a Free Application for Federal Student Aid (FAFSA), and first-time loan recipients are also required to attend a loan counseling session prior to receiving payment.
Programs Administered by the U.S. Department of Health and Human Services
In addition to the student aid programs administered by the U.S. Department of Education, several student aid programs are administered by the Department of Health and Human Services (HHS) for the health and nursing professions:
• Nursing Student Loan
• Health Professions Student Loan
• Scholarships for Disadvantaged Students
• National Health Service Corps Scholarships
With the exception of the National Health Service Corps Scholarships, the above programs are similar to the Department of Education’s campus-based programs: monies are allocated to the schools to distribute to their eligible students in designated health-care fields. Schools are responsible for managing and awarding program funds according to requirements specified by the Department of Health and Human Services.
Nursing Student Loan Program
The Nursing Student Loan (NSL) Program provides low-interest loans to nursing students attending approved nursing schools. Approved schools must offer:
• Associate degree
• Baccalaureate or equivalent degree
• Graduate degree in nursing
Loans may be made for full-time or half-time enrollment, and recipients must be citizens, U.S. nationals, or permanent residents. Schools themselves determine application and selection procedures. In most cases, nursing students who complete the FAFSA and any other required application materials are automatically considered for this program provided that they have need. Schools may award up to $2500 per academic year depending upon need.
This annual limit increases to $4000 during the final two years of a nursing program. The aggregate NSL maximum is $13,000. The interest rate on the NSL is 5 percent, and repayment of principal and interest begins nine months after your child graduates or ceases to be enrolled at least half-time. Payments may be made on a monthly or quarterly basis. Borrowers have up to ten years to repay their NSL.
Health Professions Student Loan Program
The Health Professions Student Loan (HPSL) Program provides financial assistance to students enrolled in specific health professions fields. Assistance is provided in the form of long-term, low-interest loans. HPSL interest rates are fixed at 5 percent throughout the life of the loan. Loans may be made to full-time students pursuing a course of study leading to a bachelor or doctor of science degree in pharmacy or a doctor of dentistry, podiatric medicine, optometry, or veterinary medicine degree.
Schools must use parental information when determining a student’s eligibility for the HPSL, even if the student is considered independent. The annual maximum HPSL that can be borrowed is equal to tuition plus $2500. There is no aggregate maximum. Repayment of principal and interest begins one year after your child ceases full-time study. The loans must be paid within ten years in equal or graduated installments.
Scholarships for Disadvantaged Students
The Scholarships for Disadvantaged Students (SDS) Program was developed to assist students from disadvantaged backgrounds who have demonstrated a commitment to pursuing a career in the health professions. Participating schools are allocated funds on an annual basis.
SDS funds may be used to pay for tuition and other reasonable educational expenses and reasonable living expenses incurred while enrolled as a full-time student. The amount of the scholarship may not exceed the total amount of these required expenses for a specific year.
National Health Service Corps Scholarships
This program is designed to attract health professionals to the National Health Service Corps (NHSC) to practice in areas where there is a shortage of primary-care medical professionals. Students who pursue full-time courses of study in the following fields are eligible to apply: allopathic and osteopathic medicine, nationally certified nurse midwife or nurse practitioner, and primary-care physician’s assistant. The scholarship covers tuition and required fees and provides a stipend for twelve months. NHSC recipients incur a service requirement of one year for each year the scholarship is received, with a minimum of two years’ service required.
For additional information, visit the Health and Human Services Bureau of Health Professions Web site at nhsc.bhpr.hrsa.gov.
U.S. Department of the Interior: Bureau of Indian Affairs Grants
The U.S. Department of the Interior provides grants under the auspices of the Bureau of Indian Affairs (BIA). This agency administers a higher education grant program for enrolled members of an Indian, Eskimo, or Aleut tribe who are pursuing an undergraduate or graduate degree at an accredited postsecondary institution. In order to be eligible for a Bureau of Indian Affairs Grant, students must show financial need as determined by the school they are attending. Additional information may be obtained from any Bureau of Indian Affairs Office.
State Need-Based Aid
Most state student financial assistance programs are need-based and restricted to residents of that state and/or attendance at a school in that state. Some states have reciprocity agreements that allow students to use their state grants to attend schools in any state included in the agreement. In some cases, state aid takes the form of financial support of the school or grants are made directly to the school but not on behalf of any particular student.
The conditions for need-based student aid vary by state as does the type and form of aid offered. A state may offer grants, loans, and/or work programs with their own unique eligibility requirements. Contact appropriate state agencies for updated information on their programs, including amounts of aid, eligibility requirements, and application procedures and deadlines.
Leveraging Educational Assistance Partnership Program (LEAP)
Under the LEAP Program, federal funds are allocated to states to encourage the establishment and expansion of state scholarship and grant assistance to postsecondary students. The federal allotment must be matched by funds appropriated by the state.
Specific eligibility requirements for LEAP funds are determined at the state level. Federal regulations authorize state agencies to extend eligibility to undergraduates and, if desired, to graduate students and less-than-half-time students. However, recipients must meet federal student aid eligibility requirements and demonstrate substantial financial need as determined by the state.
Students apply to their state agency either directly or through the school. The maximum annual LEAP award is $5000. State agencies have the option of setting lower maximum award amounts. States that allocate their own funds to the program may offer a higher annual maximum award.
Need-Based Aid from Institutional and Private Sources
While the money for most need-based student aid programs comes from federal or state sources, or a combination of the two, many schools have their own resources that are earmarked for student aid. This aid may be merit- or need-based or a combination of the two and may take the form of grants, loans, or employment. Schools often receive contributions from private or corporate donors with specific restrictions attached to the use of those funds. There may be a large variety of small programs with variable requirements or a large pot of discretionary funds for the aid administrator or other school staff or faculty to award.
Discretionary funds might have strict need requirements or might be set aside to help address emergency situations unanticipated when the student’s aid was originally awarded. At some schools, institutional aid might be awarded on the same basis as federal campus-based aid. In any case, you should not overlook this source of funding from the school or from individual academic departments within the school.