Insight Education - Financial Aid

Stafford subsidezed loan

Stafford unsubsidized loan

Perkins loans

Parent loans

Financial Aid is one of the most complex and confusing elements of the College Admissions Process. Typically, the financial aid process does not begin until January 1st of the year the student will graduate. Some schools will ask families to complete their preliminary financial aid forms as well as complete the Free Application for Federal Student Aid (FAFSA) and/or the CSS Profile. Families should thoroughly research all of their options.

Types of Aid available:
Federal Loans are available to eligible families. These loans are need-based and can only be granted once a family has completed the FAFSA. Below are the different types of loans that are available through the federal government:

Stafford Subsidized Loan
The interest of this loan is paid by the federal government while the student is in an approved program The loan goes into repayment six months after graduation and interest begins to accrue at that time.

Stafford UNSUBSIDIZED Loan
All students are eligible for this loan regardless of need. Students must complete the FAFSA to qualify. The interest of this loan begins to accrue upon loan distributiuon. Borrowers can request to defer interest payment until after graduation. The interest will then become part of the principal and interest will accrue on the interest as well. Borrowers can choose to pay interest only during the in-school period.

Students can borrow up to $3,500 in combined Stafford loans in their first year, up to $4,500 in their second year, and up to $5,500 in all the following years as of July 1, 2007.
Students whose families are not eligible for the PLUS loan can borrow an additional $4,000 per the first two years in unsubsidized funding and an additional $5,000 the remaining years. Students cannot borrow more than $23,000 in combined Stafford loan for their undergraduate degree and no more than $65,500 for their undergraduate and graduate degrees combined.

The interest rate is fixed at 6.8% for loans after July 1, 2006. All lenders provide the same interest rate, but many do give discounts for on-time payments or electronic payments. The loans also incur 4% in loan fees, which are decuted from the disbursement check. These fees include a 3% origination fee and 1% guarantee fee. Beginning July 1, 2006, the origination fee will reduce to 2% and reduce an additional 0.5% each year until 2010.

Stafford loans are offered through either the federal government or through private lenders. Schools that are “Direct Lending Schools” provide the loans through the federal government directly to the borrower. Students that attend schools that are not “Direct Lending Schools” must secure the funding through private lenders through the Federal Family Education Loan Program (FFELP). These loans are protected by the federal government. Students should check with the school they will attend in the Fall on its Direct Lending status.

PERKINS LOANS
These are low interest federal loans that are awarded to low-income students. This loan is offered through the school, but the funds are federal. This loan has a standard 5% interest rate. The interest is subsidized while the borrower is in school and for a period of nine months after graduation. There are no origination or guarantee fees on this type of loan. The per year maximum is $4,000 for undergraduate students with a limit of $20,000. The per year maximum is $6,000 for graduate students with a combined undergraduate and graduate limit of $40,000. Schools that participate in the Expanded Lending Option (ELO) can offer an additional $1,000 funding per year with an increased limit of $5,000 for undergraduates and $10,000 for graduate students. Schools must qualify for the ELO program with a default rate equal to or lower than 15%. Students should check with their institution to see if they qualify.

PARENT LOANS
Parents can take out loans to supplement their child’s financial aid package. Parents can borrow up to the cost of attendance minus aid already awarded. These loans are provided either through the FFELP Program (private lenders) or through the federal government through Direct Lending Schools. As of July 1, 2006, grdaute students will also be able to borrow PLUS Loans.

The PLUS loan has a fixed interest rate of 8.5% for loans that are distributed after July 1, 2006. The interest begins to accrue immediately and the loan goes into repayment 60 days after disburement. Some lenders now offer the option of deferring payment until after graduation, but the interest does accrue and will be capitalized as part of the principal. The PLUS loans charge 4% in loan fees that are deducted from each disbursement check.

The interest rate is fixed across lenders, but some lenders may offer incentives such as deductions for on-time payments and/or electronic payments. These loans are legally the parent’s obligation, even if there is an agreement between the child and parent that the child will pay the loan. Parents can apply for PLUS Loans without completing the FAFSA. Parents must complete a loan application with the lender. The lender will look at the parent’s credit history and ability to pay in determining loan eligibility. If a parent is denied eligibility for the PLUS loan, the student automatically becomes eligible for the Stafford loan or for increased Stafford loan funding.

CONSOLIDATION LOANS
Consolidation loans allow the borrower to have all their loans in one place. PLUS Loans and Student loans cannot be consolidated together because they Borrowers are different people. Consolidation loans are capped at an 8.25% interest rate. Certain lenders will give a discount based on on-time payments and/or electronic payments. The Federal Consolidation Program allows students to consolidate all federal loans, including the Stafford and Perkins. There are some Private Lender Consolidations in which a borrower can consolidate private, non-federal loans.

Consolidation Loans often allow borrowers to extend the life of the loan past the 10 year standard repayment schedule. This also can bring down the monthly payment, but the total interest paid will also increase. The interest rate of a consolidated loan is the weighted average of the loans being consolidated. The loan is rounded up to the nearest 1/8 of a percent and capped at 8.25%. The rate is fixed for the life of the loan. A loan can only be consolidated once to lock in an interest rate. Loans can be reconsolidated as long as there is one new loan that has not been consolidated previously.

Repayment on a Consolidation Loan begins 60 days after consolidation. This is why most borrowers wait until graduation to consolidate. Putting the loan into repayment causes the borrower to lose the grace period. Parents can consolidate the PLUS loan to bring the interest rate down to 8.25% from 8.5%. Some lenders have minimums on consolidation loans, making it difficult for students in the first couple of years of school to consolidate.

SCHOLARSHIPS
Scholarships are merit-based forms of aid that do not have to be repaid. Scholarships can be granted by the college the student is attending, corporations, small companies, non-profit agencies, and individuals. Scholarship requirements vary by granting agency. Contact the organizations for deadlines and qualifications. Because scholarships are merit-based, a family’s ability to pay for college is not taken into consideration and can good options for families that do not qualify for low interest loans and grants.

PELL GRANT
The Pell Grant is a form of aid that if offered by the federal government to low-income students and does not have to be repaid. Students need to complete the FAFSA for Pell Grant eligibility; there are no additional documents required. The amount of the grant is determined by the Estimated Family Contribution (EFC). The Pell Grant will not exceed the cost of attendance. The minimum Pell Grant award is $200. The maximum changes on a yearly basis depending on fund available. The grant is determined by the family’s Adjusted Gross Income.

CAL GRANT
Cal Grant is a California State awarded grant that is given to students attending school in California. These grants do not have to be repaid. The amount aid of depends on the cost of attendance at the college. To apply for a CalGrant, students should complete the FAFSA and the GPA Verification Form (through their high school). Some high schools complete the form automatically. The grants are awarded based on the family’s adjusted gross income.
Check out http://www.csac.ca.gov/facts/2006-07Income&AssetCeilingTables.pdf for Cal Grant Income and Asset Ceilings.

WORK STUDY
Students that are offered work study as a part of their financial aid package, have the option of working in a subsidized part time job. The hourly rate for the position is subsidized by the federal government. This is often a good option for students that intended to work during college.

For more specific information, please contact the Insight Office and Request to speak to the Financial Aid Expert.

NEWS AND EVENTS

Follow Insight