Financial Aid Frequently Asked Questions
- What types of financial aid are available?
- How is financial aid eligibility determined?
- When should I file the FAFSA? Do I have to file each year?
- What will I need to fill out the financial aid forms?
- How much financial aid can I expect?
- How does FAFSA calculate expected family contribution?
- What is the FAFSA verification process?
- What tax benefits exist for school loans?
What types of financial aid are available?
Financial aid is provided through the federal government, private banks and financial institutions, and by many academic institutions.
Federal financial aid
Pell Grants provide money to help undergraduate students (those working on their first bachelor’s degree) pay for their education. Students are not required to pay back grants.
For many students, Pell Grants provide a foundation for financial aid that helps determine their eligibility for additional assistance. Although not everyone qualifies for grants—which are based on financial need—all students should apply for them. Eligibility is based on the cost of education, the number of hours the student is enrolled in a bachelor’s program, and Pell regulations.
Pell grant funding is determined each year by Congress.
Federal Supplemental Educational Opportunity Grants (FSEOG) provides money to first-year undergraduate students who demonstrate exceptional need for assistance. Like Pell grants, FSEOG funds are not paid back.
FSEOG awards are based on financial need and the availability of funds to the School.
Stafford Loans are the most common source of federally backed loan funds. There are two types of Stafford loans: direct subsidized and direct unsubsidized. Your FAFSA will establish your eligibility for both.
Direct Subsidized Stafford Loans are need-based loans. To qualify for a loan, students must meet all requirements to receive federal financial aid and have been determined for eligibility for a Pell Grant.
Full-time students may be eligible to borrow up to $3,500 for the first academic year, $4,500 for the second year, and $5,500 for each year after that.
The federal government pays interest on the loans while a student attends school and during a grace period that extends for six months after the student leaves school. Students must begin to pay back the loans six months after they finish school or attend less than half time.
Direct subsidized loans disbursed between July 1, 2011 and June 30, 2012 have a fixed rate of 3.4%.
Direct Unsubsidized Stafford Loans are for all qualified students and are not based on financial need. It is open to students who are ineligible for have limited eligibility for the direct subsidized loan.
Dependent students may receive an unsubsidized loan of up to $2,000 per academic year. Independent students may borrow up to $6,000 per academic year.
Direct unsubsidized loans accrue interest from the time the loan is disbursed. Interest payments begin immediately, but can be deferred while a student attends school. Loan repayment begins six months after a student leaves school or reduces attendance below half time.
Direct unsubsidized loans disbursed between July 1, 2011 and June 30, 2012 have a fixed rate of 6.8%.
Total Stafford Borrowing Limits. Total undergraduate Stafford loans cannot exceed $23,000 for dependent students and $57,500 for independent students, who cannot receive more than $23,000 of which may be in subsidized Stafford loans).
Stafford loans must be repaid within 10 years unless the student qualifies for an alternative repayment plan.
Direct PLUS Loans allow parents with good credit histories who have dependent undergraduate students borrow up to a maximum of the student’s unmet costs. These loans are fixed at 7.9%.
Dependent students must meet requirements to receive federal financial aid. Parents must meet some of these requirements as well.
The first payment on a PLUS loan is due 60 days after the final loan disbursement.
The Private Loan Program is offered by banks and other financial institutions to students and parents. These loans are not sponsored by a government agency.
Loans provide supplemental funding when other financial aid does not cover costs and can help bridge the financing gap for school expenses. Lending institutions determine eligibility.
The interest rate on a private loan is usually one to 10% above the prime interest rate. Interest begins accruing when the loan is disbursed. Some private loans defer repayment until the student leaves school, while others require repayment 45 days after the first disbursement of the loan. Monthly payments vary but can be as low as $50 per month, with repayment terms up to 15 years.
The Institutional Loan Program (ILP) is for students attending any one of the Anthem Education family of schools. The objective of the ILP is to give students an alternative or a supplement to federal financial aid programs.
These loans have no associated fees and the interest rate is based on the repayment length of the loan. An affordable payment program is personalized to reflect each student’s individual financial circumstances.
How is financial aid eligibility determined?
Financial aid is backed by the federal government and is determined by the U.S. Department of Education. All students are encouraged to file the Free Application for Federal Student Aid (FAFSA) on the Department Web site.
The FAFSA is processed by the Department of Education Central Processing System (CPS) after it is submitted online by the student.
FAFSA looks at income, the student’s dependency status, the cost of the education being pursued, and other factors. The Department uses it to assess grants and loans for which a student could be eligible.
Banks and other financial institutions also offer private loans to cover education costs. They use their own checks to assess a borrower’s creditworthiness.
When should I file the FAFSA? Do I have to file each year?
File the FAFSA as early as possible after January 1. Applications filed before that time are returned.
Aid recipients must reapply each year to continue to receive financial aid.
What will I need to fill out the federal financial aid forms?
Students need to show several documents for themselves, their parents (if a dependent student) and their spouse, if married. Depending on the loan or grant source, these documents are usually required:
- U.S. income tax returns
- Records of any untaxed income
- Records of the current net worth (value minus debt) of any investment, business and investment farm
- Bank and/or savings account statements
How much financial aid can I expect?
Generally speaking, financial aid is calculated by subtracting a family’s expected contribution from the student’s college costs. Students must demonstrate financial need, but this does not mean that they must come from low-income families.
How does FAFSA calculate expected family contribution?
Expected family contribution is determined based on criteria defined by the federal government, using information from the FAFSA application.
One of the first things the government looks at is dependency status. It examines the ability for parents to help out dependent students. Unmarried independent students are evaluated based on their income. Spousal income is examined when married students apply for income.
The following questions can help determine eligibility
| YES / NO | Were you born before January 1, 1988? |
|---|---|
| YES / NO | At the beginning of the 2008-2009 school year, will you be working on a master’s or doctorate program (such as an MA, MBA, MD, JD, PhD, EdD, or graduate certificate, etc.)? |
| YES / NO | As of today, are you married? (Answer “Yes” if you are separated but not divorced.) |
| YES / NO | Do you have children who receive more than half their support from you? |
| YES / NO | Do you have dependents (other than your children or your spouse) who live with you and who receive more than half of their support from you, now and through June 30, 2009? |
| YES / NO | Are (a) both of your parents deceased, or (b) are you (or were you until the age of 18) a ward/dependent of the court? |
| YES / NO | Are you currently serving on active duty in the U.S. Armed Forces for purposes other than training? Are you a veteran of the U.S. Armed Forces? |
A student who answers”no” to every question is a dependent student.
Dependent students include their financial information and their family’s information on their FAFSA, including:
- Income, including parents’ income
- Family assets including savings, stocks, bonds, real estate investments, farm or business ownership, and trusts (equity in a family’s primary residence or family farm and retirement funds are excluded)
- Age of the oldest parent and need for retirement income
- Number of children and other dependents in the family household
- Number of family members in college
- Unusual or extenuating circumstances
What is the FAFSA verification process?
The CPS selects certain applications for verification. Schools on the student’s FAFSA account may select an application with conflicting information for verification as well. Students whose applications have been selected for verification are notified and given a deadline to produce certain documents, usually within 30 days of starting school. These documents include a copy of parents’ (if applicable) or the student’s signed federal tax form, and the completed and signed verification worksheet.
Upon completion of the verification process, the student will be notified if any financial aid has been impacted. Delays in the verification process could result in the denying the student permission to attend class or take tests and quizzes.
What tax benefits exist for school loans?
Certain students or their families may receive tax credits for the loans used to pay for school-related expenses. Tax credits are subtracted from the tax owed, instead of subtracted from taxable income like a tax deduction.
- The Hope Scholarship is actually tax credit, not a scholarship and is available for degree programs only.A person or family must file a federal tax return and owe taxes to qualify for this tax credit. The exact amount of the Hope credit depends on income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total credit is also based on the number of eligible dependents.If a taxpayer or family owes less in taxes than the maximum amount of the Hope credit for which it is eligible, it can only take the credit for the amount owed in taxes.
- The Lifetime Learning Credit is a tax credit available to individuals enrolled in a degree and non-degree educational program and who file a tax return and owe taxes.This amount of the credit is subtracted from the taxes owed. The credit can only be used for the amount owed in taxes.The actual amount of the credit depends on income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition.
- Interest Deductibility
Student loan interest paid after December 31, 1997 is deductible providing that the borrower is still in the first 60 months of repayment. This deduction reduces the adjusted gross income a taxpayer reports. Under law, up to $2,500 in education loan interest paid can be deducted. A taxpayer claimed as a dependent by another taxpayer is not eligible for the deduction.
- Penalty-Free IRA Withdrawals
A taxpayer may make a withdrawal from an Individual Retirement Account (IRA) to pay tuition for the taxpayer, the taxpayer’s spouse, or the child or grandchild of the taxpayer or the taxpayer’s spouse. The taxpayer will not be subject to the 10% early withdrawal tax that applies when amounts are withdrawn from an IRA before the account holder reaches age 59 1/2.
