Guest Writer Rachel Higgins on Funding Opportunities for College

How to pay for college is a very real concern for Carolina Review readers, and the piece that follows will hopefully offer some clarity–as well as perhaps some ideas. Rachel Higgins, a staff writer at education website www.accreditedonlinecolleges.org, walks through various funding options for students, discussing the differences as well as the pros and cons of each.

An Explanation of the Aid Available to Students at Traditional and Online Colleges

Students today have access to more college financial aid than ever before. However, many prospective learners are unsure about available assistance options, or how to qualify for funds from various agencies. In order for young men and women to receive a proper education and become valuable assets in the workforce, they must have a firm understanding of how financial aid works and how to apply for it.

According to recent figures released by the National Center for Education Statistics, roughly two-thirds of American undergraduates receive some form of financial aid for college; the average recipient was given $9,100 for the 2007-08 academic year. Of those who received any aid, 52 percent obtained grants averaging $4,900; 38 percent took out student loans averaging $7,100; 7 percent earned an average of $2,400 from work-study jobs; 4 percent had parents who took out Parent PLUS Loans averaging $10,800; and 2 percent received veteran’s benefits averaging $5,400.

According to Federal Student Aid, a branch of the US Department of Education, students have several options for obtaining academic financial aid. Federal Pell Grants are typically given to first-time undergraduates, though exceptions can be made for graduate students who wish to earn a teaching degree. For the 2012-13 academic year, the maximum Pell Grant comes to $5,500; however, the amount is determined by a number of factors, including tuition costs for a particular school, academic status (full- or part-time), and the individual financial needs of the applicant. Regardless of the amount received, students are not obligated to  repay the grant.

Other US government-funded grants are available, as well. Federal Supplementary Educational Opportunity Grants  (FSEOGs) award between $100 and $4,000 per year to applicants. Students with high financial need are typically considered first. Like the Pell Grants, FSEOGs are not repaid by the students; unlike Pell Grants, however, FSEOGs have limited allotments, and can only serve students on a “first come, first served” basis. Teacher Education Assistance for College and Higher Education (TEACH) Grantsalso award up to $4,000 per year. However, recipients must agree to teach in a “high-needs field” for at least four years within eight years of completing the academic program. Furthermore, the four years must be spent at a school or educational service agency that enrolls low-income students. Iraq and Afghanistan Service Grants award up to $5,500 to students that lost a parent or guardian during the recent military conflicts. In order to receive this grant, applicants must have been under the age of 24 when their loved one was killed, and they must meet all Pell Grant requirements (with the exception of “Expected Family Contribution”).

Scholarships are similar to grants, in that they are not repaid. But rather than coming from federal money, scholarships are provided by academic institutions, employers, non-profit organizations, religious entities, and other various groups and agencies. Many scholarships are awarded to men and women who display strong academic proficiency, specific skills or traits (such as athletic talent), or a combination of both. Other scholarships target certain demographics, such as women, people from particular geographic areas, and minority groups. Scholarship amounts vary greatly. Some are one-time amounts, or small stipends on a semester-basis; some are tied to grades, while others are totally no-strings. The most coveted scholarships cover the entire cost of four-year tuition.

Students can access scholarship data from a variety of sources. Most colleges and high schools have some type of financial aid office that will provide information on available scholarship opportunities. School counselors are also helpful in this area.

Other resources include federal and state agencies, public libraries and databases for academic foundations and/or community organizations. USDE cautions applicants that while most scholarships are legitimate, some are scams that can hurt one’s credit score and financial standing. Thorough research should be conducted prior to application for any scholarship, and cross-checking is essential before handing over sensitive personal information like Social Security Number.

Student loans are different from grants and scholarships in that they must be repaid once the recipient has concluded his or her academic program. The US Government offers two primary types of student loans: subsidized and non-subsidized. Subsidized loans are awarded to students with a high degree of financial need. The US Government will finance interest on subsidized loans while the student is enrolled in college courses at least part-time, as well as during the first six months after completion of a degree. Deferment of loans also applies to certain individuals (such as active military members and Peace Corps volunteers) for indefinite periods of time. Non-subsidized loans are awarded to any student, regardless of their financial need; however, each recipient is required to pay interest as long as loan payments are still outstanding. For both subsidized and non-subsidized loans, school officials determine the amount awarded to each student. All government loans are subject to income-based repayment, which allows the recipient to repay based on their gross earnings (and not the outstanding debt).

In addition to subsidized and non-subsidized loans, the federal government offers loans to applicants who meet certain criteria. For example, PLUS loans target expenses that are not covered under financial aid. The amount awarded to any given student is calculated by subtracting all other received financial aid from the total cost of tuition and attendance at his/her school. Typically, PLUS loans are awarded to either graduate students or parents of financially dependent undergraduates. The borrower must have a solid credit history, and agree to repay the loans at a fixed interest rate of 7.9 percent. Perkins loans, on the other hand, are typically only awarded to students with “exceptional financial need,” and are repaid at a fixed interest rate of 5 percent. In this case, the academic institution acts as the loan lender, and payments are made to the school’s loan servicer.

Many students and parents of students opt to receive privately funded student loans from lending agencies such as banks, credit unions and academic institutions. However, since privately funded student loans do not carry fixed interest rates or honor income-based repayment, they tend to be the more expensive option. Most will require students to begin repayment during their education, and variable interest rates for these loans can reach as high as 18 percent. There are also additional requirements for private loans, such as proof of good credit history and a co-signer who is able to cover the bill if the recipient is unable. Private loans rarely allow for loan deferment or forgiveness.

Many resources are available to students who wish to receive financial aid, and to simplify the search process.  FinAid.org offers a comprehensive list of various financial aid opportunities (such as grants, scholarships and loans), as well as useful articles and graphs that clearly illustrate the academic lending process. ED.gov, a site maintained by the US Department of Education, features information about federally funded financial aid, as well as links to applications, loan consolidation agencies and an archive of student aid-related publications. FedMoney.org provides a list of more than 240 government financial aid programs, including fellowships and traineeships. Finally, The National Student Loan Data System features information provided by schools, guaranty agencies and various lending programs, and Military.comfeatures guidelines for servicemen and women who wish to receive funding for a college degree.

Navigating the maze of available financial aid can be tricky for today’s prospective students. Fortunately, a myriad of online resources are available that outline various lending policies, explain program qualifications and enable each student to make the best choice when it comes to receiving educational assistance.