What is the FAFSA?
If a student needs financial aid for college, he/she will need to fill out the FAFSA (Free Application for Federal Student Aid). The application is used to determine the dollar amount the student or his/her family will be expected to contribute towards college. All federal grant and loan awards are determined by the FAFSA, and nearly all colleges use the FAFSA as the basis for their own financial aid awards.
The FAFSA is managed by the Office of Federal Student Aid, part of the Department of Higher Education. The Office of Federal Student Aid processes roughly 14 million financial aid applications a year and disburses about $80 billion in financial aid.
The FAFSA requires information in five categories:
- Information about the student
- Information about the student’s dependency status
- Information about the student’s parents
- Information about the student’s finances
- A list of the schools that should receive the results of the FAFSA
Students can fill out the FAFSA online at the FAFSA website, or they can apply through the mail with a paper form. The Office of Federal Student Aid strongly recommends the online application because it conducts immediate error checking, and it tends to speed up the application process by a few weeks.
Again, any financial aid award begins with the FAFSA, so student's need to complete the form before the deadlines for the schools to which they've applied. Realize that most state deadlines are much earlier than the June 30th federal deadline.
The Federal Stafford Loan is the basic building block of most students’ financial aid packages. Students using Stafford Loans can typically borrow a significant amount of money regardless of their financial need, for both undergraduate and graduate school programs.
The interest rate and terms for Stafford Loans can vary depending on whether the loans are subsidized or unsubsidized. However, in either scenario, they represent one of the best choices for borrowing to pay college costs.
Stafford Loan limits are based on two factors: whether a student is considered a dependent of his parents and his year in school.
Stafford Loan Maximum Amounts:
- Freshman - $3,500 dependent, $7,500 independent
- Sophomore - $4,500 dependent, $8,500 independent
- Junior or Later - $5,500 dependent, $10,500 independent
- Graduate or Professional Degree - $20,500 per year for either type of student
Dependent students who were not able to secure a PLUS loan for additional funds can borrow money up to the independent student loan amount.
Additionally, there is a lifetime limit on Stafford Loans, currently capped at $138,500 per student.
There are two types Stafford loans, subsidized and unsubsidized. A subsidized Stafford Loan is one that the Federal government pays the interest on while a student is still in school. In other words, the loan value has nothing added to its original amount until after you graduate. Subsidized loans are available on the basis of financial need.
Students who don’t qualify for a subsidized loan can still receive an unsubsidized loan, but will accrue interest while they are still in school. However, they do not have to begin repaying the loan until after they graduate.
The amounts of subsidized loans a student can receive are limited to the “dependent” maximums listed above. For example, the maximum subsidized loan amount for a freshman student would be $3,500. Any additional Stafford Loans received, up to the freshman year maximum of $7,500, would be unsubsidized.
For graduate school, the maximum subsidized loan amount is $8,500 out of a possible Stafford Loan package of $20,500 per year.
The current interest rate on all Stafford Loans issued after June 30, 2006 is 6.80%. Starting on July 1, 2008, and continuing through the 2011-2012 school year, the following lower rates will be offered for NEW subsidized undergraduate loans ONLY:
- 2008-2009: 6.00%
- 2009-2010: 5.60%
- 2010-2011: 4.50%
- 2011-2012: 3.40%
In addition to the interest paid on a Stafford Loan, there is also a loan fee of 4% of the total loan amount. This fee is partially deducted from each disbursement check, and is expected to decrease each year until it reaches 1% in 2010.
Repayment of all Stafford Loans begins six months after a student does one of the following:
- Graduates
- Drops-out
- Drops below half-time status
During this six-month “grace period,” interest does not get added onto a subsidized loan, but does accrue for unsubsidized loan balances.
Stafford Loans allow students to choose a repayment plan which might include:
- Even payments over 10 years
- Increasing payments over 10 years
- Even or increasing payments over 25 years (loans over $30,000)
- Income-sensitive payments
Regardless of whether or not students are applying for a subsidized or unsubsidized Stafford Loan, they must fill out a FAFSA form. Once completed, the Free Application for Federal Student Aid (FAFSA) form is forwarded to their school, who will then inform the students of their loan eligibility and lender options. When they accept the loan, they are required to sign a "master promissory note" before any funds can be disbursed.
Overview of the Federal Perkins LoansPerkins Loans are typically viewed as the best type of student loan one can receive. Unlike the Stafford and PLUS loans, they are reserved for students who demonstrate an “exceptional financial need.”
While the Federal Perkins Loans have lower overall limits than the other Federal loan programs, the other terms of the Perkins Loan (interest rate, grace period, fees, and repayment options) are the most generous.
The maximum Perkins Loan amount a student can receive in any year is determined by whether they’re an undergraduate or graduate student.
- For undergraduate students, there is a $4,000 per year cap on Perkins Loans. There is also an undergraduate cumulative limit of $20,000.
- For graduate students, there is a $6,000 per year cap on Perkins Loans. There is also a graduate and undergraduate combined cumulative limit of $40,000.
For example, a student who had borrowed $15,000 as an undergraduate student would be limited to borrowing another $25,000 as a graduate student.
The current interest rate on all Perkins Loans is 5.00%. With the exception of an upcoming dip in the Stafford Loan interest rates (2010-2012 school years only), the Perkins Loan has the cheapest interest rate of any Federal student loan program.
All Perkins Loans are subsidized loans. This means that the interest is paid by the government until graduation, for any student enrolled at least half-time. There are no loan or origination fees for a Perkins Loan.
Following graduation, students are given a 9-month grace period from making payments. After this time, Perkins Loans must be repaid within a maximum of 10 years. The minimum payment on a Perkins Loan is $40 per month.
Perkins Loans may be “forgiven” in return for certain types of public service. The most notable of these, the National Defense Education Act, forgives a percentage of a Perkins Loan for each year spent teaching at a qualifying public school.
To be considered for a Perkins Loan, students must demonstrate an exceptional financial need on their FAFSA form. Completing this form will help determine their eligibility for various Stafford Loan programs as well.
Once completed, the Free Application for Federal Student Aid (FAFSA) form is forwarded to their school, which will then inform the students of their Perkins Loan eligibility.
Federal Pell Grants are the most widely available type of grant program for undergraduate students. Unlike the Federal loan programs (Stafford, Perkins, PLUS, etc.), Pell Grant awards never need to be repaid.
Federal Pell Grants are made available to students based on a number of factors, all of which are connected to a student’s "Expected Family Contribution" (EFC). In other words, Pell Grants are given to students who demonstrate a significant financial need.
The maximum Pell Grant award can change annually based on the amount of Federal funds made available for the program. The percentage of this maximum amount that a student receives is directly affected by the student’s Expected Family Contribution (EFC), Cost of Attendance (COA), and status (full-time, half-time, etc.). For the 2008-2009 school year, the maximum Pell Grant amount is $4,731.
Unlike many of the Federal loan programs that have lifetime caps on borrowing, the Pell Grant does not currently have a lifetime maximum on awards. As long as a student is pursuing their first bachelors’ degree and is otherwise eligible, they can receive Pell Grant funds.
Federal Pell Grants are awarded to individuals based on their Expected Family Contribution (EFC), which is calculated using the assets and income of both the student and their parents. As a student’s Expected Family Contribution rises, their potential Pell Grant amount decreases. Above a certain EFC level, no Pell Grant will be awarded.
For the 2008-2009 school year, the maximum EFC level that can still receive a partial Pell Grant is $4,041.
Pell Grant award amounts are affected by a student’s Cost of Attendance for their college or university. The greater the Cost of Attendance, the closer the student will get to receiving the maximum Pell Grant amount. For the 2008-2009 school year, the minimum Cost of Attendance required to receive the full Pell Grant amount is $4,241.
Pell Grant award amounts are also affected by a student’s attendance status. Full-time students are eligible to receive the largest grant amounts, with three-quarter, half-time, and less than half-time students receiving less. It’s worth noting that the Pell Grant is one of the few programs that make money available to students attending less than half-time.
For the 2008-2009 school year, the maximum Pell Grant award per category is:
- Full-time: $4,731
- 3/4-Time: $3,548
- 1/2-Time: $2,366
- Less Than ½-Time: $1,183
Pell Grants are primarily available to undergraduate students. However, certain graduate teacher credentialing programs may also be eligible.
To be considered for a Pell Grant, students must complete a FAFSA form. Completing this form will help determine their eligibility for other loan and aid programs as well. Once completed, the Free Application for Federal Student Aid (FAFSA) form is forwarded to their school, which will then inform the students of their Pell Grant eligibility.
What is the CSS Profile Form?
When it comes to financial aid, the CSS Profile Form is often confused with FAFSA form. While there are many differences between the CSS Profile form and the FAFSA form, the main difference is the type of aid they help you to apply for.
The CSS Profile form, a service of the College Board, is used by students to apply for non-Federal financial aid at over 600 universities. In other words, the CSS is used to apply for scholarships and programs offered by individual schools. The FAFSA, on the other hand, is used to apply for Federal programs such as Stafford and Perkins Loans, as well as Pell Grants.
Unlike the FAFSA, which is free to complete, the CSS Profile form costs $25 to create and submit to one school. Additional school costs $16 per submission. A limited amount of fee waivers are available to low-income families.
Since the CSS Profile form only covers a certain group of schools, students should check the Participating Programs List before they spend the time and money to apply.
While the CSS Profile form has no specific deadline, students should submit it at least two weeks before the financial aid deadline at their school.
CSS Aid Eligibility
Whereas Federal financial aid is calculated based on a strict formula across all students nationwide, the CSS Profile form allows colleges to calculate aid eligibility for their own programs based on whatever criteria they set. Hence, the questions on one school’s CSS Profile may vary dramatically from another school’s.
Because the CSS Profile form is for private scholarships, grants, and financial aid programs, the schools are permitted to consider other factors not considered on the FAFSA form. These include items such as the value of a parent’s home, insurance contract values, and annual retirement plan contributions.
Completing the CSS Profile Form
The College Board offers the CSS Profile Form both online and in a paper format. Students should visit the College Board website for more info or to get started on your application.