Handbook: Preparing Your Child for College

Sources Of Financial Aid

Student financial aid is available from a number of sources, including the federal government, state governments, colleges and universities, and other organiza tions. Students can receive aid from more than one source.

The federal government supplies the largest amount of all student aid, about 75 percent or $35 billion annually. The largest and most popular federal student aid programs are:

- Federal Pell Grants

These are need-based grants that were given to just under 3.8 million students for school year 1998-99. In school year 1998-99, the maximum Pell Grant was $3,000.

- Federal Direct and FFEL Stafford Loans

Direct and FFEL Stafford Loans are the federal government's major form of self-help aid. Direct Stafford Loans are available through the William D. Ford Direct Loan (Direct Loan) Program and FFEL Stafford Loans are available through the Federal Family Education Loan (FFEL) Program. In 199899, approximately 5.4 million students received FFEL Stafford Loans and about 3 million received Direct Stafford Loans.

The terms and conditions of a Direct Stafford or a FFEL Stafford are similar. The major differences between the two are the source of the loan funds, some aspects of the application process, and the available repayment plans. Under the Direct Loan Program, the funds for your loan are lent to you directly by the U.S. government. If your school does not participate in the Direct Loan Program, the funds for your loan are lent to you from a bank, credit union, or other lender that participates in the FFEL program.

The Direct and FFEL programs also offer PLUS Loans for parents of dependent students and Consolidation Loans. Direct and FFEL Stafford Loans are either subsidized or unsubsidized. A subsidized loan is awarded on the basis of financial need. With this type of loan, borrowers are not charged any interest before they begin repayment or during authorized periods of deferment. The federal government "subsidizes" the interest during these periods.

An unsubsidized loan is not awarded on the basis of need. You'll be charged interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalizedthat is, the interest will be added to the principal amount of your loan and additional interest will be based upon the higher amount. This will increase the amount of money you have to repay. If you choose to pay the interest as it accumulates, you'll repay less in the long run.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period.

If you're a regular student enrolled in an eligible program of study at least half time, you may receive a Direct or FFEL Stafford Loan. You must also meet other general eligibility requirements.

If you're a dependent undergraduate student you can borrow up to:

If you're an independent undergraduate student or a dependent student whose parents are unable to get a PLUS Loan, you can borrow up to

For periods of study that are less than an academic year, the amounts you can borrow will be less than those just listed. Talk to your financial aid administrator to find out how much you can borrow.

For a Direct Loan the U.S. Department of Education will pay you through your school. For a FFEL Stafford Loan, the lender will send the loan funds to your school. In most cases, your loan will be disbursed in at least two installments; no installment can be greater than half the amount of your loan.

- Federal Campus-Based Programs

The federal government provides money to colleges to give to needy students through three federal campus-based programs. These three programs include (1) a grant program (Federal Supplemental Educational Opportunity Grants, or SEOGs), (2) a loan program (Federal Perkins Loans), and (3) the Federal Work-Study Program.

Students can get aid from more than one federal program. For the most up-to-date information about student aid supplied by the federal government, call the Federal Student Financial Aid Information Center toll free at the U.S. Department ofEducation at l-800-4FED-AID. You can also obtain a guide to federal financial aid for students, called The Student Guide, which provides an extensive and annually updated discussion of all federal student aid programs. You can obtain the Guide by writing to the following address:

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044

Or call: 1-800-4FED-AID.

States generally give financial support to public colleges and universities. This support lowers tuition for all students attending these schools. Some states also offer financial assistance directly to individual students, which can be need-based or merit-based. To find out about state aid where you live, call or write your state's higher education agency. The phone numbers and addresses of all of these agencies are listed in the last section of this handbook.

Colleges themselves provide aid to many of their students. Most of this institutional aid is in the form of scholarships or grants. Some is need-based and some is merit-based.

When your child wants financial aid information about specific schools, he or she should contact the financial aid offices of these schools and request information.

Other organizations, such as corporations, labor unions, professional associations, religious organizations, and credit unions, sometimes award financial aid. You can find out about the availability of such scholarships by contacting someone from the organization or by contacting its headquarters.

In addition, some organizations, particularly foundations, offer scholarships to minorities, women, and disabled students. To learn more about such scholarships, go to the nearest public library with a good reference section and look for directories that list such scholarships. (The names of a few books that list scholarships appear in the last section of this guide.) College admissions offices and high school guidance counselors should also be able to provide more information about scholarships.

The guidance counselors at your child's high school should be able to provide information on when and how to apply for federal, state, and other types of aid. If they cannot give you this information, try a local college. Even if your child doesn't plan to attend that particular institution, financial aid officers there should have information on federal financial aid. Many colleges can also tell you about state aid and their own institutional aid.

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