12 Most Prevalent College Financial Aid Terms
Your college education is an extremely important and expensive investment. Before you shell out thousands of dollars for an advanced education, you need to give yourself a basic education in the financial aid process.
Navigating the college financial aid process can be hard enough even for the most highly educated people. So to help, we’ve put together a quick reference guide on the 12 most common financial aid terms used.
1. FAFSA (Free Application for Federal Student Aid)
Filling out the FAFSA is one of the first steps in the financial aid process, and determines the amount that you or your family will contribute to your student’s college education.
2. Expected Family Contribution (EFC)
Calculated based on a specific formula, which considers taxed and untaxed income, assets, and benefits, as well as the size of your family and the number of family members attending college during the year.
3. Federal student aid
The largest form of student aid in the country — federal aid programs come in the form of government grants, loans, and work-study assistance and are available to students at eligible post-secondary institutions (colleges, vocational schools, and graduate schools).
4. Financial need
This is the student’s total cost of attendance that isn’t covered by the expected family contribution or outside grants and scholarships. A student must demonstrate financial need to be eligible for need-based financial assistance.
If scholarships and grants don’t cover the entire cost of your tuition, you may need a student loan to fill the gap. Federal student loans don’t have to be paid while a student is in college, and there are a variety of loan forgiveness programs available. The rates and terms are usually more flexible than private loans.
Can come from the state or federal government, from the college itself, or from private sources and doesn’t have to be paid back.
There is little difference between a scholarship and a grant, though the general consensus is that scholarships are mainly awarded for academic merit (good grades) or for something you have accomplished (volunteer work or a specific project); also, there are need-based scholarships, as well. Like grants, scholarships don’t have to be repaid.
8. Work-study/work award
The Federal Work Study program offers funds to eligible students for part-time employment to help finance the costs of college.
College tuition is the “sticker price” of your education, and does not include room, board, textbooks, or other fees. Often colleges simplify the cost by providing a flat fee for tuition.
10. Tuition reimbursement
Tuition reimbursement is sometimes called “tuition assistance,” and it is growing in popularity. Some employers will refund you the cost of your tuition if you’re studying a work-related area. Tuition reimbursement can cover as little as one or two courses, or can cover up to the entire cost of your education.
11. Room and board
Everyone needs to sleep and eat. If you plan to do it on campus, those fees are part of your total cost of attendance.
12. Award letter
Arriving in your mailbox around mid- to late April, your award letter outlines your financial aid package from the college(s) to which you applied. Colleges aren’t required to follow a standard format for award letters, and important information is sometimes missing or misleading.
I hope that these terms were helpful in your journey towards a college education. If you have any questions, please comment below and let’s discuss them!
Featured image courtesy of 401(K) 2012 licensed via Creative Commons.