Federal Financial Aid for Students
The U.S. Department of Education offers several financial aid programs for post-secondary education, including grants, loans, and work-study. Aid is usually awarded based on financial need; both the cost of education and the Expected Family Contribution (EFC) are considered.
The EFC is calculated using a formula established by Congress. Factors such as taxable and nontaxable income, assets (savings, checking accounts, family businesses, and real estate holdings), and benefits (unemployment and Social Security, for instance) are all considered in the calculation.
These are the federal aid programs available:
- Pell Grants
These grants are awarded to undergraduates based on need and family income qualifications; the amount of the grant depends on program funding. The maximum award for the 2004-2005 award year was $4,050.
- Supplemental Educational Opportunity Grants
These grants go to undergraduates who are in greater need than Pell Grant applicants. This money is supplied by the federal government, but distributed by individual colleges. Availability of these grants may be limited, depending on how much funding is allocated to a particular school. Annual grants range from $100 to $4,000.
- Federal Perkins Loan
These loans are available for students with exceptional financial need, depending on date of application, level of need, and the funding level for the particular school. Eligible undergraduate students can borrow up to $4,000 per undergraduate year of study, not to exceed a total of $20,000; eligible graduate students can borrow up to $6,000 per graduate year of study, not to exceed a total of $40,000. Interest is 5 percent. For students enrolled half-time or more, repayment begins nine months after leaving school. (Students who attend school less than half time may have a shorter grace period.) Payments can be spaced over a maximum of ten years after the grace period expires.
- Federal Work-Study Program
This program provides funds to students in exchange for work. A typical work-study job is scheduled 12 to 15 hours per week during the school year and pays at least minimum wage, but hours and compensation cannot exceed the federal work-study award. These are usually on-campus jobs such as food service or library monitoring; if off campus, they may be with a government agency, a nonprofit organization, or a for-profit company with which the school has a special arrangement.
- Direct Stafford Loans
Stafford loans are usually arranged through private lenders but federally insured and subsidized. The program offers four flexible repayment options.
- PLUS (formerly "Parents' Loans for Undergraduate Students")
Parents are eligible for PLUS loans if they pass a credit check. The amount of the loan is generally limited to the actual cost of attendance minus any financial aid already received, and repayment begins 60 days after the final loan disbursement for the academic year. Interest on PLUS loans is variable, but cannot exceed 9 percent.
- State Aid Programs
Some states offer aid based on academic performance as well as need. The recipients of most state loans must be legal residents of that state who are enrolled in a college or university within the state, although some states have reciprocity agreements with other states.