The Top 4 Sources Of Aid

Careers and Colleges, Nov, 2000 by Yojairy Sanchez

Federal, state, college, and private funding make a perfect combo for the college-bound.

When you compare your compare financial aid packages from the colleges that have accepted you, you will find that your aid can consist of funding from four major sources-the federal government, your state, and your college, as well as any private scholarship dollars that you may have won.

What follows is a detailed look at the major financial aid programs for undergraduates, as well as profiles of students, who reveal exactly how they paid for their freshman year of college. Review these sources carefully and make sure you're not missing our on any college cash.

1.FEDERAL GOVERNMENT

About 70 percent of all financial aid comes from the federal government. (See pie chart at top of page 22.) When you apply with the FAFSA, you will find out if you qualify for these programs:

FEDERAL PELL GRANTS. This year, awards are expected to provide a maximum of $3,500 to $3,650, depending on government approval. Pell grants go to students demonstrating significant need and funds are guaranteed to every student who qualifies.

FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS (SEOGs). Ranging from $100 to $4,000 a year, these awards are also for undergraduates with exceptional need. Unlike the Pell, this program does not guarantee an award if you qualify-it depends on the availability of funds at each school.

FEDERAL WORK-STUDY. This program provides jobs paying at least minimum wage to undergraduates with financial need.

FEDERAL PERKINS LOANS. These low-interest (5 percent) loans allow undergraduares with exceptional financial need to borrow up to $4,000 a year. The total amount borrowed over the course of college cannot exceed $20,000.

FEDERAL STAFFORD LOANS.

With a variable interest rate that can never exceed 8.25 percent, these loans offer up to $2,625 for freshmen, $3,500 for sophomores, and $5,500 for juniors and seniors. If you will be 24 or older before December 31, 2001, or if you are married, a graduate or professional student, someone with legal dependents other than a spouse, an orphan or ward of the court, or a veteran, you are considered financially independent (of your parents) and can borrow even more.

There are two types of Stafford loans--subsidized and unsubsidized. Subsidized loans are awarded based on need, and you are not charged interest while you're in school or in deferment (an official time when you can delay repayment--e.g., if you're unemployed). Repayment begins six months after you graduate, leave school, or drop below half-rime status. Unsubsidized loans are available regardless of need. However, with these loans, you re responsible for the interest while in school and during deferment periods.

FEDERAL PLUS LOANS. This program lets parents borrow for each dependent child who is enrolled at least half-rime. PLUS provides an amount no more than the cost of tuition, room and board, etc., minus the amount of aid already received. First payments on these loans must be made 60 days after the final disbursement.

NEW TAX CREDITS. Depending on family income, college students and their parents can also benefit from new tax deductions. The Hope Scholarship is a tax credit of up to $1,500 annually during the first two years of college, and the Lifetime Learning Credit is for subsequent years of college study--it starts at $1,000 a year. By 2003, the annual maximum rises to $2,000. Also, if you're paying interest on student loans, you may be able to deduct up to $2,000 this year from your income tax, and the government is now allowing penalty-free withdrawals from IRAs if the money goes toward a college education.

In the past, you could only take Stafford and PLUS loans through a private lender, but now you can take out a direct loan if you're attending one of the more than 1,100 schools that participate in the Federal Direct Student Loan Program. If you take our a loan under this plan, the U.S. Department of Education is your lender--not a bank. Loans through private lenders are still most prevalent and are part of the Federal Family Education Loan (FFEL) Program.

Plus, you may benefit from loan forgiveness programs once you graduate (see page 26), and the military also offers funding for those willing to serve (see page 38).

2. STATE GOYERNMENT

When you're done researching federal resources, look closer to home. Contact your state's department of higher education and ask for literature on grants, tuition assistance, fee reductions, and loans. (See our list of state guaranty agencies at www.careersandcolleges. com.) You may have to fill out additional financial aid forms, since only 22 states currently rely on the FAFSA. Many state funding programs are specifically for students who go to college instate. Increasingly, states are offering financial incentives to keep top students within state borders. However, reciprocal arrangements between states often permit students to receive discounted tuition in other states, usually nearby. Although many programs are need-based, several are based on academic, military, or minority status.