Overview of Financial Aid

Financial aid is a term used to describe monetary funding for college students in need of financial assistance. Certain lenders will grant borrowers a loan with a set fixed interest rate. The borrower will then use this funding most commonly for educational purposes. However, financial aid funding can be allocated towards purchasing a house or motor vehicle as well.

School financial aid, specifically refers to academic institutions offering students monetary funding for their education. This funding, depending on the education levels of the school, offers a student the ability to seek secondary/postsecondary education; tuition fees, room and board, etc. Public education doesn’t fall under the category for financial need.

The federal government in the U.S. offers a type of financial aid called Federal Student Financial Aid. This consists of an array of programs, scholarships, and grants. Some examples are the Federal Pell Grants, Federal SEOG Grants, SMART Grants, Academic Competitiveness Grants (ACG), Federal Stafford Loans (subsidized/unsubsidized), Federal Perkins Loan, Federal Work-Study, and Federal PLUS Loans. The Federal Perkins Loan is funded by the participating schools within the U.S. Department of Education. As for the Federal Stafford and PLUS Loans, funds are made possible from lenders within the Federal Family Education Loan Program (FFELP).

To be eligible for financial aid towards education, individuals must fill out the Free Application for Federal Student Aid (FAFSA). FAFSA determines based upon a student’s family income and assets, exactly how much they will allocate towards a student each year. In some instances, for individuals who are in dire financial turmoil, may choose in addition to FAFSA, to fill out the CSS Profile (The College Scholarship Profile). This profile makes precedence of the demand for financial aid.

*Note: (The Free Application for Federal Student Aid (FAFSA) must be resubmitted every year in order to re-qualify for financial aid.)

Types of Financial Aid

• Loans
  • A loan is typically understood as a type of debt. Monetary loans are the most common. A loan contains a series of monthly transactions between a lender and a borrower, until the loan is paid back.
• Student Loans
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• Private Loans
  • These are generally directed towards student loans in regards to financially funding a student for postsecondary education and beyond.

Types of Private Loans

• Stafford Loans
• Perkins Loans
• Parent/Graduate PLUS Loans

Scholarships
A scholarship is a type of award that offers students access into an institution of learning. There are main two-types of scholarships: merit-based and financial demand-based. Each scholarship is created based on the founder/donor of the award and the requirements an individual has to sustain, in order to be awarded.

Grants
Grants are usually provided by the governments and/or non-profit organizations and usually cover a variance of different expenditures. A grant does not need to be paid back and is awarded based upon merit- may it be academic or any other area that one proves to excel in.

Home Equity Line of Credit
HELOC allows an individual to borrow as little or ass much money is needed, without taking out one giant lump-sum loan.

Tax Credits
A tax credit helps you subsidize the amount of income tax an individual may need to pay off.  This credit erases the initial tax-cost.

Military and Veteran Benefits
The Montgomery GI Bill: The GI Bill is the first educational assistance program for the armed forces that doesn’t require Active-Duty status. Here active-reserve and retired-reserve men and women in all of the five branches are eligible.

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