Norway Savings Bank - more than money

 

One of the first steps in acclimating to college culture is speaking the language.

 

And when it comes to financial aid, it's all Greek to incoming freshmen. Here's a primer that can help high school seniors and their parents descramble the college cash code.

The nucleus of the financial aid process is the Free Application for Federal Student Aid (FAFSA), the form required to determine eligibility for all federal financial aid programs. Your family should file a FAFSA every year you plan to attend college. Every time you file a FAFSA, the federal government issues your student aid report (SAR), which details your expected family contribution or EFC (how much you and your family should be able to pay toward college), and your eligibility for federal financial aid.

Federal aid comes in many forms, and the programs you can accept depend on your school's participation. The most common federal aid programs are PLUS Loans for parents, as well as Pell Grants, Work-Study, Perkins Loans, and Stafford Loans for students. Stafford Loans allow eligible students attending approved institutions to borrow guaranteed (insured) loans at below-market rates. A subsidized Stafford Loan is eligible for interest benefits to be paid by the federal government during school, grace, and authorized deferment periods, while an unsubsidized Stafford Loan requires the student to pay interest during those periods.

Your school will provide a total cost of attendance (COA) for one year of study. This figure usually includes tuition and fees, room and board, books, supplies, transportation costs, and personal expenses. Your financial need is calculated by figuring the difference between a school's COA and your EFC.

Once your financial aid package has been determined, your school will send you an award letter, the official document which itemizes all the terms of the aid awarded. If you have any questions about your aid, you should contact one of the school's financial aid officers, who are expert in addressing students' concerns about the financial aid process.

Private/alternative loans are funds that a student or a sponsor (usually a parent) borrows from a lending institution—such as a student loan provider like Nellie Mae—instead of by the federal government. If you apply for a student loan, your financial aid officer has to certify your application, that is, confirm for the lender and guarantor that a loan applicant meets enrollment, borrowing amount, and other eligibility criteria. Once a loan application is certified and approved, the lender disburses funds to the borrower, school, or escrow agent to pay the tuition.

It is important to remember that unlike gift aid (grants or scholarships), all student loans—including those provided by the federal government—must be repaid. Check out our complete glossary of financial aid terms, plus other tools that can help your family navigate the financial aid process including brochures, and applications for federal and alternative loans.