Is this how subsidized loans work?

[Pegasus]

I've been assuming that we would not be eligible for any need-based aid but now I'm thinking that we should be eligible for subsidized direct student loans.  Is the following correct:

 

COA - EFC - merit aid = eligibility for need-based aid, including subsidized loans

 

So, using nice round numbers as an example:

 

COA = $30K

EFC = $15K

Merit aid = $5K

Grant aid = $0

 

Since this leaves a $10K eligibility for need based aid, would the student be able to get the maximum subsidized student loans (currently $3.5K freshman year, $4.5K sophomore year, and $5.5K junior and senior years)?

 

 

[Janice in NJ]

Just a note - Don't have the fed formulas in front of me regarding loans. Just offering this to help folks understand something about merit aid that came as a surprise to me. I was wrong when I thought a scholarship would reduce our EFC. (According to your post, you aren't making the mistake I made. :001_smile: )  

 

I'm sure you have read this. 

Subsidized and Unsubsidized Loans | Federal Student Aid

https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#eligibility

 

So, I thought the student would be offered the $3,500 in subsidized and $2,000 in unsubsidized. NOPE. The wording says, "No more than $3,500 of this amount may be in subsidized loans." Some of my kids were offered the $3,500/$2,000 combo platter, some were offered just $5,500 in unsubsidized, and some were offered a different cocktail. Depending on the kid and the college and the year. All over the place. So all three are paying different amounts of interest for the same amount of loan $$. Sorry - I don't know what the magic formula is!  

 

==================

A separate rant:

One of the biggest surprises is that Merit Aid doesn't often reduce the EFC. Yes, some kids earn Merit Scholarships that make college tuition-free or free entirely. But that is often not the norm. 

 

For most kids:

COA - EFC = Financial Need. And Financial Need can be made up of gift assistance (merit aid/scholarships and grants), loans (to the student and/or the parent), and student work-study.

 

So, even at a 100% need-met school, scholarships don't often reduce the EFC. That remains the same; the student just gets a scholarship instead of grant money. The benefit, of course, is that if the student loses the scholarship for some reason, the cost of attendance doesn't change; the school will make up the difference with a grant.

 

Weird, I know. Folks often think a scholarship will reduce their EFC. Nope; not always. Often the scholarship isn't big enough to make a dent in it. Scholarship dollars replace grant dollars; they are not often in addition to grant dollars.

 

Here's a scenario:

 

COA = $ 50,000

EFC = $ 25,000

Scholarship = $10,000

 

The parents pay $ 25,000

Scholarship is $10,000

Student is offered a Federal Loan for $ 5,500

Student is offered a campus work-student job for $ 2,500

College offers an additional grant for $ 7,000

($50,000 - 25K - 10K - 5,500 - 2,500 - 7,000 = $0; Viola! 100% need met!)

 

And that is considered generous. Often colleges don't meet financial need - which means that wouldn't offer that additional $ 7,000 grant. They would suggest that you and/or the student take out a loan. Check out this page for my state's flagship:

 

https://bigfuture.collegeboard.org/college-university-search/rutgers-the-state-university-of-new-jersey-new-brunswick-piscataway-campus

 

Click on "Paying" on the Left. The scroll to the tabs and click on "Financial Aid By the Numbers." Only 9% of students had full need met. That means that 91% of kids had some part of that $7,000 that they were left to figure out on their own! If you compare that to the college up the road - Princeton - the story is a bit different. They are a 100% need-met school. That just means that they were happy to cover that gap of $7,000. And in their case, Princeton runs it differently anyway. They use their own formulas because they have an enormous endowment and can afford to be more generous. My point is that most schools let you figure out that $ 7,000 on your own; they don't cover it.)  

 

The student loan: some kids are offered a subsidized loan, some an unsubsidized, and some a combo of the two. For a subsidized loan, interest on the loan doesn't kick in until 6 months after the kid leaves college. If you borrow $20,000, you only owe $20,000 the day you leave school. With a unsubsidized loan, the interest starts to accumulate the DAY you borrow the money. The day you graduate, you owe more than the $20,000. 

 

Now, the last thing you need to understand is that NONE of this is standard practice. It's all over the place depending on the school.  That's one of the reasons the gov. voted that next year's package is going to be based on last year's taxes. I was surprised to find that out!  Anyway - the hope is that parents will have better data as they decide which school is the right school. 

 

Here's more info about the EFC. 

https://studentaid.ed.gov/sa/sites/default/files/2016-17-efc-formula.pdf

 

And here's a scenario where the student gets a huge scholarship:

 

COA = $50,000

EFC = $25,000

Scholarship = $30,000

 

The parents pay $ 14,500

Scholarship is $30,000

Student is offered a Federal Loan for $ 5,500

 

That's better than you shelling out $25K, but the extra $20K in scholarship didn't help your family save $20K. Sorry! And as far as your kid finding an on-campus job - good luck! Almost all of them are reserved for work-student students. 

 

As I said, there are variations. Hopefully folks will chime in.

 

Peace,

Janice

 

Enjoy your little people

Enjoy your journey

 

 

 

 

 

Edited April 16, 2016 by Janice in NJ

[JanetC]

I've been assuming that we would not be eligible for any need-based aid but now I'm thinking that we should be eligible for subsidized direct student loans.  Is the following correct:

 

COA - EFC - merit aid = eligibility for need-based aid, including subsidized loans

 

No, not at all.

 

FAFSA EFC determines your eligibility for federally subsidized aid (subsidized loans and Pell grants), it has nothing to do with the cost of attendance of your particular institution.

 

You are eligible for Perkins loans based on the particular institution participating in that program as well as on your EFC.

 

You are always eligible for unsubsidized loans in the amount of 5500 minus your eligibility for subsidized loans. (e.g. if you get 2000 eligibility for subsidized, you qualify for 3500 unsubsidized).

 

You are always eligible for PLUS loans up to your cost of attendance. It is rarely wise to take loans in that high amount however.

[JanetC]

Weird, I know. Folks often think a scholarship will reduce their EFC. Nope; not always. Often the scholarship isn't big enough to make a dent in it. Scholarship dollars replace grant dollars; they are not often in addition to grant dollars.

 

I know people think I'm being pedantic when I say this but, what you meant to say was "Merit aid does not always reduce the family's NET PRICE"

 

Vocabulary review for those who are new to this:

 

EFC = Estimated Family Contribution, as calculated by either the FAFSA or the CSS/PROFILE.

 

COA = Cost of Attendance, "the sticker price"

 

Net Price = Your family's cost, which is the cost of attendance minus your gift aid that does not need to be repaid

 

NPC = The net price calculator on a college website, which attempts to estimate what your net price will be. Some colleges have more accurate NPC's than others. (An NPC calculator does not return an EFC, you would need to use an EFC calculator for that.)

 

Merit aid = a squishy, sometimes controversial term. I tend to define merit aid as gift aid from a college that is based on the desirability of the student rather than on the the state of the family's finances. Some people define merit aid strictly as any amount the college gives you that reduces your COA below your EFC. Others admit that the EFC formula is broken and therefore "merit aid" is really being used by families to meet their financial need and shouldn't all be lumped into "colleges wasting money on rich kids when poor kids need it more."

 

Institutional aid = any discount granted by a college, rather than by federal or state government. Can be granted based on need or other factors.

[FaithManor]

Merit aid helps reduce "the gap" which is the amount above your EFC that think you can come up with too, or in our case $16,000 per kid!!!!

 

So for one ds his merit aid was $5000.00. If he didn't have that, at that particular school we would have had an EFC plus a gap of $5000.00 to come up with. At least he didn't have the gap!

 

When dd applied to Cedarville, it was rougly $26,000 a year. She received $13,000 in merit. Our EFC was at that time $6000.00. The school offered nothing but loans for the $7000.00 gap, no need based aid at the time even though we appealed and showed how much our savings had gone down the abyss that year - the year of the infamous housing mortgage bubble burst - and sold our house for $56,000.00 loss. Nope. Not a dime of help. Since some of her scholarships were renewable but not all so that with tuition increases each year her financial situation would just keep getting more dicey, she opted not to go. We were barely holding our own over the loss on the house and savings and were going to have a terrific time coming up with the EFC but would have done it. However even with her taking out federal loans that gap was just going to increase year after year, and at the time, there was no way for us to make up the difference which would have meant a substantial private student loan debt.

 

My advice is to add a good $5000 to your EFC no matter how low it is because unless you are quite low income, there is nearly always a decent size gap.

Edited April 16, 2016 by FaithManor

[Pegasus]

 Some of my kids were offered the $3,500/$2,000 combo platter, some were offered just $5,500 in unsubsidized, and some were offered a different cocktail. Depending on the kid and the college and the year. All over the place. So all three are paying different amounts of interest for the same amount of loan $$. Sorry - I don't know what the magic formulas is!  

 

 

Ok, thanks. This is what I suspected but was trying to confirm. I was curious why I couldn't find "the formula" for the amount of subsidized loan we would be offered, if any.  I understand that things vary widely from school to school but since the sub loan is a fed gov't program, I figured it should be consistent. Now I want to know why it wouldn't be consistent.  

:confused1:

[Pegasus]

No, not at all.

 

FAFSA EFC determines your eligibility for federally subsidized aid (subsidized loans and Pell grants), it has nothing to do with the cost of attendance of your particular institution.

 

You are eligible for Perkins loans based on the particular institution participating in that program as well as on your EFC.

 

You are always eligible for unsubsidized loans in the amount of 5500 minus your eligibility for subsidized loans. (e.g. if you get 2000 eligibility for subsidized, you qualify for 3500 unsubsidized).

 

You are always eligible for PLUS loans up to your cost of attendance. It is rarely wise to take loans in that high amount however.

I apologize for poorly communicating my question. I understand that the FAFSA EFC is used to determine the federal aid like Pell Grant.  There is a very clear formula out there showing how much Pell Grant a family can expect based on their EFC.

 

I've seen nothing official to show families what they can expect in subsidized loans (just caps on the maximum amount that may be offered). So, to more clearly articulate my question:

 

Do you know how the eligibility for subsidized loans is determined/calculated?

[JanetC]

Do you know how the eligibility for subsidized loans is determined/calculated?

 

I cant find it in any of my "usual sources!" I would try the fafsa4caster. https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e1s1

 

And I do need to correct what I said above: For an expensive school (e.g. most of them) your EFC is all that matters. If you are at a community college or some low-cost state schools, the maximum amount of federal aid can exceed your total cost even if your EFC is zero, so you would not be eligible for the maximum amount at that point.

Edited April 15, 2016 by JanetC

[Pegasus]

Thanks!  I finally found the official Federal Student Aid Handbook. It is 1321 pages long and not meant for general public reading. It's designed for the schools' financial aid administrators and counselors. I will dig deep and post if I find relevant information.

 

From my brief review, it looks like the amount of subsidized loans a school can award is not unlimited so it CAN vary widely from student to student and school to school with the exact same financial circumstances.  It provides some sample calculations but then states things like "amount that COULD be awarded." (emphasis mine)

[JanetC]

From my brief review, it looks like the amount of subsidized loans a school can award is not unlimited so it CAN vary widely from student to student and school to school with the exact same financial circumstances.  It provides some sample calculations but then states things like "amount that COULD be awarded." (emphasis mine)

 

That sounds sort of like how federal work-study works - the school gets a pot of money and some rules about who they can't give it to. However, there is leeway as to how the pot is distributed to the eligible kids. (That's why work-study "runs out" if you apply late.)

 

I had no idea that subsidized loans might work that way. Do post when you figure it out! And, really, best of luck in diving into that handbook!

[JulieA97]

Thanks! I finally found the official Federal Student Aid Handbook. It is 1321 pages long and not meant for general public reading. It's designed for the schools' financial aid administrators and counselors. I will dig deep and post if I find relevant information.

 

From my brief review, it looks like the amount of subsidized loans a school can award is not unlimited so it CAN vary widely from student to student and school to school with the exact same financial circumstances. It provides some sample calculations but then states things like "amount that COULD be awarded." (emphasis mine)

Subsidized Loans- not like work study at all. Schools are not given a certain pot of money like campus based aid like work study, SEOG and Perkins. Eligibility is based on the formula listed above. COA -EFC = need. Need - grants and scholarships = remaining eligibility. A student is not given over the amount of remaining eligibilty but they can get up to $3500 for the freshman year.

 

So COA is $30,000, EFC is 15,000. Need would then be $15,000. Student gets $10,000 merit scholarship so has $5000 remaining eligibility. This student can get $3500 in sub loans.

 

On the other hand, COA is $30,000 EFC is $20,000 and student gets $10,000 scholarship. Remaining need is 0 so student not eligible for Sub loans but can get $5500 total in Unsub.

 

In the handbook, look on the volume on calculating awards. On my phone now so cant give correct page but its in there.

 

Signed, financial aid counselor :)

 

ETA: check out Volume 3, chapter 7 page 3-144. It has a packaging example that might help. If a student is eligible based on the above calucation for the full amount of Sub, it must be offered before Unsub. By law. Students may decline part or all of a loan of course but if a school participates on the federal loan program they must offer the full amount eligible for Sub before Unsub or private loans.

Edited April 16, 2016 by JulieA97

[Lori D.]

COA - EFC = Financial NEED

 

Different colleges will cover different amounts of that Financial NEED (anywhere from 60% to 100% of NEED).

To cover that percentage of Financial NEED, colleges offer a Financial Aid Package, which includes: Loans + Scholarships + Grants + Work Study.

 

How much you are offered as federal loans, grants or work study depends on your EFC from the FAFSA. Whether or not the loans are subsidized loans also depends on your EFC from the FAFSA.

 

When looking at the formula, realize that there are potentially three areas where the family would be expected to pay:

 

1. The EFC (estimated family contribution) = what the federal government expects you to pay towards college costs, based on your income tax returns.

 

2. Financial NEED "gap" -- if the college does not cover 100% of the Financial NEED -- for example, if they only cover 80% of NEED, the parent is expected to cover that 20% gap of NEED with Parent Plus loans (or other source of money -- income, savings, or private loans).

 

3. Financial NEED, financial aid package "gap" -- if the student does not rate high enough at the college for lots of merit aid to cover full tuition and/or expenses, and/or the EFC # is too high for the student to be eligible for Federal Aid (Direct Subsidized Loans, Pell Grants, FSEOG Grants, Work Study), then there is a "gap" which, again, is expected that parents will fill somehow (income, savings, or loans).

 

 

As far as how much a student might be eligible from Federal Financial Aid sources; if the EFC number is low enough so that the student qualify for the maximum amount of Federal assistance, the student is looking at:

 

$5,815/year = PELL grant (depends on Financial NEED, COA, and if full-/part-time student)

$100-$4000/year = FSEOG grant (depending on Financial NEED and other aid received)

$1000-$4000/year = Work Study (varies greatly on many factors, including job availability; unearned portion converts to a Direct Unsubsidized Loan) 

$5500/year = Direct Subsidized Loan (amount depends on EFC, Financial NEED, COA, and other factors)

 

As far as Subsidized Loans -- this is directly from the FAQ at the Student Federal Aid website:

 

Am I eligible for a Direct Subsidized Loan or a Direct Unsubsidized Loan?

To receive either type of loan, you must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school. Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.

 

 

Student Federal Aid website, FAQ on other helpful topics:

- Loans -- covers Federal vs. private loans, different types of Federal loans, and eligibility

- Grants

- Work Study

 

Welcome to the wonderfully confusing world of paying for college!  :confused1:  :crying:  :svengo:  :eek:  :mad:  Warmest regards, Lori D.

 

 

Edited April 16, 2016 by Lori D.

[Janice in NJ]

Just a quick follow up to Lori's great post. The first year no more than $3,500 many be via a subsidized loan. The second year it's $4,500, and then in the third year the cap slides up to $5,500 for the subsidized part. As I said, it doesn't mean you will be offered that. That is just the maximum you might be offered in a subsidized loan. 

 

Peace,

Janice

 

[JanetC]

I guess I was starting to believe Pegasus that other factors are considered because a friend with an EFC of about 8K was only offered a 2K subsidized loan in her financial aid package at a private local-to-her Catholic school.

 

It just seems like there must be something other than EFC versus COA to determine who is offered the maximums, but I'm not curious enough to want to wade through hundreds of pages of federal policy to find out.

[Lori D.]

Just a quick follow up to Lori's great post. The first year no more than $3,500 many be via a subsidized loan. The second year it's $4,500, and then in the third year the cap slides up to $5,500 for the subsidized part. As I said, it doesn't mean you will be offered that. That is just the maximum you might be offered in a subsidized loan...

 

...It just seems like there must be something other than EFC versus COA to determine who is offered the maximums, but I'm not curious enough to want to wade through hundreds of pages of federal policy to find out.

 

Thanks Janice! And to follow up both on Janice and JanetC's comments on amounts for subsidized loans, if you follow that link I posted above on Loans, you can then click on links to the "Types of Federal Loans", and the link for Direct Subsidized loans leads to a FAQ; clicking on the question of "How Much Can I Borrow" leads to a handy chart that has that info that Janice posted -- and JanetC, that chart is prefaced by a paragraph that says "Your school determines the loan type(s), if any, and the actual loan amount you are eligible to receive each academic year.". So I don't think there is a way of determining the amount of subsidized loan a specific school will offer without wading through all the pages that JulieA97 so kindly and helpfully provided -- just the potential maximum amount, as Janice said. :)

 

Similar sorts of additional info when you click on the Grants or Work Study links above. :)

Edited April 16, 2016 by Lori D.

[Pegasus]

Signed, financial aid counselor :)

 

ETA: check out Volume 3, chapter 7 page 3-144. It has a packaging example that might help. If a student is eligible based on the above calucation for the full amount of Sub, it must be offered before Unsub. By law. Students may decline part or all of a loan of course but if a school participates on the federal loan program they must offer the full amount eligible for Sub before Unsub or private loans.

Thank you for chiming in!  Great to hear directly from a financial aid counselor who understands all the nuanced details.  I found a clear statement that supports exactly what you've said here on page 3-142  (page 575 if you are looking at the PDF page count):

 

"In addition, a student may not receive a Direct Unsubsidized Loan unless the student has received a Direct Subsidized Loan for the maximum amount for which the student is eligible."

 

Very interesting!  I'm wondering now about the anecdotes I've heard from others where they had unmet need and were only offered unsub loans.  At least now I'll know enough to ask questions of the financial aid office.

 

You've been a big help.

Edited April 16, 2016 by Pegasus

[JulieA97]

I guess I was starting to believe Pegasus that other factors are considered because a friend with an EFC of about 8K was only offered a 2K subsidized loan in her financial aid package at a private local-to-her Catholic school.

 

It just seems like there must be something other than EFC versus COA to determine who is offered the maximums, but I'm not curious enough to want to wade through hundreds of pages of federal policy to find out.

It depends on how much the COA is and how much other aid she received. If a COA is say $15,000 (it will be a lower COA if she is commuting from home) with an EFC of $8000 and the student receives $5000 in scholarships, that only leaves $2000 for Sub. Every student and school will have different situations, but its all based on the same federal formula. COA -EFC = Need. Need - scholarships and grants =Sub loan. It wont go over $3500 for a freshman of course. But schools cannot arbitrarily award a random amount of Sub. Its all based on that formula.

 

ETA: There are programs and schools that operate on a clock hour basis instead of credit hour. In clock hour cases, if the program is less than the federal minimum for a year (900 hours), you prorate federal awards like Pell and loans. So a program that is 800 hours you take 800/900 =

89%. 89% x $3500 for a freshman = $3115 for Sub. Thats not the school deciding to award less than the student is eligible, thats just the full amount the student can get based on the federal calculation. So thats why the handbook and websites say a school determines the amounts and what type. Its a CYA type of thing. But all schools follow the federal regs.

Edited April 17, 2016 by JulieA97

[Lucy the Valiant]

*runs away with a headache fearing kids will never get to college because mom can't figure out what this even means*

[JanetC]

It depends on how much the COA is and how much other aid she received. If a COA is say $15,000 (it will be a lower COA if she is commuting from home) with an EFC of $8000 and the student receives $5000 in scholarships, that only leaves $2000 for Sub. Every student and school will have different situations, but its all based on the same federal formula. COA -EFC = Need. Need - scholarships and grants =Sub loan. It wont go over $3500 for a freshman of course. But schools cannot arbitrarily award a random amount of Sub. Its all based on that formula.

 

ETA: There are programs and schools that operate on a clock hour basis instead of credit hour. In clock hour cases, if the program is less than the federal minimum for a year (900 hours), you prorate federal awards like Pell and loans. So a program that is 800 hours you take 800/900 =

89%. 89% x $3500 for a freshman = $3115 for Sub. Thats not the school deciding to award less than the student is eligible, thats just the full amount the student can get based on the federal calculation. So thats why the handbook and websites say a school determines the amounts and what type. Its a CYA type of thing. But all schools follow the federal regs.

 

The school is about 45 mins from home, so not an easy daily commute, but they are having the package redone for living at home given the numbers. The package for living on campus had a 15K gap filled with a PLUS loan, so I'm not sure why they wouldn't have gotten the max subsidized loan. Maybe the mom gave me the wrong numbers and got the subsidized and unsubsidized mixed up?

 

[JanetC]

*runs away with a headache fearing kids will never get to college because mom can't figure out what this even means*

 

Well, they'll get into college but you might not be able to send them if you don't understand financial aid. So, please ask questions!

[JulieA97]

The school is about 45 mins from home, so not an easy daily commute, but they are having the package redone for living at home given the numbers. The package for living on campus had a 15K gap filled with a PLUS loan, so I'm not sure why they wouldn't have gotten the max subsidized loan. Maybe the mom gave me the wrong numbers and got the subsidized and unsubsidized mixed up?

 

Could be. Unsub for a dependent student would be $2000 so very possible she got them confused or looked at the award letter quickly and didnt realize the difference between the 2. Plus and Unsub can replace the EFC as well.

[JulieA97]

*runs away with a headache fearing kids will never get to college because mom can't figure out what this even means*

Please ask questions! That is what the finacial aid counselors are there for and most are more than willing to explain anything you need. I didnt understand it until I started working in it. Basically, a school has to offer the full amount of Subsidized Loans before offering other loans. The full amount depends on grade level, cost of attendance at a school, EFC from the FAFSA and other aid the student receives. Freshmen can get a max of $3500, Sophomores $4500 and Juniors and Seniors $5500. Thats for the Subsidized Loans. If you are not offered that amount, call the financial aid office and ask why. They will explain where they got the number if you are curious. You dont have to accept any or all of the loans offered.

[Arch at Home]

So what is the reasoning behind the increase in allowable subsidized loan amounts? Does it have to do with the fact that Freshmen tend to get more Merit Aid?

[8filltheheart]

So what is the reasoning behind the increase in allowable subsidized loan amounts? Does it have to do with the fact that Freshmen tend to get more Merit Aid?

 

No.  The amt of federal aid students are allowed to borrow increases by $1000 between fresh-soph and then again between soph-jr.  

 

This link has a good explanation:

https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized

[JanetC]

So what is the reasoning behind the increase in allowable subsidized loan amounts? Does it have to do with the fact that Freshmen tend to get more Merit Aid?

Maybe trying to help students fund tuition increases?

[8filltheheart]

I think the ability to take out larger loans the further into the degree has more to do with the likelihood of staying in school to graduation. 

[Arch at Home]

I think the ability to take out larger loans the further into the degree has more to do with the likelihood of staying in school to graduation.

That makes sense. So the loan numbers I see coming out of the NPCs is a combo of subsidized and unsubsidized. What is the difference?

[Lori D.]

...subsidized and unsubsidized. What is the difference?

 

Subsidized loans = gov't pays the interest on your loan while you're in school and for 6 months after end of classes

(so you only owe the amount of the loan, and then loan amount + interest once you start paying it back)

 

Unsubsidized loans = you are responsible for the interest on your loan from the moment you take on the loan

(if you choose to not pay the interest while in school, your interest accumulates and is added to the loan amount -- and when that happens, in essence, your interest starts accumulating interest)

 

Here's the complete list of differences between subsidized and unsubsidized loans from the Federal Student Financial Aid website:

 

Subsidized

- available to undergraduate students with financial need

- your school determines the amount you can borrow

- the amount may not exceed your financial need

- U.S. Department of Education pays the interest on a Direct Subsidized Loan:

     while you’re in school at least half-time

     and for the first six months after you leave school (referred to as a grace period*)

     and during a period of deferment (a postponement of loan payments)

 

Unsubsidized:

- available to undergraduate and graduate students

- no requirement to demonstrate financial need

- your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.

- you are responsible for paying the interest on a Direct Unsubsidized Loan during all periods.

- if you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan)

 

 

This is where so many students who take out loan (even a subsidized one) but don't complete a degree really get kicked in the pants -- 6 months after leaving college without a degree, their loan repayments start up, and without a degree, the odds of a higher-paying job for taking care of the loan are slim, so now you have student debt AND no degree AND no chance at a higher paying job. And, the debt requires you to keep working to pay off the debt, making it much harder to have the money or the time to go back to school to finish your degree, in order to get a higher-paying job, in order to get out from under the student debt… 

Edited April 17, 2016 by Lori D.

[Lucy the Valiant]

Okay, questions . . . (I *have* started researching, but I need to take breaks now and then because it's truly overwhelming) . . .

 

1. how early can I enter our numbers into FAFSA to even begin to find out EFC?

 

2. ........never mind, some of my questions are more personal than I am comfortable posting here, but I you people encouraged me, and I *WILL* start a folder and start asking my IRL trusted advisors

 

3. For those of you who have BTDT - bright kids (not genius, but bright & test well), limited savings & low-ish income (actually median income but in a high COL area, which equals out to low-income in practical terms), what is the ONE THING you did right or wished you had done regarding scholarship research while the kids were coming up through middle & high school?

 

I love WTM Forums, seriously.

[8filltheheart]

Figuring out FAFSA does not require creating an acct. The info is available online. I think this is the right link, but I didn't read it thoroughly. https://studentaid.ed.gov/sa/sites/default/files/2016-17-efc-formula.pdf

 

But, recognize that all that gives you is info in terms of whether or not you qualify for Pell grants and other federal assistance according to the federal formula. It does not in any way represent how much you pay individual schools. Every school has their own formula, many provide no institutional aid, etc. CSS Profile schools require another entire level of financial assessment and their formulas are proprietary and your best guesstimate is from their net price calculators, but it is an estimate.

 

When I think in terms of FA, I consider what schools individually expect us to contribute PLUS what they expect the student to contribute as the cost of attendance, not any final numbers excluding loans and work study.

 

In terms of scholarships, high test scores are the easiest and simplest way to get large dollar amts from the schools themselves. And th universities themselves are the best source of $$. Outside scholarships tend to be low dollar ants, non-renewable, or extremely competitive for the big $$ ones. NMF offers a list of schools offering large scholarships.

[JanetC]

1. how early can I enter our numbers into FAFSA to even begin to find out EFC?

 

3. For those of you who have BTDT - bright kids (not genius, but bright & test well), limited savings & low-ish income (actually median income but in a high COL area, which equals out to low-income in practical terms), what is the ONE THING you did right or wished you had done regarding scholarship research while the kids were coming up through middle & high school?

 

I love WTM Forums, seriously.

1. Run the FAFSA forecaster now, while you have all your financial forms out to do your taxes. If prestigious schools are on your list, run the college board institutional method forecaster as well.

 

https://studentaid.ed.gov/sa/fafsa/estimate

https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator

 

Repeat each year as you do your taxes to update your estimates.

 

3. Scholarship research is NOT your best bet in paying for college. At least in terms of winning a scholarship and taking it to any school you are accepted to. The best bets are to save as much money as you can and to research schools that provide good financial aid** to kids like yours. These school may be public institutions in your state or regional compact or they may be private schools.

 

**ETA: To clarify: by "financial aid" I meant either need-based aid or merit-based (scholarship) aid. I would also like to clarify that many out-of-state public schools give little or no aid to out-of-state kids, which is why I emphasized your state and regional compact. However, a few (Alabama, Arizona, and Arizona State come to mind) do give merit aid to national appliacants.

Edited April 18, 2016 by JanetC

[8filltheheart]

3. Scholarship research is NOT your best bet in paying for college. At least in terms of winning a scholarship and taking it to any school you are accepted to. The best bets are to save as much money as you can and to research schools that provide good financial aid to kids like yours. These school may be public institutions in your state or regional compact or they may be private schools.

Our experience is different. We do not qualify for anywhere near enough in terms of FA to make attending schools affordable. Room and board is stretching our budget limit.

 

Our kids do attend on scholarship $$. Our current college student is attending full-ride. Our 11th grader is also searching for full-tuition to full-ride scholarships. It is our application strategy. :)

[JanetC]

Our kids do attend on scholarship $$. Our current college student is attending full-ride. Our 11th grader is also searching for full-tuition to full-ride scholarships. It is our application strategy. :)

Maybe I didn't say it well -- I think spending your time trying to find school-based scholarships is good.

 

But, betting on winning the more long-shot scholarships is not the best college search strategy. I think it's awesome if you can be a top scorer in a national music, math, science contest, etc. but I wouldn't suggest anyone bet their future on it. The easier to win scholarships for 1000 or 2000 are also barely worth it, since many schools will reduce your financial aid by the same amount as your prize or you have to win a dozen of them to get what would be a typical merit award at a generous college. That's what I meant by looking at school offerings rather than generic scholarship contests.

[FaithManor]

Janet is right. You have to be discerning so if your child has a chance at a good outside scholarship, you will then want to look at schools that allow you to stack outside scholarships without reducing institutional scholarships.

 

In our case, that meant looking for schools that would not reduce ds's scholarships due to his $2500.00 4-H scholarship or should the team finish in the top 10 at Team America Rocketry Challenge, any prize winnings.

[8filltheheart]

Thank you for clarifying. Your OP doesn't mention searching for institutional scholarships, only saving $$ and finding schools offering good FA.

 

Fwiw, Lucy the Valiant, researching schools with large scholarships meeting my dd's interests in terms of majors has taken me a huge amt of time. So, it definitely takes effort. The only disadvantage is that schools do change their scholarship terms, so what might be true this yr might not be true next yr. I think Drexel is the school that dropped their NMF scholarship in Oct this yr and it left a lot of kids scrambling to find a replacement school.

[Lucy the Valiant]

I love you people, seriously.

 

OK, I at least know where to start. (And this confirms to me that I am not crazy starting the research this early. Someone told me to do Duke TIP challenge for them (even though we did CTY a couple of years ago), so we are going to use that as our "standardized test" next year.)

 

To those of you who took the time to type this stuff out for the benefit of a stranger you have never met, THANK YOU!

[Lucy the Valiant]

(Also, on the FAFSA4caster, is there a trick to entering a kid's DOB? It says to enter it mmddyyyy, but when I do that, it automatically inserts the slash mark, and rejects the submission. Feeling dumb . . . )

 

 

Editing to Add: Never mind, LiveChat just told me they are having technical issues; I *was* doing it correctly, but will need to come back later.

Edited April 18, 2016 by Lucy the Valiant

[8filltheheart]

That "Duke TIP" is not a tip (Sorry. Couldn't resist.) for scholarship searches. You also don't need them to register for standardized testing. Fwiw, I wouldn't put a lot of energy into standardized testing before high school.

[JanetC]

(Also, on the FAFSA4caster, is there a trick to entering a kid's DOB? It says to enter it mmddyyyy, but when I do that, it automatically inserts the slash mark, and rejects the submission. Feeling dumb . . . )

 

Hmmm... I don't recall having problems with it. Do you need a leading zero on the month or day of birth? If it's just not working, you can make up a different birthday if you want - I usually did them as "if my child is 18 this year, what would his aid be?" - AFAIK, the only thing that really matters about birthday for financial aid is if student is over age 24 they are automatically independent of parents.

[Lucy the Valiant]

Hmmm... I don't recall having problems with it. Do you need a leading zero on the month or day of birth? If it's just not working, you can make up a different birthday if you want - I usually did them as "if my child is 18 this year, what would his aid be?" - AFAIK, the only thing that really matters about birthday for financial aid is if student is over age 24 they are automatically independent of parents.

 

They are having technical issues right now, and NO date of birth will work. (I tried making some up, and even skipping it, but it won't work.) I will try again later.