Paying for college is difficult enough. The fact that
financial aid offices have a language all their own doesn’t make it any
easier.
Even the term “financial aid” can be confusing.
Basically, it refers to any money you receive to help pay for college.
The money can come from federal, state, or local governments; colleges;
or private organizations. Not all financial aid is created equal,
though: The term includes work study, loans (which you have to pay
back), and grants and scholarships (which you don’t).
We’ve
created this list of basic terms to help you speak the language like a
pro. Want more background? You’ll notice some terms have links to
stories that expand on the topic.
Let us know at college@moneymail.com if there are other terms you’d like to see defined, and we’ll add them to the list.
Cost of attendance.
The total price of going to a particular college. It includes tuition,
fees, room, board, books, supplies, meal plan, and other living
expenses, such as transportation.
Demonstrated need. The difference between your expected family contribution (see below) and the total cost of attendance.
Direct PLUS loan.
Federal loans available to parents or to graduate/professional
students. The interest rate is higher than other loans available to
undergraduate students, and borrowing limits are much higher. They’re
also frequently called Parent PLUS loans, and they’re the only federal
student loans that require a credit check.
Expected family contribution.
A formula based on income, assets, and family size that estimates how
much of a college’s price tag you can, in theory at least, afford to
pay.
Grants. Money you don’t have to pay back. Grants are generally based on financial need.
Need-aware admission.
A policy in which colleges consider applicants’ ability to pay when
admitting or rejecting them. Few colleges are completely need-aware or
need-blind (see below).
Need-based aid. Money
awarded to students when their family can’t afford to pay the full
price. Need-based aid may come in the form of grants or scholarships,
but it can also be loans with lower interest rates.
Need-blind admission.
A policy in which students are accepted without regard to their
financial need. Unless a college is extremely wealthy and generous with
its aid, though, this can mean that a student may be accepted but not
have enough money to attend.
Net price. The
amount you’ll actually pay for a college after tuition discounts,
scholarships, and grants are accounted for. For private colleges, this
is usually far less that the advertised price.
Merit aid/non-need-based aid.
This is money awarded without regard to financial need. It can be based
on academic achievement, artistic abilities, leadership skills, or any
other characteristic.
Perkins loan. Federal loans
that are reserved for low-income students. The interest rate is
relatively low and the time before your first payments are due is longer
than with other loan programs.
Scholarships.
Money that doesn’t have to be repaid. Scholarships are usually awarded
based on certain characteristics or qualities of the student and can be
merit-based or need-based. Colleges or individual departments offer
scholarships, as do thousands of nonprofit groups, businesses, and other
organizations.
Subsidized Stafford loan. Also
known as a direct subsidized loan, these federal loans have slightly
better terms, including lower interest rates, than the similar-sounding
unsubsidized Stafford loans (see below). Subsidized loans are only for
undergraduate students and are awarded based on financial need. Interest
doesn’t start accruing until you enter repayment after leaving college.
Unsubsidized Stafford loan.
Also known as a direct unsubsidized loan, these federal loans are
available to undergraduate or graduate students, and there is no
financial need requirement, so anyone can use them. Interest rates are
slightly higher than those for subsidized loans, and interest starts
adding up from the day you take out the loan.
Work study.
A program in which students are given a job on campus to help pay for
college bills. There’s the Federal Work Study program and some colleges
also have their own programs.
Now that you know all the terms, check out these tips on how to read a financial aid letter
Culled from Money
