Glossary of College Financial Aid Terminology
An A-Z Primer
Financial planning for college is a BIG deal. A really BIG DEAL. That’s why understanding the unique jargon surrounding the college application process is critical to a successful outcome. At 360 Planner we want you to be confident in your knowledge, so we have compiled this glossary of frequently used terms. We encourage you to bookmark this article and refer back to it often throughout the application process.
Award Letter – An award letter is the initial determination that specifies the amount of financial support the student is eligible to receive from a particular school. The financial award is based on the student’s college application and a completed FAFSA. The award letter almost always estimates the cost of attendance (COA) including tuition and fees, room and board, books, supplies, transportation and sometimes contains a calculation for personal expenses.
College Scholarship Services Profile (CSS) – The CSS is a document required by private colleges and universities to determine eligibility for non-governmental financial aid, including grants, loans, and scholarships. Unlike the FAFSA, the CSS is NOT free. The fees are nominal – $25 for the first application, $16 for each application thereafter. The CSS is an online application created and administered by College Board, and a complete list of institutions and scholarship programs requiring CSS is maintained on the College Board website.
Cost of Attendance(COA) – The COA is the average annual expenditure to attend a college or university. The COA is calculated by adding up tuition, fees, room & board, books, supplies, and living expenses including transportation and personal needs. For budgeting purposes, families can deduct the amount of financial aid awards from the COA to arrive at a reasonably accurate picture of what they can expect to contribute.
Demonstrated Need – The calculation for Demonstrated Need is achieved by subtracting the family’s ability to pay (EFC) from the cost of attendance (COA). Thus, a more affluent family will have a lower demonstrated need, as they can afford to bear a larger share of college expenses than a less prosperous family.
Expected Family Contribution (EFC) – Schools calculate the EFC based upon the EFC formula, which is determined by federal law, not by the individual institution. The EFC formula is the same for every student, regardless of socio-economic background and is based upon the family’s current income, including taxed and untaxed income, assets, and benefits like Social Security or unemployment. It does not take into account expenses like consumer debt (credit card balances, car payments, etc.) Schools and scholarship programs use their discretion to determine the EFC from information provided in the student’s FAFSA. A student with an EFC of 0 will receive the maximum amount of financial aid, while a student with an EFC of 5273 or higher will receive little or no financial aid. The EFC can change annually as family income varies.
Free Application for Federal Student Aid (FAFSA) – An accurate and complete FAFSA is essential for receiving money for college. Not only does it simplify the college financial aid process, but it is required when applying for grants and scholarships from many schools. Anyone planning to attend or currently enrolled in a federally accredited institution of higher learning should complete a FAFSA every year. This includes two-year or four-year colleges, graduate schools, professional schools (such as law or medical), or vocational or technical schools and programs that award a degree or a certificate or credit (such as cosmetology).
To be eligible for financial assistance from any federal program, including Pell Grants, FSEOG, Perkins Loans, Stafford Loans, PLUS Loans and federal work-study jobs, you must submit a FAFSA. State funded grants and scholarships also rely upon FAFSA information for determining eligibility. Schools use the FAFSA information to determine merit or need-based aid. With regard to state or institutional grants or loans, it is wise to renew the FAFSA in a timely manner, as funds are often limited, and are given out on a first come-first served basis.
Grants – Along with scholarships, grants are the proverbial pot of gold of college funding. Grants do not have to be repaid, but unlike scholarships, grants are primarily based on need. Scholarships can be merit-based or need-based. For many grants, grades are not a determining factor. Grants are available at both the federal and state levels, as well as through the private sector. Special grants are offered for women, minorities, disabled students, and international students as institutions strive to level the playing field for higher education. Be aware of grants from national organizations, as they are frequently overlooked. Grants from military or veterans organizations, professional societies (legal, medical, accounting, business), ethnic or political groups, even sports and hobby enthusiast organizations frequently offer grants. This is free money; all it requires is the investment of time to apply.
A Federal Supplemental Educational Opportunity Grant (FSEOG) is a grant for undergraduate students with exceptional financial need. It usually accompanies a Pell Grant, and the maximum yearly award is $4,000. Like the Pell Grant, FSEOG is determined through FAFSA, and does not need to be repaid. The funds may be distributed directly to the school, or may be given to the student in the form of a check. To be eligible, applicants must be US citizens and be enrolled in an accredited higher learning institution.
The Pell Grant is available to students whose family income is $50,000/year or less. The application process takes place via FAFSA. There is no academic requirement, but a student must generally be enrolled in at least 6 credits per semester and must maintain a GPA of 2.0 or higher to qualify. Pell awards can be as high as $6,000 per year. Students may apply for a new Pell grant each academic year for up to six years by submitting an updated FAFSA annually.
One of the primary advantages of the Pell Grant is that it can be used for all school-related expenses. The funds are paid directly to the institution, but the student directs how the money is spent. Tuition, room and board, transportation, a new laptop – all of these are considered education-related expenses. If there is grant money left over at the end of the academic year, the school will refund that money directly to the student. This portion is considered income, and must be reported on your tax return. Any Pell money spent on education-related expenses is tax-free.
The Teacher Education Assistance for College and Higher Education (TEACH) program is exclusively for students planning to become teachers. Students may be awarded up to $4,000 per year. This program has different criteria than other federal grants. Specifically, TEACH requires the student to be enrolled in a TEACH certified program, complete a special application, attend special classes that explain all the program requirements, and sign an Agreement to Serve (ATS). The ATS requires that upon graduation, new teachers will teach a high-need subject in a school serving low income families for at least four academic years during their first eight years in the profession. If these requirements are not met, the grant converts to an unsubsidized Stafford loan, and must be paid back with interest.
Most states offer educational grants to their residents. Requirements vary, but most are strictly need-based and have broader income parameters than the federal Pell Grant. Typically eligibility is restricted to students attending in-state schools, but many states have tuition exchange programs as well. This means that they have reciprocal agreements with neighboring states where students can attend universities in either state at in-state rates.
For a complete list of state higher education agencies and grant information, visit the US Department of Education website.
Private Institution Grants
Private colleges and universities can be prime sources for grants. Frequently these institutions have endowments funded by businesses or individuals (usually alumni) for the purpose of providing financial aid to eligible students. General grants are available to all students, and are usually awarded based on financial need or academic performance. Student specific grants are typically targeted toward a particular segment of the student population, such as women, minorities, or military veterans. Subject specific grants focus on students pursuing a particular degree program or career path. Non-traditional student grants are aimed at helping adult learners (single parents, displaced workers, individuals seeking a new or second career). In addition to funding provided by colleges and universities, private grants may also be funded by corporations, professional associations, religious organizations, or clubs/associations dedicated to community service.
Institutional Documentation Service (IDOC) – IDOC is a portal for submitting financial information to your selected schools. Administered by College Board, IDOC stores tax documents uploaded by families and makes them securely available to colleges and universities. IDOC differs from the CSS in that CSS provides a summary report about your financial data, while IDOC makes the actual documentation available. There is no charge to students for IDOC services. In addition, the IDOC website notifies students of which documents to submit, their pending status, and all deadlines.
Merit-based Aid – Scholarships awarded based on merits do not take into account financial need. These awards are based upon talents and interests: academic, leadership, athletic, music, artistic, etc. They are furnished by schools and private sponsors. Since these awards are based on performance, anyone may qualify to receive them.
Need Aware/Need Blind Admission – Need Blind admission is exactly what it sounds like: a school will make a decision about accepting, wait listing, or denying admission to a student without consideration of the student’s ability to pay. If accepted by a need blind school, the student deserves to be there, regardless of economic status. A Need Aware institution, on the other hand, factors in a student’s ability to pay as part of the admissions procedure. Need aware policies sometimes favor wealthier families, as marginal students who can afford to pay tend to be accepted, while exceptional students from lower income backgrounds may be denied.
Need-based Aid – Need-based financial aid is awarded through the federal government, state governments or colleges. Need-based aid can include grants, scholarships, loans, or work/study. Of these awards, only loans need to be paid back. To be considered for need-based aid, you must submit a completed FAFSA. The lower your family income, the greater chance you will qualify for need-based aid.
Net Price – The net price for attending a particular college is the out of pocket expense that a family will pay. It is the total cost (also called the sticker price) – including tuition, room and board, and books – less any grants, scholarships, or other financial aid that you receive. This number is specific to each student, as it is based on the individual’s personal financial situation.
Priority Date – A priority date can apply to a college admission, student housing, or financial aid. This is the date set by the institution when the application must be received in order to be given the strongest consideration. Most colleges have both priority and regular dates. If you miss the priority date your application will still be considered if submitted by the regular date, but the chances of approval are not as great.
Scholarship – With a reputation as the holy grail of financial aid, scholarships are awards intended to help students pay for an undergraduate degree. A completed FAFSA is required to apply for most scholarship awards. The funds can be a one-time check, or can be renewable by the semester or the school year. Scholarships are available through the federal government, state agencies, colleges, and private sponsors. There is no need to repay a scholarship.
Subsidized Loan/Direct Subsidized Loan – Subsidized loans are funded by the federal Department of Education for undergraduate students who demonstrate financial need. These loans (also called Stafford Loans or Direct Stafford Loans) do not accrue interest while you are in school or during the grace period immediately following graduation. These loans do incur an origination fee, which is a nominal 1.059% of the amount borrowed. To be considered for a subsidized loan you must submit a completed FAFSA. A quick overview:
- Available to undergraduates only
- Must demonstrate financial need
- Your school determines the loan amount, and it may not exceed your financial need
- The Dept. of Education pays the interest on the loan during the following periods:
- while you are enrolled in school (at least half time)
- during the “grace period” after you leave school (usually 6 months)
- during a deferment period (up to 6 months)
For complete guidelines visit Federal Student Aid.
Tuition – Tuition is the nucleus of the college bill. It is the fee, calculated per credit, which is associated with taking each course. For example, a college may charge $200 per credit. A freshman English class is worth 3 credits, so the student is charged $600 for the course (3 credits x $200 = $600). General education classes are usually three or four credits each, and students typically enroll in three to five classes per term.
Unsubsidized Loan – Unlike subsidized student loans, an unsubsidized loan (also called Unsubsidized Stafford Loans) is available to students at every level of higher education. It is not necessary to demonstrate financial need for an unsubsidized loan. In contrast to a subsidized loan, fixed-rate interest begins accruing immediately upon disbursal of the funds to the school, and is added to the balance until the loan is paid off. There are several types of repayment plans, varying in length from 10-25 years.
Work Study – The federal Work Study program can be beneficial for students in a difficult financial situation. Work study allows the student to work part time, up to 20 hours per week, in an on-campus position while attending classes. Work study participants receive a paycheck like a regular job, and must pay taxes on that income. Money earned can be utilized for any purpose, not just for student loan debt. In most cases, work study income does not reduce the student’s financial aid eligibility. Like grants and scholarships, work study earnings do not need to be paid back. Students at every level of higher education are eligible to participate in work study programs.