Welcome to Wachovia’s Financial Aid 101

Once you know that your child is college-bound, it’s time to learn more about covering education expenses. College Parents of America and Educaid, Wachovia Education Finance, make it easy.

Federal aid: Who is it for?

It’s a common misconception that federal assistance is only available to families who are struggling to make ends meet. The truth is that the federal government continues to be an excellent resource for all families in search of cost-effective education financing solutions.

Rather than drawing funds from other investments, many families choose to cover tuition expenses with affordable, low-interest federal loans.

There are several loan options for your family to consider including the Federal Stafford Loan and the Parent Loan for Undergraduate Students (PLUS Loan).

 

Federal Stafford Loan for Students

(Apply Now)

The Stafford Loan is one of today’s most popular financial aid options. With these loans, students normally won’t have to make any payments until six months after they graduate from school or drop below half-time enrollment.

Backed by the federal government, you will enjoy a low variable interest rate (currently 2.77% prior to repayment, 3.37% during repayment) that is adjusted annually every July 1, and capped at 8.25%.

And depending on a student’s level of financial need, the interest that accrues prior to repayment may even be subsidized (paid) by the government.

Borrowing limits on Stafford Loan will vary depending on the student’s year in school and whether they are considered a financially dependent or independent student.

 

Federal PLUS Loan for Parents

(Apply Now)

The Parent Loan for Undergraduate Students (PLUS Loan) helps parents cover their child’s education costs. Eligibility for the PLUS program is not based on income or assets – parents at all income levels are welcome to apply.

With this loan, parents may borrow up to the entire cost of education minus the other financial aid awarded to the student. The cost of attendance can include tuition, fees, room, board, books, supplies, transportation and miscellaneous expenses.

Like the Stafford Loan, the PLUS Loan also comes with a low variable interest rate (currently 4.17%). This rate is adjusted annually every July 1 and capped at 9%.

 

Understanding the Basics of Financial Aid

While Stafford and PLUS are the most popular government loans for undergraduates and their parents, they are not the only financial aid options. The following links can help answer some of most common questions that families have regarding the financial aid process:

Where does financial aid come from?
Step 1: Submitting the FAFSA
Step 2: Receiving a Student Aid Report (SAR) & FAFSA PIN
Step 3: Expected Family Contribution (EFC)
Step 4: Receiving Award Letters
Step 5: Types of Financial Aid

Federal Pell Grant
Federal Supplemental Educational Opportunity Grant (SEOG)
Scholarships
Federal Work-Study
Federal Perkins Loan 
Federal Stafford Loan
Federal PLUS Loan

 

Where does financial aid come from?

The most common types of student aid include scholarships, grants, government loans, and federal work-study.

Before a student can be considered eligible for any financial aid programs (including government loans), they must complete and submit a Free Application for Federal Student Aid (or FAFSA). The information provided on the FAFSA determines how much financial aid a student is eligible to receive.

Normally, parents who take out a PLUS Loan for their child do not have to complete a FAFSA. Check with the school’s financial aid office for more information. 

Step 1: Submitting the FAFSA

The FAFSA is available from any financial aid office, the public library, by telephone at 1-800-4FED-AID (1-800-433-3243), or online at www.fafsa.ed.gov.

Check the deadlines! The FAFSA clearly lists the deadlines for federal and state aid. These deadlines can differ between individual states and schools. Normally, students should not submit the FAFSA to be processed before January 1.

 

Step 2: The Student Aid Report (SAR) and PIN number

Several weeks after a student submits their FAFSA to the processor, they will receive a Student Aid Report or SAR. The SAR contains all the information the student provided on their FAFSA, messages from the processor, and a list of schools that will receive the SAR. Schools will use the SAR to determine a student’s eligibility for student aid.

Students will also receive a PIN number that will allow them to apply for loans online and access Department of Education information on the Internet.

If a student has not received their Student Aid Report four weeks after sending in their FAFSA, they should contact the Federal Student Aid Information Center at 1-800-433-3243. 

 

Step 3: Expected Family Contribution

Under federal student aid programs, parents are considered primarily responsible for paying for their dependent student’s education to the best of their ability. This means that the student and/or their family will most often be responsible for paying some portion of their total education costs.

This amount is called the Expected Family Contribution (or EFC). Eligibility for financial aid is determined, in part, by the difference between what a student’s family can afford to pay and the cost of attending a specific college or university.

 

Step 4: Receiving Award Letters

The next part of the financial aid process begins when the student receives financial aid award letters from their schools of interest. Award letters indicate how much funding, and what types of aid, a student is eligible to receive from each school.

An award letter typically includes a summary of the annual cost of education for that school, the total EFC, and a calculation of the student’s financial need (total cost minus the EFC). The award letter will also spell-out the types of aid that the student is eligible for.

Within two weeks of receiving an award letter, a student should inform the school whether they are accepting or declining the awards. Remember, students don’t need to accept all or any of the aid offered. 

Step 5: Types of Financial Aid

Depending on level of need and the programs that a school participates in, the award letter may offer a student grants, scholarships, Federal Work-Study, and education loans. 

Federal Pell Grant

The Federal Pell Grant is a common need-based grant for undergraduate students. It is often the first part of the financial aid package and other federal and private aid is usually added to it. Because this is a grant, it does not have to be paid back.

To determine a student’s financial need, the U.S. Department of Education uses a standard formula to evaluate the information submitted on the student’s FAFSA form. The Pell Grant is awarded to all eligible students, but the amounts for future awards will depend on program funding. 
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Federal Supplemental Educational Opportunity Grant (SEOG)

The Federal Supplemental Educational Opportunity Grant (SEOG) is available to undergraduates with exceptional financial need-those who have the lowest Expected Family Contribution. Students who receive Federal Pell Grants are given priority. Like all other grants, the SEOG does not need to be repaid.

When students qualify for this grant, they can receive between $100 and $4,000 per year (possibly more if they participate in a study-abroad program). The school credits their tuition account and/or pays the student directly. Eligible students will be paid at least once per semester, trimester, or quarter. The amount a student receives will depend on level of need and available funds. 

Scholarships

There are literally thousands of available scholarships for students. While some scholarships may be listed on the award letter, there are many others out there. It’s important to begin looking for them early. Some good resources include the Internet, high school guidance counselors, and financial aid advisors.

Federal Work-Study

This program provides both on- and off-campus jobs for students who have financial need. The program often encourages community service and work related to a student’s course of study. Students are usually paid at least federal minimum wage or more depending upon the type of work and the skills required. The money earned must be used to pay for educational expenses.

Federal Perkins Loan

The Federal Perkins Loan is a low-interest loan available to students who have exceptional financial need, those who have the lowest Expected Family Contribution. Eligibility is based on need and is determined by the information a student has provided on their FAFSA.

Under this program, undergraduates can receive a maximum of $4,000 per year ($20,000 for the entire time they are enrolled). Graduate students can receive up to $6,000 per year ($40,000 for the entire time they are enrolled including Federal Perkins Loans borrowed as an undergraduate). 

 

Federal Stafford Loan

(Apply Now)

The Federal Stafford Loan is a low-interest education loan designed for undergraduate and graduate students. This is a “government loan” meaning that it is guaranteed by the federal government.

There are two types of Stafford Loans: subsidized and unsubsidized. Depending on the financial need, a student may be eligible for one or both loan types:

Subsidized Federal Stafford Loan: Eligibility for this loan is based on financial need. The government pays the interest while the student is in school, in deferment, or during their grace period.

Unsubsidized Federal Stafford Loan: This loan is made available to all students regardless of income. The student is responsible for all interest that accrues while they are in school, in deferment, or during their grace period.

Loan amounts depend on a student’s year in school and whether they’re considered a financially dependent or an independent student. The financial aid office will determine a student’s eligibility for a subsidized or unsubsidized loan. 

Federal PLUS Loan

(Apply Now)

The Parent Loan for Undergraduate Students (PLUS Loan) is a low-interest education loan designed specifically for parents. This is a “government loan” meaning that it is guaranteed by the federal government.

Eligibility for the PLUS Loan is not based on financial need so parents at all income levels are welcome to apply. Qualified applicants must pass a credit check.

Parents may borrow up to the cost of attendance annually, minus all other financial aid received. This means that parents may borrow only up to the amount not covered by scholarships, grants, student loans, etc. 


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