What I’ve learned about the financial aid application process

couple applying for financial aidReality is setting in. The college is selected; graduation is around the corner. But, first things first. It’s FAFSA time … no I did not drop my uppers, but it is a mouth full. FAFSA is short for Free Application for Federal Student Aid. Every student entering the next level of their academic career, is required to fill this wonderful form out to insure that they are eligible to receive needed federal funds to finance their education. It shows the family financial circumstances (you are required to submit your previous year’s tax filings). So in this regard, you may want to do your taxes early so that you have the facts available for the FAFSA filing.

Without having enough money saved for our son’s first year of college, and, like most parents, living paycheck to paycheck, it was imperative that we try to receive as much aid as possible. Because my son had a high GPA, and because we also have an excellent credit rating, we qualified for a Federal Loan. My son also qualified for a subsidized loan that defers payment and interest on the loan until he graduates.

The school recommended lenders, and the lender I chose made it very easy to apply online. Representatives were also available via phone to answer any questions. Believe me, it was very easy to apply.

The invoice from my son’s school clearly itemized all the charges for the semester including the grants, scholarships and federal loans. My son is now a senior, and the 2007-2008 first semester invoice looked like this:

Comprehensive Fee ———- $550
Tuition ———————– $16,110
Deposit Transfer ————- $300
School Grant —————- $7,125
Federal Loan (Student) ——- $250
Presidential Scholarship ——- $3,125
Graduation Fee —————- $ 125
Federal Direct Loan (Student) – $2,723

The total I would owe the school is $3,262 for this semester. Not factored in is the room and board as my son decided to rent a house with three other students. The rent for his portion was $400 based on an annual rent as he was required to sign a year lease which we had been paying for since May of 2007 plus living expenses such as utilities, food, etc.

In the end I would need:

* $3262.00 for school ($6,524.00 for the year)
* $4800.00 for rent
* $2000.00 for utilities/food, etc.

totalling $10,062.00 for the whole year.

student-loans-applyI applied for a federal loan of $12,840.00 at a 8.5% interest rate. Please remember when applying for a federal loan they will take a default fee and a origination fee which amounted to $513.60. So always factor an additional amount to cover these fees. My net of the full year loan was $12,454. The lender submits the monies directly to the school, and the school in turn provides a check for the credit due that I use for my son’s rent and living expenses.

High finance you say? It does seem daunting at first but once you experience it the first year, it becomes second nature.

No monies are due on the loan until the second disbursal is made and then I will consolidate the loan with my previous loans. Usually once the loan is consolidated the interest rate is lower. Payments are made monthly and there are incentives to insure payments are made on time by offering 1% lower if all payments are made on or before the due date consecutively for a period of time.

As each year goes by, and the amount owed increases, the monthly payment also increases. However, if the monthly amount becomes too burdening, the lender will work with you to make the payment more manageable. It may mean that you will have longer to pay off the loan because in the end, they will get the total amount due.

And, that about wraps up what it takes to get a federal loan.

 

Financial Aid Applications