529 or Qualified Tuition Programs
Individual states or schools can offer programs where you can either prepay tuition or contribute to an account to save for tuition at a qualified university. The main benefit of these accounts is that as long as they are used for the educational expenses of the designated student, the earnings the account makes over time are not taxed. Anyone can start a 529 for someone, and it’s not necessary to choose the plan from the state where you reside. The details of plans vary, so it’s a good idea to read them carefully.
Students may designate their parents as an authorized payer/viewer in order to give their parents access to view and pay university bills. In most cases students will do so by logging on to the university’s billing system, and then creating a user name and password which their parents can then use to access the account.
Bursar/Student Accounting Office
This is the office at the college or university responsible for the billing of student tuition accounts. It is separate from the Financial Aid Office, which determines student aid awards.
Cost of Attendance (COA)
The total cost of attending a college or university, including tuition, room and board, fees, and estimated expenses for books, travel, and personal items.
CSS/Financial Aid PROFILE
When determining eligibility for financial aid, in addition to the FAFSA, several hundred private colleges and a number of flagship state universities also require the CSS/Financial Aid PROFILE. The CSS is administered by the College Board so your student will already have an account if he or she has taken the SAT. This longer, more involved online form collects additional data on student and family assets and liabilities, information that schools take into consideration as they distribute their own institutional funds. An interactive presentation on the CSS website explains the application process and financial documents needed.
There are many different financial aid deadlines. The FAFSA must be submitted between January 1st and June 30th but state deadlines may be earlier, and many colleges will also have earlier deadlines. It is essential to note the specific deadlines for the colleges to which your student is applying. See also “Priority deadlines.”
A student demonstrates financial need if the EFC (Expected Family Contribution) is less than the total Cost of Attendance. Cost of Attendance – EFC = demonstrated financial need.
This is the way the university gives out or applies your student’s financial aid package. The funds will generally come at the beginning of each semester (or academic term). In your student’s first year disbursement may not come until 30 days after the first day of class, as universities sometimes wait to ensure your student will continue attending. Most universities apply the money directly to “allowable charges” on your student’s bill, including tuition, room and board, and some fees. They will then give any excess aid to the student (or parent in the case of Parent PLUS loans). Your student should check with the financial aid office if she believes she should receive superfluous funds. There students can set up direct deposit or learn how to pick up the additional money.
Expected Family Contribution (EFC)
This is the minimum amount a student is expected to contribute to the cost of college. The dollar amount figure is the “output” of calculations made from the financial information your family supplies via the FAFSA and CSS/PROFILE forms. Because there are different formulas for calculating the EFC, it can vary from school to school. Basically, it is determined by the amount of a family’s income and assets while taking into consideration family size plus the number of dependent children enrolled in college in a given year.
Family Educational Rights and Privacy Act (FERPA)
This federal law grants college students the exclusive right to view and share education and financial records including grades, transcripts, and tuition/financial aid statements. Though many parents help students complete financial aid applications and pay tuition and other educational expenses, the college will communicate directly with the student and not the parent(s).
Free Application for Federal Student Aid (FAFSA)
All students applying for financial aid must complete this online form, found at fafsa.ed.gov. The FAFSA is required by all colleges and universities in the U.S. that award federal financial aid. The documents and information you will need to complete it are found on this FAFSA checklist.
A college “gaps” a student when it admits a student (who has applied and qualified for financial aid) but the financial aid package offered does not meet the student’s need demonstrated — the difference between Cost of Attendance and the student’s Estimated Family Contribution — therefore leaving a “gap.”
Grants may make up a portion of your student’s financial aid award and they can be federal, state, and/or college-funded. Grants are outright gifts and do not need to be paid back.
Income-driven repayment plans
Instead of paying the standard loan repayment amount each month, students utilizing income-driven repayment plans pay a percentage (10-20%) of their “discretionary income” or the amount they make above the poverty line for their family size. After 20 or 25 years (or less if used in combination with Public Service Loan Forgiveness), any remaining debt will be forgiven. Outlines of the three different options are available on the federal government’s student aid site.
Federal student loans may be part of a student’s financial aid package. Loans must be paid back.
This aid is awarded based on a student’s talents (athletic, musical, etc.), academic strengths, or special circumstances (for example, if a student is the first in the family to attend college). This aid may be part of a need-based aid package or may be offered to a student who does not qualify for need-based aid. Merit-aid funds may come from the state or directly from the college. Private scholarships (see below) are another potential source of merit aid that must be applied for separately.
A family’s “need” is determined based on the difference between the COA and the EFC (if there is one). If the EFC is larger than the COA, there is no financial need. If need is demonstrated, a college or university may offer a financial aid package consisting of some combination of grants, loans, scholarships, and work-study.
Colleges with a need-blind admission process do not take the financial need of an applicant into consideration when deciding whether to admit a student. Typically these schools commit to meeting 100 percent of an admitted student’s demonstrated financial need.
Need-sensitive (or need-aware) admissions
Colleges with need-sensitive admissions do factor in a student’s ability to pay when making some admission decisions. They may still offer significant amounts of financial aid, but cannot guarantee to meet 100 percent of a student’s demonstrated need.
Net Price Calculator (NPC)
The “net price” of a particular school is what your family will pay based on the difference between the Cost of Attendance (COA) and any financial aid your student might qualify for. Colleges and universities are required by law to have Net Price Calculators on their websites. The College Board’s Net Price Calculator is another option. These tools provide an estimate only of the cost of the school, based on the financial information you plug in. Using a NPC is not the same as applying for financial aid but can be part of your financial planning.
Some colleges and universities offer “priority deadlines” for financial aid applications because they have limited funds available and some portion of those funds will be distributed first-come, first-served. Therefore, a student applying before the priority deadline may receive a more generous financial aid award.
Scholarships can come from the state, the college, or from private sources. This merit-based aid does not need to be paid back. Your student must apply separately for private scholarships.
Student Aid Report (SAR)
After your student submits the FAFSA, a Student Aid Report will be generated and emailed to your student. The SAR summarizes the information entered into the FAFSA and includes the EFC (Estimated Family Contribution). The SAR is also sent directly to the school(s) your student indicated should receive it when filing the FAFSA.
Student Loan Forgiveness
This is when all or a portion of your student’s federal loans are dropped, or “forgiven”. While there are a few other reasons for a loan to be discharged, you’ll generally hear about Public Service Loan Forgiveness. If your student works for at least 10 years at a qualifying public service position, and during that time continues to make payments on loans, at the end of that time remaining debt can be dropped. Students planning to use PSLF often choose an income-driven repayment plan to maximize the amount that is ultimately forgiven by lowering loan payments to a percentage of their income.
Title IV Aid and Authorization
Title IV Aid (Federal Student Aid) consists of the programs created by Title IV of the Higher Education act, including the Pell Grant, Perkins Loan, Stafford Loan and Parent PLUS Loan, among others.
Title IV Authorization is a signed (print or electronic) statement by a student that gives the university permission to use his or her Federal Student Aid toward university charges other than tuition, fees, and room and board.
This program uses federal dollars distributed to the colleges. If your student has demonstrated need, work-study might be part of the award package. Your student may work on or off campus and will receive this portion of the financial aid award in the form of a paycheck from the college. Work-study funds earned by your student are taxable.