FastWeb Guide to Financial Aid

In order to be considered for federal and state aid, you must complete the Free Application for Federal Student Aid, or FAFSA. The Department of Education uses the FAFSA form to determine your eligibility for federal assistance (loans, grants, work-study appointments and scholarships). Most colleges also base their financial aid package on the FAFSA. There is no cost to fill out the FAFSA.

To fill out the FAFSA online and to learn more about this form, visit the FAFSA website at: www.fafsa.ed.gov.

Using the information you supply on the FAFSA, the federal processor determines your expected family contribution (EFC). The EFC is equal to the amount of money you and your parents can be expected to contribute to your college costs. Your school then applies a simple equation to decide how much financial aid you will need. Your Expected Family Contribution (EFC) is subtracted from the school's Cost of Attendance (COA) to arrive at your Financial Need.

The new FAFSA form becomes available each year on or before January 1. Submit your application as soon after January 1 as possible. At many schools, funds are limited; if you submit your FAFSA too late, they won't have any aid left for you!

Your school may require additional forms besides the FAFSA or an earlier submission deadline. Contact your school's financial aid office to learn about requirements for your school.

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• Visit the FAFSA Web site and file the form online.
• Pick up the paper form at your high school, college or library.

If you have any questions about the FAFSA or federal student assistance programs, call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). You can also submit questions through the FAFSA Web site.

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Filling out the FAFSA form can be tricky. Keep these tips in mind when filling out the form:

• Read the questions carefully. The words "you" and "your" on the FAFSA always refer to the student, not the parents.


• Submit the form on time.


• Count yourself, the student, as one of the people in your household who will be college students during the award year.


• Whether filing online or off, sign the form (you'll use your PIN online) and get all other required signatures. If you don't sign the form, you will receive an SAR, but you will not receive aid.


• It isn't necessary to include additional forms with the FAFSA. Any enclosures will be destroyed. Likewise, do not write comments or notes in the margins of the form. If there are unusual family financial circumstances, contact the school's financial aid administrator to ask for a professional judgment review.


• Make a copy of the form before mailing it. You can print out your online FAFSA before you submit the application.


• Use your legal name as it appears on your Social Security card. Nicknames or aliases will cause a processing delay.


• If your parents are divorced or separated, the parent with whom you lived the most during the past 12 months is the parent responsible for filling out the FAFSA. This is not necessarily the parent who has legal custody.


• In the question that asks about your interest in different types of aid (e.g. work-study and student loans), answer "yes" to each question. Answering "yes" does not obligate you to accept a loan or work-study position, nor does it guarantee you'll be offered either. Answering "no" to these questions will not get you more grant aid.


• If you don't understand a question or are having trouble filling out the form, call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

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The PIN allows you to:

• Electronically sign your FAFSA
• Check the status of your FAFSA
• Make corrections to your personal information online
• Fill out a renewal FAFSA next year

To obtain a PIN, eligible students and parents can visit: www.pin.ed.gov. Click on "Apply for PIN" at the bottom of the page. You can choose to receive your PIN via e-mail or postal mail. You must submit your name, social security number and date of birth to receive a PIN. It takes about three days to receive a PIN automatically.

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Unlike scholarships, loans are a form of financial aid that must be repaid. We take a look at student loans and parent loans below:

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Student Loans:

Stafford Loans:

Stafford Loans are low-interest loans, currently capped at 8.25 percent, that are made to students. The idea is to provide loan options for students who might otherwise not be able to take out a loan with a private lender because of an insufficient credit history.

There are two variations of Stafford Loans:

• Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.


• Federal Direct Student Loan Program (FDSLP) loans, administered by "Direct Lending Schools", are provided by the US government directly to students and their parents.

A Stafford Loans can be either subsidized or unsubsidized. If your loan is subsidized, the interest doesn't start adding up until after you leave school. The federal government pays the interest while you're in school. If your loan is unsubsidized, you pay the interest that accrues during your time in college.

Unsubsidized loans are open to anyone, regardless of need, but subsidized loans are only offered to students who demonstrate financial need. Many students combine subsidized and unsubsidized loans to reach the maximum amount permitted each year.

Who is eligible: Dependent or independent undergraduate or graduate students who demonstrate financial need (subsidized) or don't (unsubsidized).

How to apply: Submit a FAFSA.

Maximum you can receive: This amount can vary from year to year. Check with your prospective college's financial aid office for more details.

You can find more information about these loans through the Department of Education and FinAid.

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Perkins Loans

Perkins Loans are a special class of federal loan intended to provide extra assistance for students with extreme financial need. They are subsidized, long-term, low-interest loans (5 percent). The loan is made with combined funds from the government and your school.

Who is eligible: Undergraduate and graduate/professional students who demonstrate exceptional financial need.

How apply: Submit the FAFSA.

Maximum you can get: This amount can vary from year to year. Check with your prospective college's financial aid office for more details.

You can find more information about these loans through the Department of Education and FinAid.

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Parent Loan for Undergraduate Students (PLUS) Loans

PLUS Loans are low-interest loans, currently capped at 9 percent, that are made available to parents to cover the cost of their children's education. Like Stafford Loans, PLUS Loan are administered by both the FFEL and FDSL programs. PLUS loans are the responsibility of parents, not students.

Who is eligible: Parents of dependent undergraduate students. Borrowers generally must pass a credit check, but if they don't, they can either prove extenuating circumstances or get a friend or relative to endorse the loan instead.

How to apply: Parents submit an application, obtained from a private lender or your school.

Maximum you can get: As much as needed to cover education costs not already covered by other financial aid.

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• What application materials are needed to apply for financial aid, and does the college require its own form in addition to the Free Application for Federal Student Aid (FAFSA)?
• What are the deadlines for submitting financial aid forms?
• When will I be notified of my financial eligibility?
• Will my request for financial aid have any impact on my ability to be admitted to college?
• Describe your financial aid program, including requirements for need-based aid, merit-based aid and scholarships.
• Once my financial aid package is awarded, will additional scholarships reduce the amount of financial aid I can receive?
• Will your institution meet my full financial need, and will it meet my full financial need for all four years of my attendance?
• Are there state financial aid programs that I should know about?
• Does this college participate in a tuition payment plan that allows installment payments for each semester's bill?
• Where can I find additional sources of financial aid?

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Academic Year: The period in which school is in session - typically September through May.

Accrual Date: The date on which interest charges on an educational loan begin to accrue.

Adjusted Available Income: The remaining income after taxes and a basic living allowance have been subtracted (in the Federal Methodology).

Assets: Cash in checking and savings accounts, trusts, stocks, bonds, other securities, real estate (excluding home), income-producing property, business equipment, and business inventory. Considered in determining expected family contribution (EFC).

Asset Protection Allowance: The portion of parents' assets that are not included in the calculation of the parent contribution (calculated by Federal Methodology formula).

Assistantship: A type of student employment; usually refers to a student teaching or research position.

Associate Degree: A two-year college degree.

Award Letter: Official letter from the college financial aid office that lists all the financial aid awarded to the student.

Bachelor's Degree: A four-year college degree.

Budget: The estimated cost of attendance for a student at an institution: typically includes tuition, fees, books, supplies, room, board, personal expenses and transportation.

Bursar's Office: The university office responsible for the billing and collection of university charges.

Campus-Based Programs: U.S. Department of Education federal student aid programs administered by colleges and universities. Includes: Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS).

Central Processing System (CPS): The computer system that receives the student's need analysis data. The Central Processing System performs database matches and calculates the official Expected Family Contribution (EFC) and sends out the Student Aid Report (SAR).

Collateral: Property used to secure a loan which can be seized if the borrower defaults on a loan.

Commercial Lender: A commercial bank, savings and loan association, credit union, stock savings bank, trust company or mutual savings bank.

Commuter Student: A student who lives at home and travels to school.

Consolidation Loan: Loan that allows borrowers to lower their monthly payments by replacing their original loans with one loan. Consolidation loans typically have longer repayment periods and greater interest.

Cooperative Education (Co-op): Many college programs offer paid opportunities to gain professional, full-time work experience while enrolled in college.

Cosigner: Individual who assumes responsibility for a loan if the borrower fails to repay.

Cost of Attendance: Also known as the budget, it includes tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses.

Custodial Parent: In cases where a student's parents are divorced or separated, the custodial parent is the parent with whom the student lived the most during the past 12 months.

Default: Failure to repay or otherwise meet the terms and condition of a loan. Default typically occurs after six months of delinquent payments. Penalties include a bad credit rating, loss of future financial aid eligibility, withholding of tax refunds, garnishing wages and loss of monthly payment options.

Deferment of Loan: Period during which the repayment of the loan is suspended because the borrower meets certain eligibility requirements (e.g., enrolled in college at least half time).

Delinquency: Failure to make a scheduled loan payment.

Dependency Status: A student's dependency status determines the degree to which the student has access to parent financial resources. An independent student is at least 24 years old as of January 1, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a U.S. Armed Forces veteran or is/was an orphan or ward of the court.

Direct Loans: A new federal program where the school becomes the lending agency and manages the loan funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program.

Disbursement: The process by which financial aid funds are made available to students for use in meeting educational and related living expenses. Funds may be disbursed directly to the student, or applied to the student's account.

Early Action/Early Admission/Early Decision: An early action program has earlier deadlines and earlier notification dates than the regular admissions process. If accepted, students are not committed to attending that college. An early admission program allows exemplary high school juniors to skip their senior year and enroll directly in college. An early decision program has earlier deadlines and earlier notification dates than the regular admissions process and students who apply to an early decision program commit to attending the school if admitted (which means the student must accept the offer of admission before they see their financial aid package.)

Enrollment Status: Indication of whether student attends full or part time. Typically students must be enrolled at least half time (and in some cases full time) to qualify for financial aid.

Expected Family Contribution (EFC): The dollar amount that a family is expected to pay toward a student's educational costs. EFC is based on family earnings, assets, students in college and family size.

FAFSA: Look under Free Application for Federal Student Aid.

Federal Direct Student Loan Program (FDSLP): Loans provided by the U.S. government directly to students and their parents through their schools.

Federal Methodology: The need analysis formula used to determine a family's expected family contribution. The Federal Methodology considers family size, the number of family members in college, taxable and nontaxable income and assets.

Federal Processor: The Federal Processor is the organization that processes the information submitted on the Free Application for Federal Student Aid (FAFSA) and uses it to compute eligibility for federal student aid.

Federal Stafford Loan: Federally-guaranteed, low-interest rate for students. There are two types of Federal Stafford loans: subsidized (need-based) and unsubsidized (non-need-based). Both types allow deferment of payments until a student leaves school.

Federal Supplemental Educational Opportunity Grant (FSEOG): These are federal grants for students with exceptional financial need (as determined by the college). Approximately five percent of undergraduates are recipients of FSEOG.

Federal Work-Study: Federally sponsored Work-Study (FWS) Program provides undergraduate and graduate students with school-year part-time employment. The Federal Government pays some of the student's salary, which helps departments and businesses pay for and ultimately hire students. Eligibility is based on financial need.

Fellowship: Financial aid for graduate students that does not need to be repaid. (Typically includes tuition and living expenses.)

Financial Aid Administrator: University employee responsible for preparing and communicating information about student loans, grants, scholarships and employment programs, and for advising, awarding, reporting, counseling and supervising student financial aid office functions.

Financial Aid Package: The total amount of financial aid a student receives, including grants, loans, and federal work-study. Unsubsidized Stafford loans and PLUS loans are not considered part of the package.

Financial Aid Transcript: A record of all financial aid awards a student received at other educational institutions.

Financial Need: The difference between the student's educational costs and the Expected Family Contribution.

Fixed Interest Loans: Interest rate stays the same for the life of the loan.

Forbearance: The approved temporary suspension of loan payments due to a financial hardship (interest continues to accrue).

Free Application for Federal Student Aid (FAFSA): The application students must first complete to apply for virtually all forms of financial aid. Available at high schools and colleges or by calling 1-800-4-FED-AID, and on the Web by following the links at http://www.fafsa.ed.gov.

Gift Aid: Grants and scholarships that do not need to be repaid.

Grace Period: The period after a student either graduates or leaves school and before loan payments must begin (typically six to nine months).

Grant: Financial aid that does not have to be paid back - typically based on financial need.

Guarantee Fee: A percentage of the loan that is paid to the guarantor to insure the loan against default. The fee is usually one percent of the loan amount.

Guarantor: A state agency or private, nonprofit organization that administers a student loan insurance program.

Home Equity: The current market value of the home minus the mortgage's unpaid principal (based on market value).

Income Contingent Repayment: The size of the monthly payments depends on the income earned by the borrower. As the borrower's income increases, so do payments.

Institutional Methodology: A formula some schools devise to determine financial need for allocating their own institutional financial aid funds.

Lender: A bank, credit union or other financial institution that provides funds to the student or parent for an educational loan.

Merit-based Aid: Financial aid based on academic, artistic, athletic or other merit-oriented criteria (not financial need).

Need Analysis: The process used by a college to evaluate an applicant's financial resources and determine how much the student or family can pay toward the cost of the education.

Need-Blind Admissions: The school decides whether to offer of admission to a student without considering the student's financial situation. Most schools use a need-blind admissions process.

Need-Sensitive Admissions: The school takes the student's financial situation into account for some admissions decisions. Some schools use need-sensitive admissions for borderline students.

Packaging: A financial aid administrator's attempt at combining various types of student aid (grants, loans, scholarship and employment) to attempt to meet a student's financial need.

Parents' Contribution: A quantitative estimate - calculated by the federal government - of the parents' ability to contribute to postsecondary educational expenses.

Pell Grant: Federal grant program for undergraduate students who demonstrate financial need and have not yet completed a baccalaureate degree.

Perkins Loan: Low-interest, subsidized federal loan (five percent) for students with exceptional financial need (as determined by the college).

PLUS Loans (Parent Loans for Undergraduate Students): Federal loans available to parents of dependent undergraduate students to help finance their child's education. Parents may borrow up to the difference between education costs and financial aid received from a bank or other lending institution.

Prepaid Tuition Plan: A college savings plan guaranteed to rise in value at the same rate as college tuition. Several states and institutions offer such programs.

Principal: The amount borrowed or owed on a loan.

Professional Judgement: For need-based federal aid programs, financial aid administrators can adjust the expected family contribution (EFC), or the cost of attendance (COA), or change the dependency status (with documentation) when extenuating circumstances exist (for example, if a parent becomes unemployed, disabled or deceased).

Promissory Note: A legally binding contract a student signs before receiving loan funds that details the terms of the loan and obligates the borrower to repay.

Satisfactory Academic Progress: A school's policy concerning the minimum number of courses that must be completed each semester, the maximum time frame, and the minimum GPA required to receive financial aid.

Scholarship: A form of financial assistance that does not require repayment or employment and which is usually offered to students who show potential for distinction, or who possess certain characteristics important to the scholarship provider (such as religious beliefs, hobbies, ethnicity, etc.).

Secondary Market: An organization that buys loans from lenders, which provides the lender with the capital to issue new loans.

Servicer: An organization that is paid by a lender to administer their student loan portfolio.

Simplified Needs Test: An alternate method of calculating the expected family contribution for families with adjusted gross incomes less than $50,000, who have filed or are eligible to file an IRS Form 1040A or 1040EZ or who are not required to file an income tax return.

State Student Incentive Grants: States receive matching funds from the federal government to help fund this program for state residents.

Student Aid Report (SAR): The official notification sent to students after submitting the FAFSA. Students may be required to submit this document to the college's financial aid office.

Student Contribution: A quantitative estimate of the student's ability to contribute to postsecondary education expenses. (Typically 35 percent of his or her savings and half of the student's summer earnings above $1,750).

Subsidized Loan: A loan that student borrowers do not have to pay interest on until after their grace period expires.

Supplemental Education Opportunity Grant (SEOG): Federal grant program for undergraduate students with exceptional need. SEOG grants up to $4,000 are awarded by the school's financial aid office.

Title IV Programs: Federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended. Includes Federal Pell Grants, Federal Supplemental Educational Opportunity Grant, Federal Work Study, Federal Perkins Loan, Federal Stafford Loan, Federal PLUS Loan, Direct Loan, Direct PLUS Loan and SSIG.

Undergraduate Student: A student who has not yet received a bachelor's degree.

Unmet Need: Difference between a student's total cost of attendance at a specific institution and the student's total available resources, including financial aid.

Unsubsidized Loan: A loan that student borrowers must pay all the interest on, including while they are enrolled.

Verification: The review process in which the financial aid officer requests documentation from a financial aid applicant to verify the accuracy of the application.

Work-Study: See Federal Work-Study for a description of the federally subsidized work-study program.

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