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Summer 2007 Programs

General Aid Terms:

Federal Aid: Aid that comes from the U.S. government. Usually disbursed through your college.

Gift Aid: Financial aid that does not need to be paid back:

- Grants: Typically based on financial need

- Scholarships: Typically based on achievement or talent

Free Application for Federal Student Aid (FAFSA): The form used to determine the amount of federal and state aid for which you are eligible.

Loans: Funds that must be paid back later, with interest. Federally-guaranteed loans can be from a private lender (e.g., a bank) or from the federal government (administered by your college). Private loans are offered by private lenders with terms set by the lender, not the government.

Private Aid: Financial aid from non-governmental sources.

Dependency Status: if you are considered a dependent student, colleges will count parent income, assets and circumstances in addition to your finances in awarding aid.

Student Aid Report (SAR): The official notification sent to students after the FAFSA is received. This document will state your Expected Family Contribution (EFC).

Federal Aid Programs

Award Letter: List of types and amounts of aid that your prospective school is offering. You are not required to accept all aid.

Pell Grant: Gift aid that is given based on financial need. How much aid you will be eligible to receive is based on your EFC. Current maximum per year is $4,050 (2006).

Financial Aid Package: The total financial aid you are offered, including scholarships, grants, work-study and loans. This information is typically summarized in an award letter.

Federal Work-Study: Provides part-time employment for students who have financial need. Jobs are usually available both on and off campus.

Financial Need: the difference between your educational costs and the EFC (see below).

Perkins Loan: Fixed low interest (5 percent) loan through your college. You must demonstrate financial need. Current maximum per year for undergraduates is $4,000 (maximum total: $20,000).

Cost of Attendance (COA): This figure includes the total price of tuition, fees, room, board, books, supplies, transportation and personal expenses for one academic year of education (also known as the Student Budget).

Stafford Loan: Currently a variable interest rate loan. You can receive this loan from a private lender or your college. They can be subsidized (no interest accrues while in school) or unsubsidized (interest accrues while in school).

Expected Family Contribution (EFC): A measure of your family's financial strength based on income, assets, family size, etc., based on FAFSA. The EFC represents the amount of money the federal government believes your family is able to contribute toward college. *The amount you end up actually paying could differ from the EFC, depending on what resources available at your college.

Basic Loan Terms

Interest: An annual charge for borrowing money, expressed as a percentage of the loan balance. Interest rates are either variable (the rate can change) or fixed (the rate will not change).

Term definitions provided by:

FASTWEB Feb/Mar and Apr/May 2006

And from "Paying For College In Michigan" Handbook

www.michigan.gov/mistudentaid

Loan Fees: One-time charges to originate or guarantee a loan, expressed as a percentage of the loan balance.

Student Loan Repayment Options

Each repayment option offers varying degrees of flexibility, depending on the amount you borrowed and the loan type.

Standard Repayment Plan

Payment: Monthly Payment is fixed (minimum $50). One payment is equal to your total loan amount (principal + interest) divided by the number of months in your repayment period. The max number of months over which to pay is 120 months (10 years).

Advantages: Economical and predictable; keeps interest to a minimum

Disadvantages: Monthly payment stays the same regardless of income.

Graduated Repayment Plan

Payment: Repayment amount increases every two years until the loan is paid off (takes between 12 and 30 years). The larger the loan amount, the more years you will have to pay the loan back.

Advantages: Monthly payments will be easier to manage at first; initial payments will be lower than the Standard Plan.

Disadvantages: You will end up paying more in interest. Also, without a stable or increasing income, you may have trouble as the monthly payments rise over time.

Extended Repayment Plan

Payment: Same as the Standard Plan, except that students receive a longer period of time to pay off their loan (usually 12 to 30 years). The larger the loan amount, the  more years you will have to pay the loan back.

Advantages: Lower monthly payments than the Standard Plan.

Disadvantages: Increases the amount you pay in (with interest) over the life of the loan.

Income Contingent Plan

Payment: Your  monthly payment is adjusted annually based on yearly income, family size, interest rate and loan amount. Your monthly payments will rise and fall in relation to your income.

Advantages: You usually have up to 25 years to repay. Any portion of the loan amount that has not been repaid up to this time is forgiven.

Disadvantages: After 25 years, the forgiven loan balance will be counted as income and is taxable. Parent loans are not eligible to be repaid with the income contingent plan.

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