Monthly Archives: April 2014

Financial Aid

5 Steps to Financial Aid

Step 1. Look for “free” money first.

Try to get “free” financial aid first. Free financial aid is the type of aid that you do not need to repay.

Unfortunately, free financial aid usually doesn’t cover 100% of your costs. And you may need to find other ways to pay for college, including taking out low-cost loans and using any money you may have saved. Alternative sources are also an option but use them only as a last resort. Take time to understand all the ways you can pay for college.

If you include more than one college on your FAFSA (Free Application for Federal Student Aid), you will receive one financial aid award letter (award offer) from each of those schools. These offers will likely contain a combination of free aid and low-cost loans. Evaluate each school’s financial aid offer carefully.

Ways to Pay for College
Free aid
  • You do not need to repay free aid, as long as you meet all of the obligations.
  • Free aid includes scholarships and grants.
  • Sources of free aid include the federal government, your state, your school, your employer, your community, religious organizations, and others.

Note: Be aware that in some cases, a grant may convert to a loan if certain obligations are not met.

Work-study or other employment
  • You can help pay for your education by working part- or full-time while you attend school.
  • Some employers offer tuition reimbursement programs in which they give money toward your education.
Low-cost loans
  • These loans offer reduced interest rates, various repayment options, and no prepayment penalties.
  • The primary source is the federal government, which offers loans for undergraduates, graduates, and parents.
  • Your school may offer institutional loans and flexible tuition payment plans.
  • You can always use money you already have to pay for school.
  • Sources include savings accounts, 529 plans, pre-paid tuition plans, or other savings programs.
Alternative sources
  • Private education loans can fill any gaps in funding after you have exhausted other aid types.
  • You may be able to use home equity loans and lines of credit depending on your situation.
  • Avoid cashing out insurance policies or retirement funds or using high-interest advances on credit cards. These sources are almost NEVER a good idea.


How to Pay for College – Scholarships, Loans, Financial Aid & the FAFSA

picture of paper moneyThere are many types of student financial aid for college, including scholarships, grants, loans and work-study and it can be earned at the federal, state or institution level. For more information on college costs and financial aid, check out the links and articles below.


Grants & Scholarships

The MDHE administers the grant and scholarship programs listed in the sidebar on the right.


Grant awards are usually based on financial need, do not need to be repaid and are available from the state, federal government or the college you plan to attend.

To apply for most grants, the Free Application for Federal Student Aid (FAFSA) must be completed by April 1 prior to the upcoming academic year.


Scholarships reward students for academic or athletic achievements, service to a local community, unique skills, special talents or even a specific career interest. Scholarships do not typically need to be repaid, but make sure you understand the scholarship requirements before you accept any money.

Other Scholarships

Other scholarships may be available through the school you are planning to attend, community groups, charitable foundations, religious organizations and other agencies. If you search the Internet for scholarships, here are some important scholarship search tips.

America Saves for College

Sallie Mae’s “How America Saves for College 2013” study, conducted by Ipsos, finds that despite rising college costs, fewer American families with children under age 18 save for college (50%) than did just two years ago (60%). Based on a nationally representative survey of parents of children under age 18, the study found that:

  • While nearly all parents believe college is an investment in their child’s future, only one-third have a plan to pay for college.
  • When asked to describe their feelings about saving for college, parents’ top answers were overwhelmed, annoyed, frustrated, scared, or that they don’t like thinking about it at all.
  • Among those not saving, 47 percent cite a barrier other than money. Top reasons included thinking that children would be awarded enough financial aid to cover the cost of college, children are too young or too old, uncertainty about which savings option to use, procrastination and feeling it is the child’s responsibility to save and pay for college.
  • Starting to save is most frequently prompted by major milestones such as a child’s birth (34%), starting school (24%), or learning about college costs from friends and family (20%).
  • Slightly more than one quarter (27%) of parents who are saving for college use a 529 college savings plan. However, more parents save for college using general funds or CDs (42%) and may miss out on tax incentives offered by a 529 account


Simplify Student Loans

A Proposal to Radically Simplify Student Loan Payments

By March 24, 2014

Whether students leave college with a degree or without one, they face a dizzying array of challenges—where to live, how to get a job, and increasingly, how to repay their loans. Five organizations, including the National Association of Student Financial Aid Administrators and Young Invincibles, have a proposal that aims to answer that last question with a streamlined and automated alternative to the complex system of repaying loans.

As of now, and with few exceptions, borrowers must start paying back their loans six months after they leave school and repay according to a standard 10-year schedule. If their monthly payment is too high, things get complicated quickly. The government has six other repayment options. Two are pretty straightforward: Borrowers can reduce monthly costs either by extending payments over 25 years or by keeping the 10-year period but starting with smaller monthly payments that gradually increase over time.

Four more plans tie payment schedules to how much the borrower earns, each with different thresholds, eligibility, and terms. Those plans are far from perfect, but advocates for student borrowers generally like them because they provide graduates with flexibility and typically forgive the remainder of the debt after 10 to 25 years. For a long time, the Department of Education struggled to get students to use the plans, though recently borrowers are signing up in greater numbers.

The proposal rolls up a number of suggested improvements into one comprehensive attempt to fix the two biggest problems: the complexity of having so many options, and the relatively low participation by borrowers. Not unlike the successful effort to encourage automatic enrollment in retirement savings plans, the groups advocate what they call “auto-IBR,” short for income-based repayment. The plan would change the default payment option from the standard 10-year term to a repayment schedule that’s tied to a percentage of the borrower’s income and eventually forgives the remaining balance after a certain period of time. It also suggests the payments be automatically deducted from a borrower’s paycheck, similar to the way Social Security is collected, an idea championed last year by Representative Tom Petri, a Republican from Wisconsin.

The plan recommends various ways to make this work. One option is to require borrowers to pay 18 percent of everything they earn above $25,000 a year; another sets the payment level at 10 percent of income above $10,000 a year. The proposal also suggests longer terms for borrowers who take out a lot of debt, at least $50,000 or $60,000 in different scenarios. That’s to minimize giving a disproportionate benefit to students who borrow a lot—looking at you, law students!—and could see huge amounts forgiven. While this all may sound a bit complicated, it’s far simpler than the current situation.