What Smart Parents Need to Know about Financial Aid

jar of money representing why you need to understand financial aidMost parents know that they will need financial aid to send their kids to college. But they don’t always understand financial aid actually comes from a variety of sources and can vary depending on the college. Do you know the answers to the following financial aid questions?

Which of the following are considered financial aid?

  • Pell Grants
  • Private Loans
  • Athletic Scholarships
  • PLUS Loans
  • Rotary Club Scholarships

Answer: All of these are forms of financial aid and may be part of or affect a college’s financial aid award.

Lesson: Colleges get to define student need and not all aid is created equal.

True or False: Your Expected Family Contribution (EFC) is the maximum you’ll pay to go to college.

Answer: False. EFC is calculated when students submit the FAFSA. The only financial aid it guarantees is the money awarded by the federal government.

Lesson: Most colleges do not meet 100% of demonstrated need. Therefore, your EFC should be considered the minimum you’re expected to pay for college.

What is the maximum amount parents can borrow through PLUS loans?

  • $5,865
  • $15,000
  • $27,000
  • The full cost of tuition

Answer: Parents can borrow up to the full cost of tuition which is why some colleges include PLUS loans in financial aid award letters so that it appears that students have had their financial need met.

Lesson: Colleges get to decide how they meet the student’s need which they also get to define. So it’s important to apply to the right colleges.

Which college charges students more from outside Michigan, the University of Michigan at Ann Arbor (public) or Kalamazoo College (private)?

Answer: University of Michigan. Out-of-state students are charged over $59,000 to attend compared to the $57,116 the private college Kalamazoo charges.

Lesson: Public colleges are generally not a good deal for out-of-state students.

True or False: if you qualify for a work-study job, you are guaranteed a specific amount of money.

Answer: False. Most colleges can’t even guarantee the availability of a job. Furthermore, if the student doesn’t work the hours, she won’t get paid.

Lesson: It’s easy to make assumptions about financial aid. Families need to take the time to learn the ins and outs of financial aid to cut the cost of college.

Learn more about the different forms of financial aid by taking the free class: Intro to Cutting College Costs by Paying for College 101


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