Financial Aid FAQs

Financial Aid FAQs

Financial aid is top-of-mind for students and their parents in the springtime.  Below is a list of frequently asked questions we often hear in regard to financial aid.
What is Financial Aid?
Financial Aid is financial assistance that helps cover educational expenses.
How Do I Apply for Financial Aid?
Every October, the Office of Federal Student Aid releases an updated version of the Free Application for Federal Student Aid (FAFSA). Any student hoping to qualify for financial aid must complete the FAFSA before the deadline. FAFSA deadlines vary by state but usually fall around spring of each year.
The FAFSA asks for a lot of information about the income and assets held by the student and his or her parents. To make the process easier, we recommend having a copy of your most recent tax return nearby.
You will also need to provide at least one college to which the FAFSA results are sent. These institutions will use the information on your FAFSA to determine your financial aid package.
What happens once I fill out the FAFSA?
A few days after completing the FAFSA, you will receive your Student Aid Report (SAR). Your SAR will contain a summary of your information as well as your Expected Family Contribution (EFC). Your EFC is an estimate of how much financial aid you are eligible to receive.
A few weeks later, you will receive award letters from the colleges listed on your FAFSA. These award letters will contain a summary of the federal and non-federal financial aid offered through the institution.
What Types of Financial Aid are Available?
1. Grants
Grants are the most desirable financial aid option. They are gifts from the government that do not need to be paid back.
2. Federal Student Loans
Federal student loans are loans from the government that must be paid back. They are generally more desirable than private student loans as they tend to have lower, fixed interest rates compared to private loans.
Federal student loans also offer more flexible repayment plans. Borrowers may have the option to defer loan payments altogether in certain circumstances and may eventually be forgiven if the student is willing to work in specific (usually federal) industries for a number of years.
3. Work-Study Jobs
Work-study jobs are a way for students to earn money while in school. Jobs are often on campus, and students earn at least minimum wage. This money does not need to be paid back.
One important note to parents: Income from work-study jobs does not have to be used for education expenses, and earnings are often paid directly to the student. Despite the fact that these jobs are technically financial aid, there’s nothing stopping your child from spending this money on pizza.
Although a work-study job provides income to the student, these earnings are not subject to FICA taxes and will not count against the student the next time he or she applies for financial aid.
4. Private Student Loans
Private student loans, like most loans, are based on the credit worthiness of the borrower. Most students will need a co-signer to secure a private student loan. These loans are offered through private banks and lending institutions, and the terms can vary widely depending on the lender.
Private student loans are generally less desirable than federal loans due to their higher interest rates. Finding a fixed rate is also more difficult as most private student loans have a variable rate.
Similar to federal loans, students can usually defer private loan payments while in school.
What Happens If I Default on a Student Loan?
There are three ways to default on a student loan:
1. Miss too many payments (usually nine months for federal loans; private loans vary)
2. Violate the terms of your loan agreement
3. Fraudulently obtain your loan
Once your loan is in default, the entire loan balance is due, and your loan is assigned to a debt collector. If things continue to escalate, you could be sued by your lender.
If you default on federal student loans, you automatically lose the ability to apply for additional financial aid so if the student is still enrolled in school, they may not be able to pay for their education until the defaulted loan has been resolved.
To get a federal loan out of default, you have three options:
1. Pay the balance
2. Consolidate the loan in default
A loan rehabilitation agreement usually involves restructuring the terms of your loan and lowering monthly payments. If you are able to comply with the terms of your rehabilitation agreement, the default is removed from your credit report. Unfortunately, the record of your missed payments will remain on your credit report and may affect your credit score.
What Happens to My Student Loan Debt If I Die?
Upon the death of a student, federal student loan debt is discharged by the government. However, private loans may not be discharged. Each private student loan contract is different, and family members could remain responsible for student loan debt – especially in instances where a co-signer is involved.
How Do I Know What Options are Right for Me?
With so many options, it can be difficult to find the right course of action for you and your family. Feel free to give us a call to discuss your unique situation. We can help design a solution that is personalized to fit your needs.

FSA’s current written Disclosure Brochure and Privacy Notice discussing our current advisory services and fees is available at www.FSAinvest.com/disclosures or by calling 301-949-7300.

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