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Paying for College

Financial aid overview

Paying for college can be a daunting task. When making decisions about how to pay for college, it may be best to first familiarize yourself with the different types of financial aid available. Types of aid include Federal grants, Federal Work Study, and Federal student loans as well as scholarships and state aid.

The two main categories of financial aid for college are gift aid and self-help aid. Gift aid includes grants and scholarships, which usually do not have to be paid back. Self-help aid includes work study and loans. Pay from work study is earned by the student. Loans are to be repaid by the borrower with interest added. Federal financial aid in the form of grants, low-interest loans, and work study is used to pay for college expenses such as tuition and fees, room and board, books and supplies, and transportation. It can also be used to pay for other related expenses such as a computer and dependent care

Applying for Federal financial aid

To receive Federal financial aid, you will be required to apply each year. If you have previously received a Federal student loan, it may be helpful to see the total amount of Federal student loans that you have already borrowed. To view details about your previous Federal student loan, please sign on to NSLDS. Once you have signed into your NSLDS account, click on each loan to find your loan servicer contact information.

To apply for Federal financial aid, complete the Free Application for Federal Student Aid (FAFSA). The information listed on the FAFSA application will help to determine the amount of grants, work study, Federal student loans, and some types of state aid that you may be eligible to receive.

To see an estimate of how much Federal student aid you may be eligible to receive, complete the FAFSA4caster.

When applying for Federal financial aid, the following tips will help to reduce the risk of identity theft:

  • Apply for aid by completing the Free Application for Federal Student Aid (FAFSA) at the fafsa.ed.gov website.

  • When you exit the FAFSA website, close the browser so cookies from the session will be deleted automatically.

  • Don’t give anyone your Federal Student Aid ID, even if that person is helping you fill out the FAFSA.

  • Review your financial aid award documents and keep track of the amount of aid you applied for and received.

  • Never give personal information over the phone or Internet unless you are the one who made the contact.

Basic eligibility for Federal financial aid

To qualify for Federal financial aid, you must meet the following basic eligibility requirements:

  • Demonstrate financial need (for most programs)

  • Be a U.S. citizen or eligible noncitizen

  • Have a valid Social Security number

  • Be registered with the Selective Service, if you are a male

  • Have a high school diploma or a recognized equivalent of a high school diploma such as a General Educational Development certificate (GED) or complete a high school education in a home school setting approved under state law

  • Be enrolled as a regular student working toward a degree or certificate in an eligible program at an eligible institution

  • Be enrolled at least half time to be eligible for Direct Loan program funds

  • Make Satisfactory Academic Progress (SAP), as determined by the college

  • Not be in default on a Federal student loan or owe a Federal grant overpayment or Federal loan overpayment

Federal grants

A Federal grant is money that does not have to be repaid and is based on financial need. To apply for a Federal grant, complete the Free Application for Federal Student Aid (FAFSA)Completing and submitting the FAFSA is free, and it is your access to the largest source of financial aid for college.

There are four types of Federal grants:

  • Federal Pell Grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant
  • Iraq and Afghanistan Service Grant (IASG)
     

The chart below lists information about Federal grants.

Federal Grant Chart

Federal Grant

Summary

Award Information

Federal Pell Grant

  • Awarded to undergraduate students who have exceptional financial need and have not earned a first bachelor’s or professional degree

 

  • Can only receive for 12 semesters or the equivalent (roughly six years)

  • Maximum amount awarded for the 2017-18 award year is $5,920

 

  • Amount can change yearly

 

  • Amount received is based on

  • Financial need

  • Cost of Attendance (COA)

  • Status as full-time or part-time student

  • Attending school for full academic year or less

 

Federal Supplemental Educational Opportunity Grant (FSEOG)

  • Awarded to undergraduate students who have the most exceptional financial need

 

  • Priority is given to Pell Grant recipients

 

  • Administered directly by the financial aid office at your school

 

  • Check with your school to see if they offer FSEOG, since not all schools participate

 

  • Amount awarded is between $100 and $4000 per year

 

  • Amount received is based on

  • Financial need

  • Amount of other aid you will receive

  • Availability of funds at your school

 

 

Teacher Education Assistance for College and Higher Education (TEACH) Grant

  • You must sign a “TEACH Grant Agreement to Serve” in which you agree to teach

  • In a high-need field

  • At an elementary school, secondary school, or educational service agency that serves students from low-income families

  • For at least four complete academic years within eight years after completing the course of study for which you received the TEACH grant

 

  • Check with your school for additional requirements and to see if they participate in the TEACH Grant program

 

  • Amount awarded is up to $4,000 a year

 

  • If you do not complete your service obligation, all TEACH Grant funds you received will be converted to a Direct Unsubsidized Loan. You must then repay this loan to the U.S. Department of Education (ED). You will be charged interest from the date the TEACH Grant was disbursed

Iraq and Afghanistan Service Grant (IASG)

 

 

 

 

  • You may be eligible to receive an IASG if

  • Your parent or guardian was a member of the U.S. armed forces and died as a result of military service performed in Iraq or Afghanistan after the events of 9/11, and

  • You were under 24 years old, or

  • You were enrolled in college at least part time at the time of your parent’s or guardian’s death

 

  • Amount awarded is equal to the amount of a maximum Pell Grant for the award year but cannot exceed your Cost of Attendance (COA) for that award year

 

  • The maximum Pell Grant amount awarded for the 2017-18 award year is $5,920

Federal work study

The Federal Work Study Program (FWS) provides part-time jobs for undergraduate and graduate students with financial need, allowing you to earn money to help pay for educational expenses. The program is available to full-time or part-time students. This program encourages community service work and work related to your course of study.

The FWS program is administered by participating schools. To find out if your school participates in the FWS program, check with your school’s financial aid office. To apply for the FWS program, complete the Free Application for Federal Student Aid (FAFSA). Completing and submitting the FAFSA is free, and it is your access to the largest source of financial aid for college.

The amount you can earn under the FWS program will be at least the current Federal minimum wage. You may earn more depending on the type of work you do and the skills required. The amount of FWS awarded depends on when you apply, your level of financial need, and your school’s funding level. The amount you earn cannot exceed your total FWS award.

FWS jobs can be on campus or off campus. If you work on campus, you will usually be working for your school. If you work off campus, your employer will usually be a private nonprofit organization or a public agency, and the work performed must be in the public interest. If you are interested in getting a FWS job, be sure to apply for aid early. Schools award funds on a first come, first served basis.

If you are an undergraduate student, you are paid by the hour. If you are a graduate student, you are paid by the hour or by salary, depending on the work you do. Your school will pay you at least once a month. When assigning work hours, your employer or your school’s financial aid office will consider your class schedule and your academic progress.

Federal student loans versus private loans

If you apply for financial aid, the school may include student loans as part of their financial aid package. Before accepting a student loan, it is important to know the different types of loans.

There are two types of student loans:

  • Federal student loans-these are loans funded by the Federal government

  • Private student loans-these are nonfederal loans made by a lender such as a bank, credit union, state agency, or a school

If you need to borrow money to pay for your education, it may be best to start with Federal student loans. To find out more about each type of Federal student loan, see the information listed in “Federal Student Loans”.

Federal student loans include many benefits not typically offered with private loans such as fixed interest rates, income-based repayment plans, and postponement of payments through deferment and forbearance options. Private loans are generally more expensive than Federal student loans.

The chart below lists a summary of the differences between Federal student loans and private student loans.

Summary of Differences Between Federal Student Loans and Private Student Loans

Federal Student Loans Private Student Loans

Repayment does not begin until after you graduate or become enrolled less than half time

Repayment may be required while you are in school

The interest rate is fixed and may be lower than private loans or credit cards

Interest rates may be variable and can change annually. A high variable interest rate may substantially increase the total amount you repay

Undergraduate students with financial need may qualify for a subsidized loan where the Federal government pays the interest while you are in school at least half time and during certain grace and deferment periods

You pay the interest

A credit check is not required for Federal student loans (except for PLUS loans)

An established credit record may be required. The cost of the loan may depend on your credit score and other factors

A cosigner is not required in most cases

A cosigner may be required

 

Interest paid may be tax deductible

Interest paid may not be tax deductible

Loans can be consolidated into a Direct Consolidation Loan

Loans cannot be consolidated into a Direct Consolidation Loan

If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments through deferment or forbearance options

Postponement or lower payment options may not be offered

Several repayment plans are offered that may tie your monthly payment to your income or extend the time you have to repay your loan

Check with the private loan lender to see if repayment options are available

There is not a prepayment penalty fee

Check with the private loan lender to see if there is a prepayment penalty fee

You may be able to have your loan discharged if you become disabled, you die or the student the loan was taken out for dies, or in rare cases, if you file bankruptcy

Discharge of a private loan may not be available. Check with the private loan lender

You may be eligible to have a portion of your loan forgiven if you are a teacher or work in public service

Forgiveness of a private loan may not be available. Check with the private loan lender

Federal student loans

A Federal student loan is money borrowed for college that must be repaid with added interest. Federal student loans are available to undergraduate students, graduate students, and parents of dependent undergraduate students. These loans provide low interest rates and have flexible repayment options. The amount you can receive is based on several factors including grade level, financial need, and Cost of Attendance (COA).

There are two types of Federal student loans:

  • The Federal Perkins Loan program is a school-based loan program for undergraduate and graduate students with exceptional financial need. Under this program, the school is your lender.

  • The William D. Ford Federal Direct Loan (Direct Loan Program) is the largest Federal student loan program. Under this program, the U.S. Department of Education (ED) is your lender. There are four types of loans in this program:

  • Direct Subsidized loans

  • Direct Unsubsidized loans

  • Direct PLUS loans

  • Direct Consolidation loans

 

The chart below lists information about Federal student loan programs.

Federal Student Loan Programs

Loan Program

Eligibility

Information

Federal Direct Subsidized Loan

  •  For undergraduate students who are enrolled at least half time

 

  • Must demonstrate financial need

  •  The U.S. Department of Education (ED) is your lender

 

  • The Federal government pays the interest while you are in school, in grace, or in a deferment

 

  • The interest rate for loans first disbursed on or after 7/1/18 and before 7/1/19 is 5.05%

 

Federal Direct Unsubsidized Loan

  • For undergraduate and graduate students enrolled at least half time

 

  • Financial need is not required

  • The U.S. Department of Education (ED) is your lender

 

  • You are responsible for paying the interest on the loan starting on the date the loan is first disbursed

 

  • The interest rate for undergraduate loans first disbursed on or after 7/1/18 and before 7/1/19 is 5.05%

 

  • The interest rate for graduate or professional loans first disbursed on or after 7/1/18 and before 7/1/19 is 6.60%

 

Federal Direct PLUS Loan

  • For parents of dependent undergraduate students and for graduate or professional students

 

  • Students must be enrolled at least half time

 

  • Financial need is not required

 

  • Borrowers must not have adverse credit history 

 

  • The U.S. Department of Education (ED) is your lender

 

  • You are responsible for paying the interest on the loan starting on the date the loan is first disbursed

 

  • The interest rate for loans first disbursed on or after 7/1/18 and 7/1/19 is 7.60%

 

 

Federal Direct Consolidation Loan

  • For borrowers who want to combine multiple Federal student loans into one loan with one payment

 

  • To consolidate your loans, you must be in grace or repayment

  • The U.S. Department of Education (ED) is your lender

 

  • The interest rate is a fixed rate based on the weighted average of the interest rates of the loans being consolidated

 

 

Your school will determine the loan type(s) and the actual loan amount you are eligible to receive each academic year. There are annual loan limits on the amount of subsidized and unsubsidized loans that you may be eligible to receive each academic year. The actual loan amount you are eligible to receive each academic year may be less than the annual loan limit. These limits vary depending on what grade level you are in at school and whether you are a dependent or independent student. If you are a dependent student whose parents are ineligible for a Direct PLUS Loan, you may be able to receive additional Direct Unsubsidized Loan funds.

There is also an aggregate loan limit on the total amount you may borrow for undergraduate and graduate study. If the total loan amount you receive over the course of your education reaches the aggregate loan limit, you are not eligible to receive additional loans.

The chart below lists the annual and aggregate loan limits for subsidized and unsubsidized Federal student loans.

Federal Student Loan Annual and Aggregate Loan Limit Chart

Year

Dependent Students (except students whose parents are unable to obtain PLUS Loans)

Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)

First-Year Undergraduate Annual Loan Limit

$5,500—No more than $3,500 of this amount may be in subsidized loans

$9,500—No more than $3,500 of this amount may be in subsidized loans

Second-Year Undergraduate Annual Loan Limit

$6,500—No more than $4,500 of this amount may be in subsidized loans

$10,500—No more than $4,500 of this amount may be in subsidized loans

Third-Year and Beyond Undergraduate Annual Loan Limit

$7,500—No more than $5,500 of this amount may be in subsidized loans

$12,500—No more than $5,500 of this amount may be in subsidized loans

Graduate or Professional Students Annual Loan Limit

Not Applicable (all graduate and professional students are considered independent)

  • $20,500 (unsubsidized only)

 

  • Certain health profession programs may receive additional amounts each year

 

  • Contact your school for more information

PLUS Annual Loan Limit

Not Applicable

Maximum amount is Cost of Attendance (COA) minus any other financial aid student receives

Subsidized and Unsubsidized Aggregate Loan Limit

$31,000—No more than $23,000 of this amount may be in subsidized loans

  • $57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans

 

  • $138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans

 

  • The graduate aggregate limit includes all Federal student loans received for undergraduate study

 

  • Certain health profession programs may have a higher aggregate limit

 

  • Contact your school for more information

Scholarships and state aid

Financial aid is available from a variety of sources to help pay for your college or career school education. Financial aid in the form of a scholarship is money that does not have to be repaid. Receiving a scholarship will help reduce the cost of your education.

Scholarships may be offered by schools, employers, individual companies, communities, religious groups, or various organizations. Scholarships may be merit-based. A merit-based scholarship can be earned by meeting certain standards set by the scholarship-giver, which may include academic achievement, special talents, and other interests. Some scholarships are based on financial need. Many scholarships are geared toward a particular group of people. For instance, there are scholarships for military families, single parents, or students majoring in specific degrees.

Several resources are available to help you search for scholarships. To find information concerning scholarships and other financial aid for the state of Arkansas, please click on the Arkansas Department of Higher Education website.

To find resources available to help you search for scholarships and other types of financial aid, go to the Resources tab at the top of this website.

Tax benefits

There are two tax credits that may help offset the cost of your college expenses by reducing the amount of income tax you pay:

  • The American Opportunity Credit allows you to claim up to $2,500 per student per year for the first four years of college

  • The Lifetime Learning Credit allows you to claim up to $2,000 per student per year for college tuition and fees, books, supplies, and equipment required to be purchased from the school

Another tax benefit for college is you may withdraw money from an Individual Retirement Account (IRA) to pay for qualifying higher education expenses. You will owe Federal income tax on the amount withdrawn, but you will not be required to pay an early withdrawal penalty.

If you take out a student loan (Federal or nonfederal), you may be able to take a tax deduction for interest paid. The maximum deduction is $2,500 a year.

Always check with your tax advisor to verify the tax benefits available and how they will affect your financial circumstances.