FAFSA – Why Apply?

Because you have the potential of being awarded a piece of the $100 billion in aid (in the form of grants, loans, scholarships and work study) that is awarded each year to approximately 10 million students to help pay for postsecondary education.

Federal Student Aid uses the data on your FAFSA to calculate an Expected Family Contribution (EFC). The EFC is an indicator of your family’s financial strength to pay for education after high school. Your school will subtract your EFC from your total cost of attendance. The result is your financial need.

The EFC is not the amount of money that your family must provide. Rather, you should think of the EFC as an index that colleges use to determine how much financial aid (grants, loans, or work-study) you would receive if you were to attend their school.

Your application results are transmitted to the school(s) listed on your FAFSA, and the school(s) uses the EFC amount to determine the amount of financial aid that you are eligible to receive. Many states and schools also use the FAFSA data to award aid from their programs. Some states and schools also may require you to complete additional applications.

Completing and submitting a FAFSA is free, whether you file electronically or on paper. In fact, charging students and/or parents a fee for completing and/or submitting the FAFSA is prohibited by law.

Federal student aid programs
There are three categories of federal student aid: grants, loans and work-study. Grants provide financial aid that does not have to be repaid. Loans provide borrowed money that must be repaid with interest. Work-study allows students to earn money to help pay for education expenses while enrolled in school.

Your financial aid “package”—the aid your school awards you—is likely to include funds from the federal student aid programs. Note that not all schools participate in all of the federal student aid programs administered by the U.S. Department of Education. The major programs are described below:

Federal Pell Grants are available to undergraduate students only (with one minor exception for teacher certification students). Grants do not have to be repaid. For the 2010-2011 award year (July 1, 2010 to June 30, 2011), the maximum award is $5,500.

William D. Ford Federal Direct Stafford Loans are student loans that must be repaid and are available to both undergraduate and graduate students. If your school participates in the William D. Ford Federal Direct Loan (Direct Loan) Program, the federal government provides the funds for your Direct Stafford Loan through your school. First-year dependent undergraduates are eligible for a subsidized loan up to $3,500 and up to an additional unsubsidized amount of $2,000 for a total of $5,500. A subsidized loan is awarded on the basis of financial need. If you’re eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you’re in school, for the first six months after you leave school, and if you qualify to have your payments deferred. For an unsubsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. Amounts increase for subsequent years of study, with higher amounts for graduate students. Federal Stafford Loans first disbursed on or after July 1, 2006 have a fixed rate of 6.8 percent. Direct Subsidized loans first disbursed to undergraduate students only on or after July 1, 2009 have an interest rate of 5.6 percent.

Direct PLUS Loans are unsubsidized loans made to parents of dependent undergraduate students (Parent PLUS loans) and to graduate or professional students (Graduate PLUS loans). Direct PLUS Loan funds are provided by the federal government through the school. A graduate or professional student must complete the Free Application for Federal Student Aid (FAFSA) and the school must determine the student’s eligibility for the maximum annual amount of a FFEL or a Direct Loan Program Stafford Loan (subsidized or unsubsidized) before the student may apply for a Graduate PLUS Loan. However, the student is not required to accept the Stafford Loan funds as a condition for receiving a Graduate PLUS Loan. A dependent undergraduate student whose parent is unable to obtain a PLUS Loan may borrow additional Stafford Loan funds at the higher loan limits otherwise only available to independent undergraduates. Direct PLUS Loans first disbursed on or after July 1, 2006 have a fixed interest rate of 7.9 percent. FFEL PLUS Loans first disbursed on or after July 1, 2006 have a fixed interest rate of 8.5 percent. Learn more about options for parents.

Campus-Based Programs are administered by participating schools. There are two of these programs available at Piedmont. Federal Supplemental Educational Opportunity Grants are grants available for undergraduates only; awards range from $100-$4,000. Federal Work-Study provides jobs to undergraduate and graduate students, allowing them to earn money to help pay education expenses.

Adapted from the Federal Student Aid Website.