Types of College Financial Aid

There are two basic types of financial aid:

1. “Gift” aid: money that does not have to be paid back (for example, grants and scholarships)

2. “Self-help” aid: money that you work for or that you will need to pay back later (for example, work-study or loans)

Definitions:

Grants and scholarships are money that does not have to be paid back. To receive grants, you usually have to demonstrate financial need.

To receive scholarships, you usually have to demonstrate a talent or skill and have to maintain a certain level of performance (e.g., good grades) to keep receiving it.

Work-study is a job that helps you pay for your education through working. A loan is money that must be paid back, usually with interest.

Although you have to repay a loan, you still should consider a federal student loan as a good way to pay for college.

Federal Student aid and the FAFSA

Financial aid can come from colleges, companies, private scholarship funds, or the state you live in, but a lot of it comes from the U.S. Department of Education. The money that comes from the government is called federal student aid.

Federal Student Aid

Most federal student aid is based on need. After January 1 of your senior year of high school, you should complete and submit your Free Application for Federal Student Aid (FAFSA)at www.fafsa.ed.gov. Based on the info you provide, the FAFSA determines your Expected Family Contribution, or EFC, a number that most colleges, states, and some scholarships use to figure out how much help you need. Keep in mind that the U.S. Department of Education, colleges, and scholarship providers can only give you aid if you APPLY for it. You need to take the action!

Learn Where the Money Is

Figuring out how to pay for college can seem overwhelming. There are many financial aid options, different places where aid can come from, and various rules governing who gets what which can leave even seasoned students and parents who have been through the process before more than a little confused. IndianaCollegeCosts.org has a section that is designed to give you an introduction to the various types and sources of financial aid, as well as places to look for additional dollars and tax breaks. You also will find numerous links to other resources in each section which can provide even greater details, so that when you are ready to dig a little deeper, more help is at your fingertips.

Start Saving for College

·         Start a college savings plan at CollegeChoiceDirect.com

·         Check out Upromise.com and learn how your family’s everyday spending can add to your college savings plan.

·         Create a budget at CashforCollegeIndiana.org.

Estimate the Cost of College

The Indiana College Costs Estimator is a FREE service offering families consistent and accurate comparisons of college costs across all Indiana campuses, both public and private. Visit IndianaCollegeCosts.org on your computer and check out the new smartphone app at CashforCollegeIndiana.org.

1.Your best strategy is to save a specific amount each month—even as little as $20 or $50 per month can add up quickly over time. You can have the money automatically deducted from your paycheck and set aside in a savings account – ask your employer or bank for more information. Investigate the

Indiana CollegeChoice 529 Savings Plan as an easy way to invest in your child’s education tax-free. See collegechoiceplan.com to learn more.

2. Be realistic about your savings goals. You may not be able to save enough for all four years of tuition, room and board and other expenses – but you could save enough to give your child the right start. Remember, you also need to save for your own retirement and emergencies. Use a savings calculator, such as the one found at mappingyourfuture.org/money/savingscalculator.htm to determine how your monthly contribution can grow.

3. Make college savings a family project. When friends and relatives ask for gift ideas, suggest that they contribute even small amounts to your child’s college account. Your child can contribute, too, by setting aside gift money or— eventually—earnings from babysitting or other part-time jobs.