2 minute read
Key Terms
How Do People Pay for College?
KEY TERM: Loans
Money, property or other material goods given to another party in exchange for future repayment of the loan value or principal amount, along with interest.
Examples: Mortgage, car loan, home renovation or starting a business
Borrowed funds that must be repaid with interest.
KEY TERM: Student Loans
Student loans provided by the federal government typically have lower interest rates and more flexible repayment options than loans from private lenders. There are several types of student loans that students may qualify for based on their financial need.
There are two types of federal student loans, subsidized and unsubsidized. If you qualify, you will save more money and accrue less interest with subsidized loans.
KEY TERM: Scholarships
Merit-based gift aid. These can be based on accomplishments such as academic performance (grades or standardized test scores), artistic or athletic ability, leadership and community service.
Scholarships generally do not have to be repaid. They can come from state governments, corporations or non-profits. Often, the largest source of scholarships are those awarded directly from the college or university.
Types of Scholarships:
Merit Aid - Based on skills or academic accomplishments
Needs-Based Aid - Based on financial situation
Identity-Based Scholarships - Typically awarded to underrepresented groups to encourage participation in programs and fields that tend to be homogeneous
Government Scholarships - From local, state or federal governments and the qualifications, types and requirements vary
Athletic Scholarships - Awarded by collegiate sports teams to recruit talent to play for them
Activity-Based Scholarships - Based upon students’ involvement with a profession, hobby or extracurricular activity such as a club or community service
Military Scholarships - For service in a branch of the U.S. armed forces. In some cases, military scholarships are extended to family members of those who serve
Employer-Sponsored Tuition Assistance - Provided by a company to support its employees education
KEY TERM: Grants
Need-based gift aid. Qualification for grants is based on a student’s financial need, as determined by the Free Application for Federal Student Aid (FAFSA) or the College Scholarship Service (CSS) Profile. Grants for college can come from the federal government, state governments or directly from the college or university.
KEY TERM: EFC (Expected Family Contribution)
The form that the federal government, state government, colleges, universities and other organizations use to award financial aid. The FAFSA should be completed by the required deadline prior to each year of college, as financial aid is determined on a year-by-year basis.
The amount of money that a student’s family is expected to contribute to college costs for one year. Financial need is calculated as the difference between the cost of attending school and the expected family contribution. The EFC considers family income, assets, size of current household and the number of family members currently enrolled in college.
Quick Stat:
“ Roughly 1.7 million high school graduates didn’t file the Free Application for Federal Student
Aid in the 2020-21 school year. And just under half of them — about 813,000 students — were eligible for federal Pell Grants aimed at low-income students, according to a report by the National College Attainment Network, a nonprofit group that works on behalf of low-income and minority students. The average grant, which doesn’t need to be repaid, would have been almost $4,500.”
