Financial Aid - Can it be accepted partially?

Paying for College
1

Hi,

I vaguely remember to had read in the past that if you don’t accept it fully, it might impact the aid offered next year (assuming that there is no change EFC from this year to next year), but don’t remember where I read it. Can someone confirm it and/or guide me to the place where I find more details?

I got a bit of grant, subsidized, unsubsidized, and parent PLUS loans and wondering if I (and my parents) should take some of them, for example Parent PLUS and unsubsidized. First of all, do I have a choice to accept aid partially?

Thanks!

2

First of all, a parent PLUS loan is not financial aid. It is a loan that parents are entitled to take, assuming good credit, based on COA of the college, not something the college can offer or not.

Eligibility for federal direct loans is also something that is determined by law, by the government, not by the college. That’s the whole point of the FAFSA. Your eligibility depends on college COA and whether you have unmet need based on your FAFSA EFC

I assume you want to take the grant, since it is a cash grant offered now - and who turns away free money – so assuming your question is can you accept the grant and turn down all or part of the loans, the answer is yes, you can.

3

You can accept or reject whatever you want. It will not change the loan offers for next year as each year, for loans and grants, is based on the FAFSA for that year. If you don’t take the money in a year it doesn’t carry over to the next year.

Your Stafford loans, subsidized and unsubsidized, are going to have a lower interest rate and origination fee than PLUS loans. IMO, you should always take the loans in the order of 1)subsidized, 2)unsubsidized, 3)then any other loans offered to the student usually have lower interest rates like a Perkins or a state or school loan, and then 4)either Plus or a private loan depending on the interest rate and fees.

4

First of all, a parent PLUS loan is not financial aid. It is a loan that parents are entitled to take, assuming good credit, based on COA of the college, not something the college can offer or not.

Parent PLUS loans ARE federal financial aid. They allow families that might not otherwise have access to funding for their children to be able to send their kids to school. The federal government makes these loans. While you may not like these loans, they are a godsend for many families.

5

Kelsmom, it is common for some colleges to package their financial aid in a misleading way, listing the PLUS loan as “aid” that is subtracted from the total, so that it appears they are meeting the student’s full need.

Parent PLUS loans are NOT something that is given to the student to meet their need. It is something given to the parent to assist in financing college, and is tied to the COA of the college, not to FAFSA EFC. That is, if an upper middle class family has a $35K EFC and their child is attending a college that meets full need -, the parents may still use PLUS loans to borrow to meet the EFC. Example:

EXAMPLE A (College that meets full need without loans)

College COA: $50,000
EFC: $35,000
College Grant: $15,000
Unmet need: -0-
Parent PLUS loan: $35,000

When I mentioned misleading financial aid packaging above, I am talking about award letters that look like this:

EXAMPLE B (College that does not meet need):

College COA: $50,000
Federal Direct Loans: $5000
Work Study: $5000
Parent PLUS loan: $40,000
Balance remaining: -0-

The college has presented a statement that leads the family believe that the PLUS loan is something that the college is giving them to meet their need.

This is what leads to situations such as the OP thinking that if the award isn’t “accepted fully” it will be less in the following year.

We could debate semantics but I consider “financial aid” to be what is given to the STUDENT to meet need, and “need” as being college cost of attendance less EFC. So in my EXAMPLE A, the financial aid to the student is in the form of a grant. The PLUS loan is a federally supported financing vehicle to allow the parents to meet EFC, but is not related to the student’s need. Since it is going help the parents meet EFC, rather than to meet student need, I would not consider it financial aid. While the parents do have to complete a FAFSA as a prerequisite to taking a PLUS loan, there is no need requirement. A family could theoretically have a $75K EFC, well above the COA of their child’s college, and still borrow up to the full cost of attendance in a PLUS loan.

In my EXAMPLE B, the student has $10,000 in self-help aid (direct loans and work study) and $5K in unmet need, but the designation of the Parent PLUS loan as part of the financial aid package would tend to mislead the family. After consideration of the loan & work study, the student’s family must contribute $40K, even though their EFC is $35K.

So that is why I don’t call a Parent PLUS loan “financial aid.”

6

by that reasoning, a student loan isn’t aid either. It’s not helping the student pay for college, it is helping the student finance college.

I agree that when you see OOP=$0, you think you’ve won the lottery, but some schools put a lot of student loans in that ‘financial aid’ package - stafford loans, Perkins loans, school loans, state loans.

We don’t consider it ‘mortgage aid’ when someone gets an FHA loan to buy a house, but we do consider student financial aid to include loans of any type. A Plus loan can only be given through a student’s enrollment in a college.

7

If the school does not let the student and parent know about the option of a PLUS loan, how will they know it is available to them? Like all other loans that are not based on need, they are still financial aid. Some of us are lucky enough that we have other ways to pay, but there are some who need those loans. For some, it may be the only way out of poverty. I realize it doesn’t seem right to borrow to get out of poverty, but it is the only way for many people to be able to be in a position to get a degree.

8

I don’t consider unsubsidized loans to be financial “aid” either, and did not allow my kids to take them.

Subsidized loans are different, because the government was paying the interest. The actual value of the “aid” is not the dollar value of the loan, but the dollar value of the interest that would otherwise accrue over the years when the loans are in remission – which can be a substantial amount, especially for a student who goes on to graduate school.

The school does not have to present the PLUS loan in the way I set forth in Example B.

They can let the families know about the availabilty of other types of loans by listing them as funding options.

Additionally, given the fact that Parent PLUS loans do not have a need component, it seems to me that the college bursar’s office should also be providing this information, along with information about whatever other payment plans they may have for tuition.

I took PLUS loans for my kids so I don’t require a lecture about “some of us”. But financing is not the same as need-based aid. There were times in my life where I could not afford basic necessities without borrowing – it was a godsend to have a company like CareCredit to finance medical & dental costs, for example – but it was not “aid”.

I’d add that failure to understand this distinction is what leads to some families digging themselves a financial hole by borrowing money they cannot afford to pay back. Parent PLUS loans are meant to be something the parent pays, not something to be passed on to the college graduate years later along with accumulated interest for the years the student was in college.

9

Some of us … this was not specifically meant as YOU (but I did mean to include me in the some of us, as I do consider myself to be fortunate compared to so many, regardless of whether or not I ever borrowed a Parent PLUS loan).

Here is why it is financial aid: The Department of Education considers Parent PLUS loans to be federal financial aid; a FAFSA is required in order to be able to borrow this loan. The appropriate department in a college or university to communicate this option is the financial aid office. The Bursars Office neither awards nor processes Parent PLUS loans. The fact is that this is a form of financial aid, whether or not anyone thinks it ought to be considered as such.

The failure is not in the distinction of whether or not a Parent PLUS loan is “aid.” If there is any failure, it is in a lack of understanding how that loan works. I believe that schools should provide an adequate explanation of this option, and I believe it is the responsibility of parents to read the MPN that they sign. I don’t know how to make people pay attention to what they are signing and ask questions if they don’t understand, though.

10

My D rejected the loan one year and never use the WS due to the small amounts after merit aids, both loans and WS keep showing up on the initial financial aid award notice with full amounts every year, although they will be replaced by scholarships mostly later on. SO declining the loan or not using WS has no impact in future FA.

11

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You do not have to take the unsubsidized or parent plus loans and it will not affect a future a package

12

Thank you all. Accepted grant, subsidized and unsubsidized loans. I may not need Parent PLUS or a private loan outside for year 1, and hopefully never need it for the remaining 3 years too.

13

If you can pay it out of pocket then you don’t need the loans.