<p>I have been on cc for almost a year now, and in that span of time I have amassed a great wealth of knowledge about college admissions and just college in general. But for all I know, one topic still confounds me. As my big brother now begins his college search (I am but a measly junior, he is a senior), it has become apparent to me that I know nothing about financial aid. Money will indeed be the factor that decides where he will spend the next four years of his life, but since neither of my parents attended college, we are all in the dark about how to pay for my big brother's education. I know that he will be unable to obtain a substantial amount of merit aid since he is a relatively average student, and that loans will be a necessity, but that is where I am lost. How do I help him apply for financial aid and loans when I have no idea what I'm doing? I know there are private loans and federal loans, but that's as far as my knowledge goes. I have no idea how to apply for loans or any type of financial aid. So help me CC, please refer me to any website (or thread on this site) or literature that will explain the financial aid process thoroughly (or you can do it if you have the time). </p>
<p>Sparknotes Version: Brother is applying to college very soon. Need to learn as much about the financial aid process as I can. I have no idea where to begin, and any help you can provide is appreciated. Thank You.</p>
<p>Edit: By the way, this will in all likelihood be the first in a series of n00bish questions regarding college application technicalities.</p>
<p>To apply for federal financial aid (federal grants, loans, work study) he will need to complete FAFSA. FAFSA is the Free Application for Federal Student Aid. Note the first words are Free Application - you do not have to pay to do the application. The correct site to go to is FAFSA</a> - Free Application for Federal Student Aid</p>
<p>You cannot do FAFSA for the 2009-2010 school year until January 1st 2009. FAFSA will ask for parent and student information. It will ask for income and asset information of parents and student. These numbers are put through a formula called the EFC formula and this produces the EFC - Expected Family Contribution. The EFC is sent to the schools you listed on FAFSA.</p>
<p>Schools have a figure called the COA (Cost Of Attendance).This usually consists of averaged annual students cost for tuition and fees/room and board/books/miscellaneous expenses/travel expenses. The school will take your EFC away from their COA to come up with your need on which financial aid is based. For instance if your EFC is 8000 and the schools COA is $20,000 then your need is $12,000. This need may be met with grants, loans, work study and there may possibly be a 'gap'. A gap is where need is not fully met.</p>
<p>Swimcatsmom got to it as I was typing, and she did a great job (as usual).</p>
<p>Let me add that it's great you are looking into this now. You will want to encourage your brother to apply to schools he will be able to afford. The most important place to start is finding out your family's expected family contribution (EFC). You will probably need your parents' help in gathering info for this. Once you find out the EFC, you will be able to start looking into the financial aid policies for schools your brother likes. </p>
<p>Once you find out the EFC & a few schools he likes, check out the schools' websites. If you have any questions, do not hesitate to post them. We like to help!</p>
<p>From a university website: "Interest payments can be deferred until graduation and then will be capitalized and added the to principal of the loan. "</p>
<p>Does "capitalized" simply mean added to the original amount of the loan?</p>
<p>Yes. But it will probably be added to the original loan periodically (could be annually, or quarterly, or some other time period depending on the terms of the loan) then interest will be charged on original loan and the interest. </p>
<p>For instance if the year 1 loan is $10,000 with an interest rate of 10% capitalized annually thenthat original $10,000 would grow as follows:
End of year one you would owe $11,000 ($10,000 + 10% interest - $1,000).
End of year 2 you would owe $12,100 ($11,000 + 10% of 11,000 - $1,100)
End of year 3 you would owe $13,310 ($12,100 + 10% of $12,100 - $1,210)
End of year 4 you would owe $14,641 ($13,310 + 10% of $13,310 - $1,331)</p>