Suggestions for scenario involving outside scholarships and Stafford loans?

Paying for College
1

<p>Given the following scenario for a college freshman, can you suggest some options?
Cost of attendance = $50,000
College gives need based grant of $20,000, bringing remaining cost for family to $30,000
Parents are willing to cover $20,000 per year
College includes expected student self-help of $4,000 per year between work study and summer job in their FA package.
Student receives an outside scholarship of $8,000</p>

<p>I am especially wondering what the constraints are, when a college says that outside scholarships can only be applied to the student's self help portion. In this case, can the student apply $4,000 of the scholarship to his self help, but then still take out a Stafford Loan for $5,500, or is the Stafford Loan somehow affected by the scholarship money?</p>

2

<p>Direct Loans are generally included as part of your financial aid package.</p>

<p>Your school determines the actual loan amount you are eligible to receive each academic year.</p>

<p>So, if the loans are not in your financial aid package, then you’ll not get any direct loans unless there is a change in your family’s financial situations.</p>

3

<p>I thought (almost) every student is eligible for an unsubsidized Stafford loan. What if the school does not put loans in their FA packages? Aren’t those students still eligible somehow for the unsubsidized Stafford Loan?</p>

4

<p>All students are eligible for Direct Loans (at a school that is eligible). Most colleges will package students loans into the “need” package. IF they do not package loans (at very few “meet need, no loan” schools) - then you can use students loans to help meet the EFC. </p>

<p>In the case you describe the o/s scholarship may be first applied to any student contributions &/or student loans and then towards the school grant. Please check with the particular college in question. I have seen many variations on how outside scholarships are applied to the finances.</p>

<p>If this is a no loan school and the $20 includes the $4k of student contribution I would expect this:</p>

<p>COA 50K
Grant $12k
O/s scholarship $8k
Net $30k
Student Loans $5.5k
Student Work $2k</p>

<p>The student will become ineligible for work study but can still obtain an on campus job. This scenario would leave 22,500 for the parents (& student summer work)</p>

5

<p>Does the college also explain how the “excess” scholarship (the amount over the student self-help expectation) affects the financial aid package? Some schools will reduce THEIR grants to you by this amount. Some schools will first use it to reduce any loan that was part of the package. Not very many let you use it toward you family’s contribution. </p>

<p>Policies differ, so you need to find out how this would work at each school.</p>

6

<p>“Policies differ, so you need to find out how this would work at each school.” </p>

<p>The above is really the answer. You need to look at the policies of the school and the terms of the award and what is included in it.</p>

<p>That’s why when you read that a school meets 100% of need, you have to be wary since 1) They define the need 2) Self Help can be included in the need package which means student employment and loans 3) Outside scholarships can be absorbed 4) Stafford loans can be included as part of the awards.</p>

<p>The most generous schools will not include Stafford loans, any loans or PELL in the package, nor will it have required student employment or workstudy in the package. They may also let you keep your scholarship money which will only reduce federal funds as required (such as eligible Stafford loans) Other schools will go after all of that.</p>

<p>It is possible to get a package that will include the $5500 that nearly all students that fill out the FAFSA and get a SAR from them, also include any PELL grant money, (that’s actually typical) and also require summer employment and give a work study award as well. That can pose a problem when the family/student is counting on summer employment, work during the school year, and the Stafford direct loan to go towards the EFC. We were entitled to zero in financial aid, and used the Stafford option as well as student funds from summer employment and work during the school years to meet college costs and to provide a bit of a buffer. IT’s really a hit when a family that comes up in need has all of that swallowed up as financial aid.</p>

<p>Some schools even have the gall to present the Parent PLUS loan as part of the package. </p>

<p>In some typical packages from those schools that are considered generous in that they guarantee to meet all need, I have seen the subsidized part of the Stafford included as part of the package, but not the unsub. So there is a lot of mix and match one can see.</p>

<p>it’s a big problem when student employment is assumed and the student lives in an area where there are no jobs and/or has transportation issues that are an impediment. I mentioned in another thread how my cousin has one vehicle, has an hour’s drive to work and has to be there by 6 AM. His kids don’t even have driver’s licenses because of the additonal cost it would add to their insurance plus he hasn’t the time and energy to do anything in that regard. The kids get to school via school buses or friends’ rides. They would have to cobble together a ride system if they found a job, and considering how little they will likely net from working, it’s a tough go. </p>

<p>In the OP’s specific scenario, using info given, from outside awards, that student would get $4k put towards his self help requirement and get $4k “free money” that can go towards the parental contribution. The Stafford loans are looked at in a whole different scenario because they are federal loans. They FAFSA EFC comes into play here and the school’s official COA. The NEED is defined as the difference between the two. You then subtract out the school aid package and the scholarship money. that is the net need figure. The student can take out for freshman year Stafford loans up to $5500 as long as the COA minus scholarship and need package amounts don’t exceed that. However for the Subsidized part of the Stafford (up to $3500 can be subsidized) there has to be need to justify that. </p>

<p>The school, unless it uses FAFSA only for financial aid determination, has a need figure that does not necessarily match what FAFSA defines as need, so when applying federal (and some state) funds towards need, you have to go back to the FAFSA EFC. COA minus EFC will equal the FAFSA need, and then any grants, scholarships, aid, workstudy given to the student will be subtracted from that need figure. Those are federal laws governing how the loans can be distributed and the school has to go by them.</p>

7

<p>If COA = $50K and the school is giving <em>grant</em> aid of $20K plus expects $4K of student self help, that sounds like it leaves only $26K for parents to cover. Many school include $2K of term work in the computation of “aid” and expect a certain amount ($2K in this case) from summer savings to go toward the total “family contribution”. Most schools also include the full $5500 in Stafford loans in the “aid”.</p>

<p>If this were the case with your school I’d expect to see something like this before the outside scholarship:</p>

<p>$50K COA
$5.5K stafford loans
$2K student work</p>

<h2>$12.5K need-based grant</h2>

<p>$30K remains to be paid
$2K from student earnings
$28K from other family resources</p>

<p>If the student earns an $8K outside scholarship which can be used toward “self help” this often includes all of loans, work-study and summer earnings. Let’s say your student is still willing to work while at school, then they could use the $8K to replace 5.5K of loans, 2K of summer earnings and .5K of work study leaving:</p>

<p>$50K COA
$6K from outside scholarship
$1.5K student work</p>

<h2>$12.5K need-based grant</h2>

<p>$30K remains to be paid
$2K from outside scholarship
$28K from other family resources</p>

<p>Since you didn’t need the 5.5K in loans in your aid package (replaced by the outside scholarship) and since every student can borrow the 5.5K regardless of need, the student can now borrow the 5.5K and pay it to family portion, leaving $22.5K still to be paid. If the student still does earn 2K over the summer, that leaves 20.5K to be paid by the family. Presumably the student could either earn a little more over the summer or the parents could agree to contribute a bit more to close that $500 gap.</p>

8

<p>mathmomvt, I guess that was the crux of my question… whether the 5.5K Stafford loan (unsubsidized, we won’t qualify for subsidized), would be available to my DS even if it wasn’t noted in the FA package. For instance, what about full need-met schools that don’t include loans in their FA packages? If the student wants to get the 5.5K loan to help cover the difference between what the school wants the family to pay, and what the parents are willing to pay, is that loan still an option? DS is looking at many schools, so it sounds as though we need to check with each one.</p>

9

<p>Yes, as long as you fill out the FAFSA, your DS can borrow 5.5K for freshman year. Most schools will include that in their “package” in which case you can’t use it toward your family contribution, but if the school does not include it, your son can borrow the money and use it toward whatever he chooses.</p>

<p>The loan is always an option. What you need to find out from each school is (a) will they already include the loan in his financial aid package and (b) how they will treat any outside scholarships (because sometimes an outside scholarship can replace the loans included in the package, if any, restoring to your son the opportunity to borrow that money toward family contribution).</p>

<p>IF your son takes out a loan when he doesn’t have “need” (i.e. his full need was met without loans) then the entire loan will be unsubsidized. If the loan is used to “meet need” then part of it may be subsidized. (It can only be subsidized if what you are left to pay after <em>any</em> – school-based or outside – scholarships/grants are applied exceeds your FAFSA EFC, regardless of whether the school computes a different contribution using PROFILE and/or their own application in addition to FAFSA.)</p>

<p>Subsidized loans are at a higher interest rate and begin to accrue interest the day the loan is taken.</p>

10

<p>The Stafford loan is still available ,when not included as part of the financial aid package, in the amount of: the official college COA (Cost of Attendence) minus any financial aid awarded along with any other scholarships comes up with a number up to the maximum award amount (usually $5500 for freshmen).</p>

<p>So you add up all of the money the college has awarded to your son including work study funds if he decides to accept them plus the outside scholarhship mone and subtract that total from the COA. That is how much additional federal eligibility he has in terms of getting Stafford money, for you borrowing PLUS funds, </p>

<p>Depending on what your FAFSA EFC is, not the school’s definition of need but the EFC generated by FAFSA, if there is any need left after all of the awards are applied, that portion can qualify as need and if Staffords are taken, up to $3500 of them can be subsidized, The FAFSA need is what drives this, not the school’s.</p>