Government Help: From Pell Grants to Student Loans, Mastering the Financial Aid Basics
Colleges are getting very tight with their financial aid rewards. So, The Wall Street Journal warns, students and their families should be careful to press the right buttons to get all the financial aid they’re entitled to. The Journal has got plenty of advice about how much to keep in a student’s 529 account (not too much) and how to adjust your income to maximize your reward. And one of the basics is to fill out the FAFSA, something that everyone at all income levels should do. Megan McClean, the director of policy and federal relations at the National Association of Student Financial Aid Administrators, echoes that suggestion.
“This is the first step and has to occur if a student wants any aid from the government,” she told us in a phone interview.
College has become a very pricey but necessary expense, and it’s only getting more costly as the economic recession grinds on. With that in mind, we wanted to get down to the financial aid basics, which means taking advantage of what the government can offer. Certainly, this doesn’t mean you shouldn’t explore all of the options — what your school can give, what sorts of scholarships and grants you qualify for through third-party organizations and other options. But the government’s tuition assistance programs are a fundamental benefit that can continue to reap rewards even after you’ve completed your studies.
Everything starts with the FAFSA, the Free Application for Federal Student Aid. Note the word “free.”
“If you come across something that’s charging, that’s not it,” warns McClean. The form is tweaked and re-released every year on January 1 and can be filled out online.
For the neediest, there are Pell grants, which offer up to $5,550 worth of aid that doesn’t have to be paid back. Work-study programs, also need-based, dole out their benefits via paycheck, and there are student loans.
As we’ve mentioned (and, surely, as you’ve noticed) the cost for a college education has increased over the years, making something like $5,000 seem like small potatoes.
“Pell grants used to cover a larger percentage of tuition and fees,” says McClean. “Now things are more expensive. Also, this goes to very low-income students. So there’s increased reliance on student loans, which we don’t necessarily think is a bad thing because there are protections.”
There has been a lot of talk about student loans lately and much of it has been bad. From horror stories of people saddled with so much student loan debt they work simply to pay it down, to threats of government legislation lapses that could drive interest rates up, it seems like student loans are a financial booby trap rather than a genuine resource to those in need. BusinessWeek recently called it “Debt for Life,” noting that U.S. student loan obligations had surpassed $1 trillion in March.