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Countdown to college: More terms from the financial aid glossary

By Lee Shulman Bierer, The Charlotte Observer on

Published in Education News

Last week I began the Financial Aid Glossary with an A-to-C listing. Here's the rest ...

Deferment of a loan: A period of postponement during which the repayment of loan principal is suspended because the borrower meets one or more deferment requirements.

Demonstrated need: The difference between your Expected Family Contribution (see below) and the total cost of attendance.

Direct PLUS loan: Federal loans available to parents or to graduate/professional students. The interest rate is higher than other loans available to undergraduate students, and borrowing limits are much higher. They're also frequently called Parent PLUS loans, and they're the only federal student loans that require a credit check.

Expected Family Contribution: A formula that estimates how much of a college's price tag you can, in theory, afford to pay. The FAFSA formula takes several factors into account to determine a family's EFC, including: annual income, certain assets, family size, parental age (the older the parent, the larger the allocation towards retirement), reasonable non-discretionary expenses, number of students in the household attending college currently or in the near future. The EFC is the formula used to determine a student's need for financial assistance for college expenses. Your EFC will be calculated once you have completed the FAFSA. It's important to note that most colleges do not make up the difference between your EFC and the cost of attendance with grants. Loans are frequently part of the financial package. If your EFC is greater than the amount you have saved or greater than what you had planned to spend, you have lots of company.

FAFSA: Free Application for Federal Student Aid (www.fafsa.ed.gov). Everyone should complete this form. It's simple, and you don't need to hire anyone to fill it out for you. The FAFSA will ask questions about your income and assets, not including retirement plans; your child's income and assets in their name; the size of your household; and the number of children in the household attending college.

 

FAFSA forecaster: Filling this out allows you to begin exploring financial aid opportunities such as grants and scholarships before a student's senior year in high school. After completing these forms, you can transition to the FAFSA form, and it will automatically populate with your information.

Federal Direct Loan Programs: Four types of loans to student and parent borrowers:

1. Subsidized Stafford loans: Federally financed low-interest loans are only for undergraduate students and are awarded based on financial need. Interest doesn't start accruing until after leaving college. Also known as a direct subsidized loan, these federal loans have slightly better terms than the similar-sounding unsubsidized Stafford loans.

2. Unsubsidized Stafford loans: Also known as a direct unsubsidized loan, these federal loans are available to undergraduate or graduate students, and there is no financial need requirement, so anyone can use them. Historically, interest rates on unsubsidized loans were slightly higher than those for subsidized loans, though the rates have been equal in recent years. Still, unlike subsidized loans, interest on unsubsidized loans starts adding up from the day you take out the loan.

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