The Ultimate Guide to Financial Aid and FAFSA for College Students

Financial aid is crucial for incoming college students. This in-depth guide gives college students all the resources they need to successfully apply for the FAFSA and fund their college costs.

Spend some time looking into colleges and you're in for a healthy dose of sticker shock. A survey conducted by Sallie Mae in 2019 found that cost is the number one factor families consider when choosing a college, above even academic criteria. In fact, four out of five families in America eliminated potential colleges based solely on the price.

This may not come as a huge eye-opener for most; the average cost of attending a public 4-year university in the United States is $26,120 per year, which equals $104,480 for a bachelor's degree. Compare that to just 30 years ago, when the total cost for a 4-year degree would have set you back $26,902, according to the National Center for Education Statistics. It's no surprise, then, that student loans have overtaken credit cards and auto loans as the biggest non-housing debt in America.

Here's the good news -- it's not as bad as it sounds. There are ways to pay for college without breaking the bank or mortgaging your future. To help you get there, we've put together a guide to help you understand your options around financial aid and how to use and fill out the Free Application for Federal Student Aid (FAFSA). Whether you're pursuing a traditional on-campus degree or an online degree, this guide can help you understand how to make your degree more affordable.

What is Financial Aid?

Financial aid is designed to help families and students afford college. It can cover a range of costs including tuition, books, transportation, fees, supplies and room and board. Here are the four types of financial aid:

Scholarships: Scholarships are offered by non-profits, individuals, schools, city/community groups and private companies, often based on a particular trait, talent or academic merit and don't need to be repaid.

Grants: Grants are typically offered by government programs, public and private trusts, foundations or private businesses and don't need to be repaid.

Loans: Loans are sums of money offered by the government and private organizations that must be paid off on schedule and at a predetermined interest rate.

Work-study programs: Work-study programs are typically federally- or state-funded jobs on campus or in community service that are given to students with financial need.

All these forms of financial aid have eligibility requirements that could include maintaining full-time enrollment status, upholding a certain GPA, staying out of trouble, making on-time payments, or participating in volunteer work. It will almost certainly include attending an accredited college as a matriculating student - all federal and state aid is dependent on attending an accredited institution as a degree-seeking student. Students are not eligible to receive federal or state aid if they have identified as non-degree seeking students looking to take a few classes, and withdrawing from classes can also effect certain aid. We will delve deeper into these requirements in a moment.

When determining how much financial aid you'll realistically need and when deciding what type(s) of aid you want to use or apply for, it's a good idea to take a look at the published cost of attendance (COA) of colleges you are interested in to get a gauge on the annual expenses you can expect. Each school calculates their own COAs based on common costs such as transportation, meals, housing, tuition, books, and supplies. Depending on factors such as the location of the school and the tuition, colleges may have drastically different COAs. Every school will also have multiple official COAs to reflect circumstances that would affect living costs, such as whether a student is paying in-state or out-of-state tuition, and the type of housing (on- or off-campus) that they live in. Your own expenses may vary, but a college's Financial Aid Department will refer to their official COAs to determine your financial aid package.

You may still want to take a snapshot of your finances and create your own budget as well to plan ahead of time since your own expenses may be different from the official COAs that a school publishes. Some questions to ask yourself are:

  • Will you be living on campus or getting an apartment off-campus?
  • Will you get a meal plan or make meals yourself?
  • Aside from tuition, does the program charge fees for technology, recreation, buildings or student activities? These can add up to thousands more over the course of your college career.
  • Are there free bus passes? Is parking free?
  • What's the general cost of living in the college's location for groceries, toiletries and supplies?
  • How much will it cost to have a social life?

Don't forget to factor in a cushion for unexpected costs, too. They're unavoidable and can be a real buzzkill to your educational plans if you're not ready for them. Once you've got a general picture of what it's going to cost you, you can take the first step toward getting financial aid: FAFSA.

What is FAFSA?

FAFSA is the Free Application for Federal Student Aid. It's tied to a huge number of federal grants, scholarships and work-study programs and can even connect you to many state and college-specific aid programs. You'll fill it out before your first year in college and you'll need to fill it out every subsequent year to keep receiving aid. In addition, you'll need to continue to meet basic eligibility requirements and make satisfactory academic progress, which will be determined by your school but includes things like maintaining a minimum GPA and completing a set number of credits.

What Are FAFSA Requirements?

To be eligible to receive financial aid, you'll need to meet a number of basic eligibility requirements. FAFSA's site runs a handy tool called the FAFSA4caster that will ask you some questions to determine your eligibility before you fill out the application. Some of the basic requirements you'll need to satisfy before your first semester include:

  • Demonstrating a need for financial aid
  • Proving legal status in the United States
  • Having a valid Social Security number (students from the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau are exempt from this requirement)
  • Registering for Selective Service, if you are male and between the ages of 18 and 26
  • Showing that you've been accepted to an accredited degree or certificate program
  • Signing a statement saying the financial aid will only be used for educational purposes
  • Showing proof of a high school diploma or its equivalent (like a GED). If you don't have a high school diploma or its equivalent, you may still be able to qualify by meeting one of two conditions. If you are in an eligible career pathway program or were in a college program prior to July 1, 2012, you can take an 'ability-to-benefit' exam or complete six college credits (or the equivalent). The exam can be administered by your college.

How to Apply for FAFSA

Once you've determined your eligibility, you're ready to tackle the application. Take a deep breath. This can seem daunting but it's not that bad. In fact, if you've gathered everything you need, you can complete the application in an hour or so. Let's break down the process step-by-step:

1
Make a FSA ID

Creating an FSA ID will make the application process much easier. It will let you sign your FAFSA application electronically, allow you to give your digital John Hancock to federal loan documents, give you access to the myStudentAid app, and let you easily check your financial aid status throughout your college career. It will also streamline your process by saving your progress, auto-filling some fields in the online application, and storing your application for renewals in subsequent years.

Before you begin, it is important to determine whether you are considered dependent or independent as this will decide whether or not you need to provide parent information when filling out your FAFSA. There are a number of factors that play into your dependency status, and the FSA provides a table to help you determine your dependency as well as resources for students with circumstances that restrict them from reporting parental information

Based on your dependency status, you will either use your own social security number (SSN) or need a parent or guardian's SSN to sign up for an FSA ID.

2
Gather the Required Documents

Gather all the documents you'll need to apply in advance and you'll save yourself a ton of time and energy. The documents needed for the FAFSA will depend on factors like your citizenship, tax status, and financial standing. To fill out the FAFSA, you may need the following:

  • Your social security card
  • Your driver's license
  • Tax information for you (and your spouse, if applicable) or, if you're a dependent, your parents' tax documents, which may be:
    • IRS 1040
    • Foreign tax return, IRS 1040NR-EZ or IRS 1040NR
    • Tax return for the U.S. Virgin Islands, American Samoa, Puerto Rico, Guam, the Federated States of Micronesia, the Marshall Islands or Palau
  • Income records that aren't taxed, including:
    • Veterans noneducation benefits
    • Child support received or paid
    • Interest
  • Information on your or your parents' assets, including:
    • Checking and savings accounts
    • Real estate owned
    • Stocks and bonds
    • Investments
    • Business assets
  • If you are a non-U.S. citizen, your Alien Registration Card (green card)
3
Fill Out the FAFSA

With all your documents and numbers in front of you, you're all set to fill out the form. There are several ways to do this. You can fill out the form online by logging into your account at FAFSA.gov, you can use the myStudentAid mobile app on your smartphone from the iOS App Store or the Google Play Store or you can print out the FAFSA pdf and mail it in.

We highly recommend that students fill out and submit their FAFSA forms online. If you submit the forms online, you will hear back within a few days, whereas it can take 8 to 10 weeks to hear back if you send it in through mail.

The form itself is fairly simple, but FAFSA gives you several ways to get help as you fill it out. You can click on icons throughout the form to find helpful tips about the field, and some icons will have links to more information, like FAQs. You'll want to make sure your pop-up blocker isn't blocking anything from fafsa.ed.gov.

For more in-depth help, you can also click 'Contact Us' in various places along the form. During business hours, you'll be able to call a live representative who speaks either English or Spanish. In off-hours, you'll be able to send in an email with any questions you may have.

Alternatively, your college's financial aid office can often help you fill out the form and tackle any issues you might encounter.

4
Choose Colleges or Schools

As you fill out your FAFSA application, you'll be required to designate at least one school to receive the info. If you're using the FAFSA pdf, you can list up to four schools. The online application and the mobile app allow you to list up to 10. To designate schools, you'll use their codes, which can be found on the Federal School Code Search.

When it comes to federal aid, it doesn't matter in what order you list your schools. However, certain states do care about your school order. For instance, they may prefer a state school to be listed first. To find out how your state handles school choice order, check out the U.S. Department of Education's guide to FAFSA.

5
Sign and Submit Your Application

When everything is filled out, you can print the document, sign it, and mail it off to FAFSA, or you can use your FSA ID to digitally sign it and send it in instantaneously. For digital applications, you'll be taken to a confirmation page and sent a confirmation email once the form submits successfully. We recommend saving a copy of both the confirmation page and email; each one is different and has valuable information you might need down the road.

The confirmation page will have a link to submit your application's information to your state's aid program if your state has a partnership with FAFSA. For instance, if you live in the state of New York, you'll be able to quickly apply to the state's Tuition Assistance Program (TAP).

You can check on the status of your FAFSA application at any time using your FSA ID or the myStudentAid app if you submitted online. If you mailed in a paper application, it may take 7-10 days to get a status message. There are four possible statuses:

Status Message Meaning
Processing Your application is being processed; this can take up to 6 days
Processed Successfully Your application was processed and there's nothing else you need to do
On Hold: Missing Signatures You'll need to submit your signatures successfully before the process will move forward
Action Required You'll need to take further action; contact the school to address the issue

It takes anywhere from three days to three weeks to hear back. When you do, it will be in the form of a Student Aid Report (SAR). Your SAR isn't going to tell you how much aid you've qualified for. It will, however, give you the Expected Family Contribution (EFC), the number that determines your eligibility for aid. Be sure to check over your SAR carefully and correct any errors as quickly as possible; this is the document your schools will use to offer you an award letter or aid offer.

An award letter should come from each school you listed on your application telling you exactly how much aid you'll get and breaking down the amount into grants, scholarships and loans. Each school has its own schedule for awarding aid. You might know in the winter what you'll be getting for next fall, or you might not hear until right before your term starts. Talk to the school's financial aid office to learn these details and formally accept the aid offer before the deadline.

What Is the 2020 FAFSA Deadline?

The official federal FAFSA application deadline for the 2020-21 academic year is June 30, 2021. However, waiting until the last minute to submit an application isn't wise. That's because many colleges give out aid to the earliest applicants. Also, there are several states that give out award money on a first-come, first-served basis. Those states are Oregon, Texas, North Carolina, Illinois, Alaska, Oklahoma, Kentucky, Nevada, South Dakota, Indiana, South Carolina, Washington and Vermont.

Types of Student Financial Aid

There are several types of financial aid for which you might qualify. Understanding your options can help you know how best to pay for school. A variety of financial aid sources are detailed below.

Federal Financial Aid

The federal government offers a wide range of financial aid options:

Grants

Grants are a form of financial aid that's typically based on need does not need to be repaid. The federal government has several grants including Pell Grants, Teacher Education Assistance for College and Higher Education Grants (TEACH), Iraq and Afghanistan Service Grants and Federal Supplemental Educational Opportunity Grants (FSEOG).

Work-Study Program

The Federal Work-Study Program gives both undergraduate and graduate students with financial need the opportunity to work part-time while they're in school. On-campus jobs are typically for the school, while off-campus jobs are often at non-profit organizations or government agencies to emphasize the importance of civic involvement. You'll be paid at least minimum wage, though some jobs might pay more based on the skills involved, your school's level of funding and your financial need.

Undergraduate students are always paid by the hour; graduate students may receive a salary. Both are paid directly and at least once per month.

Loans

  • Direct Subsidized Loans are designed for undergraduate students and are based on financial need.
  • Direct Unsubsidized Loans aren't based on need and are available for students at every degree level; undergraduate, graduate, and professional.
  • Direct PLUS Loans are designed specifically for graduate students, professional students, and parents of undergraduate students (not undergraduate students themselves). Direct Plus Loans might cover the cost of attendance when other forms of financial aid aren't sufficient. Borrowers must undergo a credit check and may have to meet additional requirements.
  • Direct Consolidation Loans let students combine all of their federal student loans into one loan from one source. The interest rates of the combined loans will be averaged to form a fixed interest rate.

There are limits to how much you can borrow, depending on the year, whether the loan is subsidized and your degree level (undergraduate or graduate):

Dependent undergraduate students Loan Limit
First year $5,500 overall; $3,500 subsidized
Second year $6,500 overall; $4,500 subsidized
Third year and up $7,500 overall; $5,500 subsidized
Total limit $31,000 overall; $23,000 subsidized

Independent undergraduate students
First year $9,500 overall; $3,500 subsidized
Second year $10,500 overall; $4,500 subsidized
Third year and up $12,500 overall; $5,500 subsidized
Total limit $57,500 overall; $23,000 subsidized

Graduate and professional students (unsubsidized) Loan Limit
Annual limit $20,500
Total limit $138,500, including undergraduate loans

Other Federal Aid

In addition to grants, loans and work-study programs, the federal government provides a range of special aid programs. For instance, if you are or were in foster care, you might be able to get help paying for school with the Educational and Training Vouchers (ETV) Program for current and former foster care youth.

Or, if you volunteered with Americorps, you might be eligible for the Segal AmeriCorps Education Award, which awards up to $6,195.00, depending on your service hours.

The IRS also provide tax breaks for students to help offset the cost of tuition, fees, books and more. These include the Lifetime Learning Credit and the American Opportunity Credit.

State Financial Aid

Nearly every state in the country offers grants for aspiring students, and most are based on need. For instance, if you live in Texas, you might be eligible for free money for college under the Texas Public Educational Grant Program (TPEG). For the TPEG, you need to demonstrate financial need and be registered for Selective Service, if applicable.

If you are heading to an undergraduate program in Florida, you might find aid through the Access to Better Learning and Education (ABLE) Grant Program.

Many states also have scholarship programs that are need- and merit-based. The Idaho Opportunity Scholarship awards up to $3,500 per year for students with financial need who have graduated from a high school in the Gem State. Students must maintain a 2.7 GPA to remain eligible.

Want to see what programs your state offers? The National Association of Student Financial Aid Administrators (NASFAA) has links, or you can look up your state's department of education website.

Private Student Loans

Many private lenders, such as banks, credit unions and online lenders, offer loans specifically for college students. The terms on these loans can vary significantly from lender to lender, but you typically need a combination of a good credit score and a verifiable income source. Alternatively, you would need someone who meets these criteria and is willing to cosign a loan for you.

Private loans allow you to borrow more than federal loans; their limit is the cost of attendance at your school after financial aid. Lenders may also have their own limits, and the amount you can borrow will also be dependent on your ability to repay the loan.

Your (or your co-signer's) qualifications will also determine the interest rate and the length of time you have to pay the loan back. Some lenders might give you 10 years to pay the loan in full, while others may have 15-year terms. Interest rates on private loans will almost always be higher than those on federal loans. Also, unlike federal loans, private student loans don't typically offer deferments or forgiveness.

Because of the terms and limitations on private loans, they should be considered a last resort, after every federal and state grant, scholarship, loan and work-study opportunity has been exhausted.

College-Awarded Financial Aid

Most colleges or career schools have their own forms of need-based or merit-based financial aid, usually in the form of a grant or scholarship. Many of these are provided by donations from alumni or corporations and might be geared toward a specific field such as business or nursing. Others aim to help students in particular life situations, such as those who come from single-parent households or immigrant families.

Most of these grants and scholarships will be listed on your school's financial aid site. Check with your school's financial aid office for information on qualifying and applying for college-awarded financial aid.

Grants for College

Grants are need-based financial aid. They do not have to be repaid. There are a number of federal grants that provide free money for college and we've detailed some of the biggest ones below.

Pell Grants

Pell Grants are one of the most common federal grants available. The amount you qualify for will depend on your expected family contribution, how much your program costs and your full- or part-time status in school. Typically, Pell Grants are applied to your program costs, and if any money remains, it is paid directly to the student to help cover other expenses such as supplies and living costs. To maintain your eligibility, you'll need to stay enrolled in school and fill out a FAFSA form for every academic year.

Teacher Education Assistance for College and Higher Education Grants

Teacher Education Assistance for College and Higher Education (TEACH) Grants are designed to help defray the costs of education for people who want to become teachers in low-income and high-need schools. You'll have to meet the basic eligibility requirements of the federal financial aid program, attend TEACH Grant counseling, sign the 'TEACH Grant Agreement to Serve' and maintain certain academic standards. Note that not every teaching program in the country qualifies; you'll want to make sure your program is TEACH Grant eligible.

Iraq and Afghanistan Service Grants

The Iraq and Afghanistan Service Grant is made to ease the financial burden of students who lost a parent or guardian in the wars in Afghanistan and Iraq. To receive aid, you'll be asked to show that you were under 24 years of age at the time of the parent's death (or enrolled in college part-time), as well as meet the general eligibility requirements of a Pell Grant.

Federal Supplemental Educational Opportunity Grants

Each year, the U.S. Department of Education provides a certain amount of funds to each school that participates in the Federal Supplemental Educational Opportunity Grant (FSEOG) program. The schools then decide how to disburse the funds based on the needs of their students, with each individual award between $100 and $4,000 per academic year. Each school sets a deadline, and the funds are typically given on a first-come, first-served basis, so it's a good idea to apply as early as possible.

College Scholarships

Earlier, we touched on federal and school-specific scholarships, but there are also a huge number of national and local scholarships that might help you foot the bill for your college education. If you're worried you might not qualify for one, rest easy; there are scholarships that fit every niche imaginable. Many are based on gender, race, disability or veteran status; some are based on academic achievement, and others are given out for things like being tall, sharing your passion for vegetarianism, or writing about how much you love the number five.

Types of Scholarships

To give you an idea of where to look for a scholarship, let's profile a few of the most common areas in which a scholarship might be awarded.

Merit-Based Scholarships These scholarships are typically based on academic, artistic, scientific or special-interest achievements. Students with good GPAs or high scores on standardized tests may be eligible, and students who have done something extraordinary during their high school careers are also often considered. One of the biggest sources is the National Merit Scholarship Program, which is set to give out around $41 million in aid money for the 2021 school year. To qualify, students need to take the PSAT during their junior year of high school. Ivy League universities don't offer any merit-based scholarships and instead award aid based on financial need.

Need-Based Scholarships Need-based scholarships may also have academic requirements but they're primarily based on the student's (or the student's family's) ability to pay for school. Almost every school has need-based aid, typically from alumni donations, memorial funds or corporate giving. For example, Boise State University offers the Albertsons Employee Alumni Scholarship, the Barbara Parrish Memorial Scholarship and the Jodie Long/Veronica Loucks Nursing Scholarship. Florida Atlantic University has a range of merit-based scholarships through its Outstanding Owls Deserve program, and the University of North Carolina has the Pisgah Scholars program, UNC Asheville Need-based Grants and UNC Asheville Academic Grants. National need-based funds are available as well. One example is the Jeannette Rankin Women's Scholarship Fund (JRF), which provides college scholarships for lower-income women over the age of 35.

Athletic Scholarships If you can contribute to a school's sports program, you might be able to get free money for tuition, fees, books and even room and board. According to the National Collegiate Athletic Association (NCAA), there's around $3 billion dollars in scholarships given out to about 150,000 student-athletes each year. That hefty sum comes from Division I and Division II schools only; Division III schools don't give out athletic scholarships.

Colleges typically send out recruiters who make the rounds at high schools or national and regional competitions looking for talent. You can also contact schools that you think are a good fit and let the coaches know you are interested in competing at the collegiate level. Keep in mind that while sports like football, baseball and basketball may grab the headlines, schools have athletic scholarships for all sorts of sports.

Field-Specific Scholarships Many corporations offer scholarships to students who are studying in a specific field. One of the biggest is the Microsoft Scholarship Program, which gives out hefty sums to students studying in a STEM (Science, Technology, Engineering, and Math) or computer science field. These scholarships are available in nearly every field imaginable. For instance, the International Spa Association Foundation awards scholarships to students who want to enter the field of spa management and the National Society of Accountants Scholarship Foundation has 40 scholarships for aspiring accountants.

Special Attribute Scholarships Special attribute scholarships are awarded based on things like personality traits, beliefs, life background, sexual orientation or gender identification. For example, there are several scholarships available for minority, LGBT, or Hispanic and Latino students. A few examples include the Albert W. Dent Graduate Student Scholarship, which offers minority graduate students in healthcare up to $5,000 for school, or the First in the Family Humanist Scholarship, which is awarded to homeless, foster care, undocumented or LGBTQ youths in the African-American community.

For detailed information about scholarships for minority, LGBT, or Hispanic and Latino students

Unique Scholarships If you don't qualify for merit- or need-based aid (and even if you do), there are funny, silly and oddball scholarships that might just fit your style and give you some extra money in the tuition coffers. Here are just a few:

Employer Scholarships One often-overlooked source of funds for college is your employer. Employers often offer scholarship programs to employees with good grades and work ethics. The Burger King Scholars Program, the ExxonMobil Bernard Harris Math and Science Scholarship and the Hyundai Scholarship are all examples. You may qualify through your parent's employment as well. For instance, the Chicago Police and Fire Scholarship provides funds for students of firefighters and police officers in the Chicago area.

Community Service Scholarships Not only will community service make you a more well-rounded person and give you a richer resume, but it can also get you money for college. The Americorps may be the biggest example, but there are also scholarships like the Do Something Awards and the Echoing Green Public Service Fellowship.

Using FAFSA for Scholarships

While the FAFSA is designed to connect you with federal aid, it can also play an important role in procuring scholarships like the ones listed above. In fact, some scholarships, even independent ones, require students to have filled out their FAFSA forms first. After you've filled out and filed your FAFSA, head to the Department of Education's Scholarship Finder. There, you can sort by location, degree level, affiliation, gender and more to find scholarships that are a perfect fit for you and learn how to apply for them.

Your school's financial aid office can also help you track down scholarship options. However, with the sheer number of awards out there, it's worth doing some legwork yourself as well.

Student attendance

The financial aid office estimates the aid students will need to cover their tuition, and students keep earning a percentage of that aid as they attend class. 100% of it is not automatically given to the students - attendance and financial aid go hand-in-hand, so students cannot just decide to not attend classes.

Financial aid limits

Be mindful that there are financial aid limits to one's degree. Sometimes students get caught up in not knowing the right path that they want and transfer multiple times to find the right fit. At that point, they realize that they've already utilized financial aid at multiple schools and have used a big chunk of their loan eligibility. Grants and loans cap out, so students need to keep these financial limitations in consideration so that they don't end up running out of money a few classes or semesters shy of their degree.

Apply for scholarships!

There is a lot of hesitation in applying for scholarships because many students think they will not receive them. It is also a task that seems daunting because students need to check that sources are secure before applying. A tip here is that a lot of schools have outside scholarship resources that they've vetted. Even if students are not interested in attending a specific school, if it is located around the area they wish to attend college in, they can look through the outside scholarship websites that they list. There are a ton of untapped scholarships that students do not utilize.

Be your own advocate

In some schools, it can be hard to directly contact one's financial aid advisor. It is important for students to have patience, ask questions and be their own advocate. If students are unclear on anything, they need to make sure that they ask so their financial aid advisor can explain it to them.

Ruthann Wyatt
Director of Student Financial Services
Pierce College. Philadelphia, PA

How Do You Pay Back Financial Aid?

Once you leave school, graduate or your credits dip below part-time enrollment, you'll need to start repaying your student loan.

With most federal student loans, you'll choose or be assigned a repayment plan. Each repayment plan has its own terms and loan servicer. Your loan servicer will provide you with the steps you need to take to set up payments. Some repayment plans may be a fixed amount per month, some may start low and increase as you go, and others might be based on a percentage of your income. You can change your repayment plan at any time at no cost, but you'll want to check the eligibility requirements and terms to make sure it's a good fit.

There are several things you should know about repaying your student loan. Below are the most important.

Student Loan Grace Period

Some federal student loans come with a grace period, meaning you won't have to make payments during this time. This is an important tool; it can give you a break while you find work and set up your life outside of school. Keep in mind that interest on your loan will continue to accrue during your grace period. If possible, it's a good idea to make interest-only payments to prevent your interest from adding to your principal loan amount.

If you have a Direct Subsidized or Unsubsidized Loan, you will have a six-month grace period. If you have a Direct Plus loan, you will be required to begin paying it back as soon as you've received it in full.

There are some circumstances that can change your grace period:

  • Active duty military that's called up for over 30 days will have their six-month grace period reset when they come back.
  • If you come back to school and enroll at least half-time, your six-month grace period will reset the next time it's eligible to.
  • If you consolidate your loan with a Direct Consolidation Loan, you will forfeit your grace period.

Student Loan Deferment & Forbearance

It's not uncommon to be a little strapped financially when you're starting your life outside of school. If you find yourself unable to make payments on your student loans, you may be able to qualify for a deferment or forbearance. Both will allow you to suspend payments -- or make smaller payments -- for a short period of time. It's important to note that, like a grace period, your interest will still accrue while you're not making payments, which can increase the total amount you owe.

For most temporary relief, you'll need to apply (typically by submitting a form) through your loan servicer. Aside from economic hardship, there are many circumstances under which you can apply for a deferment or forbearance including:

  • Military service
  • Unemployment
  • Undergoing cancer treatment
  • Americorps service
  • Graduate fellowships
  • Medical or dental residencies
  • Rehabilitation training

Student Loan Forgiveness and Cancellation

Many federal student loans can be completely forgiven or canceled. There are several reasons you might have your loan forgiven including death, permanent disability, the closure of your school and, in some cases, bankruptcy. There are also two popular federal programs that provide student loan forgiveness.

The Teacher Loan Forgiveness Program can wipe out as much as $17,500 in student loans provided you find full-time employment as a teacher in a low-income school and stay there for five consecutive academic years.

The Public Service Loan Forgiveness (PSLF) program applies to students who work in the non-profit or government sector. To qualify, you'll need to have a Direct Loan, work full-time, be enrolled in an income-driven repayment plan and make 120 qualifying payments on your loan.

Student Loan Default

If you have a loan under the Federal Family Education Loan Program or the William D. Ford Federal Direct Loan Program, your account will be considered in default if you haven't made a payment in 270 days. There is a range of consequences for letting your loan default including:

  • You won't be able to apply for deferment or forbearance
  • The full balance of your loan will immediately be due
  • You lose eligibility for further financial aid
  • Your credit score will be affected, which might impact your ability to buy or rent a house or car
  • Your wages might be automatically withheld and used to pay the loan
  • You could be taken to court and charged for the costs this entails/li>
  • Your school transcript can be withheld

Our advice? Don't let your loan default. If you're having trouble making payments, contact your loan servicer and talk with them about your options.

Financial Aid Suspension

You can lose your financial aid in several ways. Some of these include defaulting on a student loan, not maintaining satisfactory academic progress, losing legal status in the U.S. or having a run-in with the law.

If You Lose Financial Aid, Can You Get It Back?

Yes. What you need to do to get it back will depend on the reason you lost it. For instance, if you lost it because of your grades, you may be able to appeal or take classes to raise your GPA to satisfy your school's standards. If you lost it because you defaulted on payment, you'll need to consolidate or rehabilitate your loan by making getting back up to date. Keep in mind that you will need to pay for your college costs while you're working on getting your financial aid back.

If you are arrested and incarcerated because of a drug or sexual offense, you may lose eligibility for many federal financial aid programs. If your incarceration was for another offense, you may regain your eligibility upon release.

Glossary of Financial Aid Terms

Academic Year
an academic year is a period during which the school is in session, typically nine months.
Bachelor's Degree
a 4-year undergraduate degree, usually at a public or private university.
Cost of Attendance
the total cost of attending college, including tuition, fees, books, supplies, housing, food and more.
Deferment
allow you to temporarily postpone payment although you'll still accrue interest.
Fellowship
financial aid for students in graduate school that often covers tuition and living expenses; does not need to be paid back.
Graduated Repayment Plan
a repayment plan where payments start low and gradually increase for up to 10 years.
Grant
financial aid based on need; does not have to be paid back.
Loan Forgiveness
the ability for all or part of your loan to be written off if you participate in certain jobs, non-profit or volunteer work.
Scholarships
are funds offered based on academic merit or traits; they do not need to be paid back.
Undergraduate
the degree-level that includes 2-year associate's and 4-year bachelor's degrees.
Associate's Degree
a 2-year undergraduate degree, typically at a community college or trade school.
Consolidation Loan
a loan that lets you combine several loans into one. They often come with longer terms and higher interest rates.
Default
failing to honor the terms of a loan. For many federal student loans, a borrower defaults on the loan if he or she doesn't pay for over 270 days.
Expected Family Contribution (EFC)
the amount your family can contribute to the cost of education; it's used to determine your aid package in the FAFSA.
Free Application for Federal Student Aid (FAFSA)
the application students must fill out and submit to receive financial aid.
Graduate
degree-level that includes master's and doctoral programs
Interest
the percentage of the loan the borrower pays the lender on the unpaid principal.
Loans
funds borrowed by the student, either from the government or a private source, and used to pay for school; loans must be repaid with interest.
Student Aid Report (SAR)
is received after submitting your FAFSA application; it provides information to your schools that is used to calculate your aid package.
Work-study programs
allow students to work while they attend school, using the wages to pay for the cost of attendance.
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