Financial Aid: Understanding the Lingo
By Michele Blandino
As the cost of attending college continues to climb, more and more students are turning to financial aid programs and other forms of assistance to help with the expense. However, with all of the different financial aid programs available, it easy to become overwhelmed before the process even begins.
To help make things a little easier, here is a look at some of the most commonly used financial aid terms:
FAFSA
The Free Application for Federal Student Aid (FAFSA) is a form used by the federal government to determine how much federal aid the student may be eligible to receive. The FAFSA must be filed each year for which aid is requested and should be completed as soon after January 1 as possible. Therefore, for a student planning to begin college in September of 2006 should submit their FAFSA immediately after January 1, 2006.
EFC
The Expected Family Contribution (EFC) is the amount the student and their family will be expected to contribute toward the cost of education. The EFC is determined by examining the family’s assets to determine what percentage of the total expenses they will be able to absorb as well as any assets held in the student’s name. It is important to know that up to 35 percent of assets held in the student’s name can be included in the EFC.
Cost of Education
The Cost of Education is the total amount it will cost to attend college for one year. Included in the cost of education is tuition and fees, room and board, books and supplies, travel costs, child care expenses and any extra costs incurred as a result of a handicap.
Merit-Based Aid
A type of financial assistance given to a student based on their achievement in a particular area. The key difference between merit-based aid and other types of financial aid is that the student’s financial circumstances are not used to determine a student’s eligibility for merit-based aid.
Hope Scholarship Credit
This program allows families with an income of less than $100,000 (the amount falls to $50,000 for individuals) to offset a portion of college expenses by allowing them claim a tax credit of up to $1,500 on their federal income tax return for the first two years of college. Similarly, the Lifetime Learning Credit allows taxpayers to claim a credit of up to $1,000 per year for education expenses incurred beyond the second year of college.
Independent Student
An independent student is a student whose eligibility for federal financial aid is based only on their income. Students who reach age 24 on or before the last day of the year in which college education begins, is automatically considered to be independent. Students under the age of 24 are considered independent if they are married, the supporter of a legal dependent other than a spouse, a veteran of the United States Armed Forces, an orphan, or a graduate or professional student.
