Financial Aid Quiz
- Which, if any, of the following options for student financial aid must be repaid?
- Pell Grants
- Federal Work Study programs
- Bright Futures Scholarships
- Perkins Loans
- Florida Resident Access Grants
- Stafford Loans
- True or False: Special interest scholarships are needs-based and merit-based.
- If a student has a Direct Stafford loan and borrows $40,000 at the current interest rate of 4.5%, what will the total repayment amount (interest plus principal) be at the end of the federal repayment period?
- If a student stops paying on a student loan provided by the United States government, which, if any, of the following consequences could result?
- Student’s eligibility for additional student aid can be terminated
- Student’s credit rating can be damaged
- Late fees and collection costs can be charged
- Paychecks can be garnished
- State and federal tax refunds can be withheld
- Student can be sued
- All of the above
- None of the above
- This is too complicated and scary. Where can I get help?
- Florida Virtual Campus (www.flvc.org) or Florida Shines (www.floridashines.org)
- High school guidance counselors and transition specialists
- Financial aid offices at colleges and universities
- The Florida Student Scholarship and Grant Programs website
- The U.S. Department of Education "Student Aid on the Web" site
- All of the above
- d & f
- Trick question! A special interest scholarship can be needs-based, merit-based, both, or neither.
- All of the above
Perkins, Stafford (and other student loans) must be repaid. Grants and scholarships generally do not need to be repaid. Earnings from the Federal Work Study program are not repaid since they are wages for work performed. All forms of financial aid may have conditions such as maintaining a minimum grade point average and credit hours per term while in college.
Needs-based scholarships are based on financial need, usually calculated as family income below a certain level, the amount of which may vary by scholarship.
Merit-based scholarships are based on merit, usually by setting minimum levels for high school grade point average or SAT/ACT scores, being a National Merit Scholar Finalist, etc.
Special interest scholarships may be directed to specific categories of students such as children of disabled veterans, students who will be the first in their families to attend postsecondary education, children of alumni of certain colleges or universities and so on. These scholarships may also include needs-based or merit-based criteria as a condition for the award.
How can this be? The longer it takes to repay the loan and the lower the monthly payment amount, the more interest accumulates. The federal government has two repayment periods and two types of repayment plans with monthly payments.
Standard loans have a ten year repayment period.
Extended loans have a 25 year repayment period.
Fixed rate payments are the same amount every month.
Graduated rate payments start at a lower monthly amount than fixed-rate payments and increase every two years.Therefore, for a $40,000 student loan:
- A standard (ten years), a fixed-rate loan would have a repayment amount of $49,746.
- A standard (ten years), graduated rate loan would have a repayment amount of $51,598.
- An extended (25 year), a fixed-rate loan would have a repayment amount of $66,699.
- An extended (25 year), graduated rate loan would have a repayment amount of $72,929.
Student loans are serious financial commitments, just like mortgage and automobile loans. If borrowers stop making payments during their repayment periods (that is, they "default" on the loans), the holders of the loan can send negative reports on the borrowers to the three national credit bureaus that calculate credit ratings, causing the ratings to drop. Loan holders can also charge late fees and collection costs, get a court order to take money out of the borrowers’ paychecks (known as "garnishing") and sue the borrowers. Federal and state governments can also terminate students’ eligibility for additional student aid as well as take the money from federal and state tax refund checks.
Maintaining a good credit rating is important. Reviewing credit ratings is part of the application process for a number of goods and services including loans, credit cards, bank accounts, mortgages, apartment leases and purchases such as automobiles, furniture, farm equipment and contractor services. Some employers also require a credit check, especially for positions of trust such as police officers, bank employees and store employees who handle expensive merchandise and large amounts of money.
Information on student financial aid may look scary at first, but the more students and families learn about it, the easier it gets. Web addresses for all of the Web sites listed in this question are provided in the Resource section below.
The Florida Virtual Campus is the place to start preparing for and researching colleges, financial aid and college life.
Key points for students and families who want to be sure they successfully secure financial aid include:
- Start early in identifying and applying for financial aid. Students who wait until the last minute may miss the application deadline—or discover that funds like the Pell grant (awarded by postsecondary institutions on a first come, first served basis) may have run out.
- Familiarize yourselves with financial aid forms and requirements so that the necessary supporting information and documents can be collected before it’s time to complete the forms.
- Ensure that you understand the terms and conditions for all financial aid options before signing any papers. Reputable postsecondary institutions will not pressure students to sign financial and/or enrollment papers on the spot. (See Accreditation in the A-Z Glossary.)
- Ensure that the student financial aid options selected are reasonable based on the financial resources of the student and family and that they reflect the full cost of attending the postsecondary institution (tuition, books, laptop, activity and other fees, room and board on campus versus off-campus living, transportation expenses, etc).
- Ask for assistance when in doubt about financial, academic and campus living issues. Difficult choices may have to be made, so be sure to consider all factors and make use of all available resources before making a decision that could be regretted later.
- Read the Accreditation entry in the A-Z Glossary before applying to any postsecondary institution.