Federal Student Funds: Key Terms to Know
One of the most crucial pieces of advice we give you on this blog is to complete the FAFSA. We like to harp on it a lot, but we do it for good reason— there is really no downside to applying. The application is simple to fill out, provides you eligibility for all the federal student-aid programs available, and oh yeah—is FREE. It would be a shame if you missed out on funds just because you forgot to send in a form, so don’t make that mistake. If you haven’t done so already, head over to the FAFSA website to submit your application.
While we 100% recommend that you do your FAFSA, it can also be difficult to decipher the award letter that you end up receiving. Your funds will likely be spread across a bunch of loans, grants, and other programs that have different terms and conditions. Since you’d probably like to know what you’re getting yourself into, we’ve provided a glossary below of some of the most important key terms for federal funding:
- Pell Grant – Need-based funds that do not have to be paid back. Pell Grants are portable, meaning that they can be used at any participating school.
- Supplemental Education Opportunity Grant (SEOG) – Like the Pell Grant, a SEOG is need-based and does not have to be paid back. However, it is not portable, so the amount you receive might vary depending on the school.
- Stafford Loan - Fixed interest rate loan offered to students. All payments are deferred until 6 months after graduation. They usually come in two varieties: subsidized and unsubsidized. Subsidized Stafford Loans are available to students demonstrating financial need. The interest accrued on subsidized Stafford loans during school, grace, and deferment periods is paid off by the Department of Education. Unsubsidized Stafford Loans are available to all other eligible students. For these, the borrower is responsible for interest accrued during the lifetime of the loan. The interest rates for the 2011-2012 academic year are 3.4% for subsidized loans and 6.8% for unsubsidized loans.
- Perkins Loan - Need-based, fixed rate loan. They are similar to subsidized Stafford Loans in that interest accrued during the life of the loan is taken care of by the government. However, Perkins loans have a grace period of 9 months and are not portable. The current interest rate is 5%.
- PLUS Loan – Fixed rate loan offered to parents (The GradPLUS loan, offered to graduate and professional students, is virtually identical). PLUS Loans follow a similar repayment schedule as Stafford Loans (grace period of 6 months). However, unlike Stafford and Perkins Loans, PLUS Loans are the responsibility of parents, not students. Also, borrowing limits are not as strict, as you can receive up to your total cost of attendance minus any other financial aid. The current interest rate is 7.9%.
For more information, check out our Federal Student Aid chart. If you have questions about any other terms you come across in your financial aid quest, feel free to use our Ask the Experts form and we will do our best to help you out!