Paying for Your Degree
For many people, paying for their finance degrees is harder than studying for it. As college costs continue to climb, a graduate or undergraduate education can seem increasingly elusive. Students should know, however, that there is plenty of financial aid available if they are willing to pursue it.
Financial aid for college comes in three primary forms: grants, scholarships, and loans. Many students pay for their college careers from a combination of all three.
Grants and scholarships are both free money that does not have to be paid back, while loans do, so these first two options are obviously more desirable.
Grants are funds given usually (but not always) by non-profit organizations such as the federal government, corporations, or foundations for many purposes that do not necessarily include college. Some grants are based on financial need; some are for a special project or business venture; while others are awarded as financial aid for college. There are usually no special requirements attached to a grant other than meeting the initial qualification and sometimes writing a proposal to the donor of the grant.
Scholarships are given by the government, businesses, foundations, colleges, and universities, but it is money that is intended specifically for people attending college. The recipient also is usually required to meet certain conditions both before and after receiving the money. For example, they may have to achieve a minimum grade point average before receiving the scholarship, and then must maintain a certain grade point average afterwards. Scholarships can be awarded on the basis of many things, such as financial need, race or ethnic origin, the field the student is majoring in, or merit (usually for good grades or some outstanding talent).
Student loans can be obtained through many sources, such as governments, colleges and universities, charities, or private banks, but they are debts that must be re-paid. It is, therefore, best to carefully estimate your school expenses and borrow only the amount you know you will need in order to avoid excessive financial liability after graduation.
Other forms of financial aid can include such things as work/study programs, in which the federal government subsidizes non-profit and campus jobs for students; employer tuition assistance, in which help with college tuition is a form of employee benefit for a student or a student's parents; and savings programs such as state-sponsored, pre-paid tuition plans, which lock in current tuition rates.
Financial Aid
Financial aid for earning degrees can come from many sources, but the largest provider of these funds is the federal government. So the first step in obtaining financial aid is to fill out a FAFSA (Free Application for Federal Student Aid). This is a form that estimates how much financial aid you can receive and how much tuition you or your family will pay.
You should fill out this form no matter what your financial situation happens to be. Even if you don't qualify for aid on the basis of financial hardship, a FAFSA will at the very least make you eligible for low-cost federal student loans. Since many schools set their financial aid deadlines in February and March, you are allowed to estimate your income and taxes on this form in order to meet these early deadlines, then correct them later after your taxes are filed.
The federal government may give out the lion's share of financial aid in the form of such endowments as Pell Grants, Academic Competitiveness Grants, Stafford loans and PLUS loans, but state governments are also significant donors of money for educational purposes. Some states give grants and scholarships based only on grades while others take both grades and financial need into account.
Other sources of graduate and undergraduate financial aid include companies, non-profit organizations, and schools themselves. Some companies provide educational financial aid as a benefit to their employees or the children of their employees, while others hold scholarship contests that also act as ingenious marketing campaigns. Many charities and non-profit organizations give grants and scholarships, which may require projects like essays or the filling out of forms such as the College Board's College Scholarship Service (CSS)/Financial Aid Profile. Colleges and universities also usually require the filling out of at least a FAFSA and sometimes the CSS/Profile to qualify for need-based grants and scholarships. Other schools award these based only on such merits as outstanding grades or test scores, athletic ability, creative talent, or other desired skills.
Although most financial aid usually goes to students and/or families with annual incomes of less than $50,000, there is no set cut-off income for qualification. Need is calculated on the expected family and/or student contribution to tuition, which is based not only on income but other variables such as assets, liabilities, number of members in the household, etc. So analyze your finances carefully and see if there are other factors that might qualify you as needy, such being a single parent, divorced, or widowed.
If you don't meet the criteria for aid based on need, look for ways that you might be eligible based on merit by assessing all of your special skills, talents and knowledge, then seeking out sources that reward them with financial aid. Some grants and scholarships are also targeted at such traits as gender, race, ethnic origin, and even sexual orientation. Finally, you may also have luck obtaining aid from schools that are looking for students with certain characteristics to broaden their diversity, such as more women at schools dominated by men and vice versa, or students who belong to minority ethnic groups.
As for finding all of these sources of financial aid, you can conduct your own search through the Internet using the many databases listing these sources. Your high school counselor or the financial aid department of colleges to which you are considering applying can also be very helpful. They are usually aware of more obscure, less publicized financial aid programs that may not attract as much competition.
Grants
Grants are generally tax-exempt funds that are usually given by non-profit organizations. They are intended for many purposes, such as helping people in financial need or funding a research project or business venture, but are also used as financial aid for higher education. These funds do not have to be re-paid and usually have no conditions attached to them beyond the initial qualification. The most well-known educational financial aid grants in the U. S. are those given out by the federal government, but there are also other sources of this free money for college that can help you earn degrees.
The federal government provides Pell Grants to students who can prove economic hardship. The FAFSA (Free Application for Federal Student Aid) that every student should fill out will determine whether you qualify. Students with a total family income of up to $50,000 may be eligible for Pell Grants, but most of these grants go to students with a total family income of less than $20,000. The maximum Pell Grant amount for the 2010-11 award year is $5,500, although the amount you receive depends on factors such as your school expenses, whether you are a full- or part-time student, and whether you are attending for a full academic year or less. If you also have a parent or guardian who died as a result of military action in Iraq or Afghanistan after September 11, 2001, are under 24 years of age, and were enrolled in college at least part-time when your parent died, you will receive the total Pell Grant amount.
The Academic Competiveness Grant (ACG) and the National SMART Grant are other educational grants offered by the federal government that take grades as well as need into account. Both are for undergraduate students who qualify for Pell Grants but also demonstrate outstanding academic ability by maintaining at least a 3.0 GPA. Eligible freshman and sophomore undergraduates can receive up to $1,300 in addition to their Pell Grant, while up to $4,000 is provided for qualifying juniors and seniors. Unfortunately, both of these programs are due to expire at the end of the 2011 academic year, so check with your school and the Department of Education for more details.
Many states run lottery games in which the profits are intended for education. Therefore, many state governments may also provide educational aid grants, usually for disadvantaged students, minorities, and students majoring in a high-need field of study.
Many colleges and universities also set aside grant money to students who can demonstrate financial need; who have proven exceptional academic ability; or who can help to diversify the student body. Check to see whether you are eligible for any such grants available at colleges to which you are planning to apply. Your high school counselor or college financial aid department should be able to direct you to grants given out by other organizations for which you may qualify.
Scholarships
The terms scholarship and grant are often used interchangeably. They are similar in that they are both free gift money that does not have to be re-paid, and both can be used to help pay for a college education. However, a more narrow definition would be that grants are usually tax-exempt funds given by a non-profit organization for many purposes besides college, such as research. Scholarships are funds that are intended specifically for education, and they usually have more stringent qualifications that must be met.
Scholarships are given by the government, businesses, foundations, charities, and colleges and universities. The amounts awarded can vary greatly, ranging from a few hundred dollars to full tuition. Many students pay for their college career through the proceeds of several different scholarships. There are literally thousands of scholarships available that are awarded based on many factors, such as financial need, a particular field of study, outstanding grades, athletic or creative talent, medical or disability status, military status, age, religion, political affiliation, nationality, race, ethnic origin, gender, and sexual orientation.
Most students working toward a degree will be attending a business school attached to a college or university, many of which offer scholarships to finance students. Students should, therefore, check with the school of their choice to see what is available. These scholarships can be based on a variety of factors, such as financial need, academic achievement, or field of study.
Many companies and organizations also award scholarships. For example, the Coca Cola Company offers the Coca Cola First Generation Scholarship program for students who are the first in their immediate families to attend college. The American Institute of Certified Public Accountants (AICPA) offers five AICPA/Accountemps Student Scholarships worth $2,500 to students majoring in accounting, finance or information systems. The AICPA Scholarship for Minority Accounting Students ranges from $1,500 to $3,000.
Scholarships for graduate students are less common than for undergraduates, but they are available. Graduate students should explore all the avenues they pursued as undergraduates but expand their search to include teaching fellowships or assistantships through universities, organizations or The Fulbright Program; college-based scholarships; professional organizations; and career-specific scholarships. For example, the AICPA funds the Accounting Doctoral Scholars Program, as well as offering teaching fellowships to minority CPA doctoral students and a $5,000 John L. Carey Scholarship to liberal arts and other non-business degree holders who pursue graduate studies in the accounting and CPA designations.
A search on the Internet will yield hundreds of websites that maintain databases of scholarships that can be searched by subject, state, and student type. High schools and colleges will also be able to provide you with scholarship information.
Student Loans
Almost all students must turn to loans to help pay for their degree. Loans should be supplemented by any financial aid available, including scholarships, grants, work/study programs, and your own or your family's contribution. The important thing to remember about loans is that they are debts that must be re-paid eventually, so only borrow what you know is necessary to cover the rest of your school expenses.
The federal government offers several low-interest student loans:
- Stafford Loans come in two types: subsidized and unsubsidized. Subsidized Stafford Loans are based on financial need as determined by your school and do not accrue interest during deferment periods or as long as you are enrolled in school at least half-time. The fixed interest rate for 2010 – 2011 is 4.5%, and students can borrow up to $20,500 depending on their status, degree level, and years in school. Unsubsidized Stafford Loans are not based on financial need. They accrue interest from the time the loan is issued until it is repaid in full. The fixed interest rate is currently 6.8% and students can borrow up to $12,000, depending on years in school. Stafford Loans for graduate students are fixed at an interest rate of 6.8% for both subsidized and unsubsidized types. Stafford Loans are issued directly to your school, which applies the money toward your tuition and fees.
- Perkins Loans are 5% interest loans for both undergraduate and graduate students who can demonstrate financial need. Undergraduates can borrow a total of up to $27,500; graduates up to $60,000, including any Perkins Loans borrowed as an undergraduate. The school can either release the funds directly to the student or use them to credit the student's account. Unlike other federal loans, a Perkins Loan is not loaned directly from the federal government, but through a school's financial aid office using federal funds. The loan is therefore repaid to the school.
- PLUS (Parent Loan for Undergraduate Students) Loans, as the name suggests, are loans for parents of dependent students, although graduate students can borrow PLUS funds also (called GradPLUS Loans). They are non-need loans similar to those obtained through private sources, except with the benefits of requiring no collateral, a federal guarantee, and a fixed low interest rate of 7.9%. (Some parents with good credit, however, may be able to borrow from a private bank for a lower interest rate than the PLUS program.) To qualify, the parent or grad student must pass a credit check or, if their credit is insufficient, have a co-signer willing to be responsible for payment. The yearly limit of a PLUS loan is the cost of school attendance minus any other financial aid the student receives. Interest on PLUS loans may be tax deductible under the Hope Education Tax Credit.
Loans can also come from many other sources, including charities, colleges and universities, and private banks. A few charities and schools even offer loans at zero interest rates. Some schools will also offer other financial help to its alumni, such as discounts on tuition for graduate programs. The interest rates and fees for student loans from private financial institutions can vary greatly, as can credit requirements. Students should, therefore, take advantage of any free financial aid and low-cost federal loans to which they are entitled before they decide to apply for a private loan.