Federal College Aid

The federal government represents the largest percentage of college grants. Forty-four percent of grants come from the federal government.

Federal money for undergraduates is dispensed to those who have shown they need financial help to attend college.

Pell Grants

The vast majority of this federal money is awarded through the Pell Grant program. The maximum Pell Grant award for the 2017-2018 school year is $5,920. Students who are automatically eligible for this full grant have adjusted gross family incomes of of $25,000 or less.

The larger the family income and the smaller the size of the household, the lower the Pell award. According to federal statistics, 92% of Pell Grant recipients have household adjusted gross incomes of under $50,000.

The following chart breaks down what size Pell Grant a family can expect based on their federal Expected Family Contribution: 2017-2018 Pell Grant Award Chart.

To obtain a Pell Grant or other federal assistance, a student must complete the FAFSA to establish a student’s eligibility.

Federal law limits the number of Pell Grants an undergrad can potentially receive. Qualified students can receive the equivalent of six years of Pell Grant funding over their lifetimes.

You can learn more about Pell eligibility limits here: Pell Grant Limits

Other Federal Grants

In addition to the Pell Grant program, there are more modest federal grant programs. You can find the details about these programs by clicking the links below.

TEACH Grants

Iraq and Afghanistan Service Grants

Federal Supplemental Educational Opportunity Grant (FSEOG)

I want to pay particular attention to the FSEOG because this money can run out quickly.

Depending on financial need, the FSEOG grants range from $100 to $4,000 a year. If your family is very low income – or you work with students who are impoverished – it’s critically important that they complete the FAFSA very quickly and preferably on the first day possible – Oct. 1.

FSEOG money can run out very quickly on individual college campuses. In fact at some colleges, students who have a $0 EFC, but don’t file on Oct. 1 or close to it, may not receive any money at all.

The federal website warns that this money can run out, but it can be shocking to discover how quickly this can happen. Stephanie Hancock, a Certified Financial Planner and a financial aid expert in Los Angeles, told me about a student with a EFC of $4, who got shut out of FSEOG money at Northern Arizona University even though she filed on the first possible day. The money was allocated to the students who also filed on the same day, but who had EFCs of $0!

Each participating school receives a certain amount of FSEOG funding each year from the federal government and once it’s gone, it’s gone. This is different from the Pell Grant program where eligible student will receive the awards regardless of when they file for aid.

When A Family Doesn’t Qualify for Federal Grant

No doubt many parents taking this course will not qualify for Pell Grant money. It’s also unlikely that families who seek help from college consultants would qualify for this or any other federal grant, but they can be eligible for other types of federal assistance.

Other Types of Federal Aid

Federal Loans

Families who are shut out of federal grants will qualify for federal college loans since there are no income limits. Without filing the FAFSA, parents and students will not have access to federal student and parent loans. According to the latest statistics, 71% of college students are now borrowing for college.

The best loan for students will be the federal Direct Subsidized and Unsubsidized Loans, which used to be called Stafford Loans. The interest rates are lower than students could find elsewhere and they come with a safety net. The current interest rate is 3.76% If students graduate from college and are unemployed or underemployed they could qualify for one of the federal repayment plans that essentially have borrowers repay based on what they can afford rather than what they owe.

The best current federal repayment plan is called Revised Pay As You Earn.

The federal loan for parents is called the Direct PLUS Loan, which does not offer attractive rates, but can be the only source of money for some parents after their children tap into the federal Direct Loan program. The interest rate for PLUS Loans is currently 6.31% with a 4.2% origination fee on all borrowed money.

The maximum PLUS loan amount that a parent can borrow is the cost of attendance (determined by the school) minus any other financial assistance received. There is no federal repayment program for parents.

You’ll learn more about loans in the module entitled, Borrowing for College.

Work-Study Jobs

Without applying for financial aid, students would not be eligible for campus work-study jobs. On some campuses, most or even all of the student jobs are reserved for students who filed for financial aid.

Students who receive work-study jobs must earn at least the federal minimum wage. Schools typically pay up to half of a work-study student’s salary and the federal government kicks in the rest. In a student’s financial aid award, the school will include the maximum number of hours (it will vary) that the student can work through this program.

Keep in mind that work-study wages are even more valuable because they are exempt from financial aid calculations. Other student earnings, in contrast, can be assessed at up to 50 cents on the dollar for financial aid purposes. So if your child works in the school cafeteria, the money will not be counted for financial aid purposes. If your child has the same job at a pizza place off campus, his or her salary will be included in the financial aid calculation.

The money for this program is limited and some schools have larger pots of money than others.  Because the money can dry up, it’s important that families file the FAFSA ASAP. The work-study awards can be dispensed on a first-come, first-served basis.

Here is the formula for determining eligibility for work study:

The school’s Cost of Attendance (COA) minus the child’s Expected Family Contribution and any grants, and scholarships equals work-study eligibility. If this need eligibility is completely filled by federal student loans, then the student could either borrow less and work for the money instead, or in many cases, the school could switch some or all of the Subsidized Direct Loan to a Unsubsidized Direct Student loan and award work study.



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