The Top 4 Sources of Aid

The Top 4 Sources of Aid

Don Rauf

Federal, state, private, and college funding make a perfect combo for the college-bound.

When you receive financial aid awards from the colleges that accept you, you will find that your aid package is probably pieced together from various federal, state, college, and private programs. To arrive at a package, financial aid administrators (FAAs) use this basic formula:


Your family contribution is determined by information you give on the FAFSA. Outside aid means private scholarship dollars that you put towards college costs. Once those are subtracted from the cost, the FAA will try to meet your remaining “need” with a combination of federal, state, and college resources.

What follows is a detailed look at the major financial aid programs for undergraduates, as well as profiles of students, who reveal exactly how they paid for their freshman year of college. Review these sources carefully to make sure you’re not missing out on any potential funding options.

1. Federal Government

About 70 percent of all financial aid comes from the federal government. (See pie chart at top of page 24.) When you apply with the FAFSA, you will find out if you qualify for these programs:

FEDERAL PELL GRANTS. These awards of up to $3,250 go to students demonstrating significant need. The program guarantees funds to every student who qualifies.

FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS (SEOGs). Ranging from $100 to $4,000 a year, these awards are also for undergraduates with exceptional need. Unlike the Pell, this program does not guarantee an award if you qualify-it depends on the availability of funds at each school.

FEDERAL WORK-STUDY. This program provides jobs paying at least minimum wage to undergraduates with financial need.

FEDERAL PERKINS LOANS. These low-interest (5 percent) loans allow undergraduates with exceptional financial need to borrow up to $4,000 a year. The total amount borrowed over the course of college cannot exceed $20,000.

FEDERAL STAFFORD LOANS. With a variable interest rate that can never exceed 8.25 percent, these loans offer up to $2,625 for freshmen, $3,500 for sophomores, and $5,500 for juniors and seniors. If you will be 24 or older before December 31, 2000; or if you are married; a graduate or professional student; someone with legal dependents other than a spouse; an orphan or ward of the court; or a veteran; you are considered financially independent (of your parents) and can borrow even more.

There are two types of Stafford loans–subsidized and unsubsidized Subsidized loans are awarded based on need, and you are not charged interest while you’re in school or in deferment (an official time when you can delay repayment–e.g., if you’re unemployed). Repayment begins six months after you graduate, leave school, or drop below half-time status. Unsubsidized loans are available regardless of need. However, with these loans, you’re responsible for the interest while in school and during deferment periods.

FEDERAL PLUS LOANS. This program lets parents borrow for each dependent child who is enrolled at least half-time. PLUS provides an amount no more than the cost of tuition, room and board, etc., minus the amount of aid already received. First payments on these loans must be made 60 days after the final disbursement.

In the past, you could only take out Stafford and PLUS loans through a private lender, but now you can take out a direct loan if you’re attending one of the more than 1,250 schools that participate in the Federal Direct Student Loan Program. If you take out a loan under this plan, the U.S. Department of Education is your lender–not a bank. Loans through private lenders are still most prevalent and are part of the Federal Family Education Loan (FFEL) Program.

NEW TAX CREDITS. Depending on family income, college students and their parents can also benefit from new tax deductions. The Hope Scholarship is a tax credit of up to $1,500 annually during the first two years of college, and the Lifetime Learning Credit is for subsequent years of college study–it starts at $1,000 a year and increases to an annual maximum of $2,000 by the year 2002. Also, if you’re paying interest on student loans, you may be able to deduct up to $1,000 this year from your income tax, and the government is now allowing penalty-free withdrawals from IRAs if the money goes toward a college education.

Plus, you may benefit from loan forgiveness programs once you graduate (see page 45), and the military also offers funding for those willing to serve (see page 26).

2. State Government

When you’re done researching federal resources, look closer to home. Contact your states department of higher education and ask for literature on grants, tuition assistance, fee reductions, and loans. (See our list of state guaranty agencies on page 55.) You may have to fill out additional financial aid forms, since only 23 states currently rely on the FAFSA. Many state funding programs are specifically for students who go to college in-state. Increasingly, states are offering financial incentives to keep top students within state borders. However, reciprocal arrangements between states often permit students to receive discounted tuition in other states, usually nearby. Although many programs are need-based, several are based on academic, military, or minority status.

3. Colleges

Colleges offer a variety of funding from their own financial resources, including grants, scholarships, student job programs, and low-interest loans. Be sure to check with your college financial aid administrator about programs you may qualify for. Although some will be need-based, college awards often recognize academic achievement or a special talent. Many schools also have dollars to support specific fields of study.

Furthermore, at about 900 colleges, students are able to participate in cooperative education. Through this system, young people divide their time between on-campus learning and off-campus earning. Typically, co-op students work at a job related to their field of study and earn course credit as well as a salary, typically between $6,000 and $16,000 a year. (For more information, see Web Watch on page 24.)

4. Private Sources

Corporations, professional associations, unions, religious groups, and other “private” organizations award scholarships to students based on a wide range of qualifications, including need, heritage, and talent–whether it be artistic, athletic, scientific, or something else. Although these types of awards make up one of the smallest slices of the financial aid pie (see chart above), they can still make a difference in affording college.

Because there are thousands of scholarships out there, finding the ones you qualify for can be a daunting task. For a fee, scholarship search services will hunt for awards that match your qualifications. However, there are many free ways to find scholarship dollars. (For more on scholarships, see page 30.)


This graph gives you an idea of where financial aid comes

from. Note that almost half is in the form of federal loans.

Federal Loans $40.25 billion (49%)

Federal Tuition Tax Credits $6.2 billion (7.5%)

Employer-Paid $2.6 billion (3.1%)

Federal Grants $10.7 billion (13%)

Veterans Administration $1.46 billion (1.7%)

Collegiate Resources $14.6 billion (17.7%)

The States $4.65 billion (5.6%)

Private Sources/Scholarships $1.6 billion (1.9%)

Source: Octameron Associates (

Need-based Aid Pays for Food, Tuition, and More

Kevin Henley, 18, thinks the campus cuisine at the University of Washington is A-OK. “I don’t have any problems with it,” Henley says. “I’m a human garbage disposal–I just pretty much eat food.” The Kent, Washington, native is paying for his plastic-tray grub, not to mention his education, with a combination of federal and college grants based on need. Finding the money was “a source of stress” for him, but so many family members are alumni that Henley knew his fate lay with Seattle’s State U. “Since. I was born,” he says, “I was raised to go here.”

College Scholarships. Part of Henley’s tuition was waived based on need.

AMOUNT: $4,066

Federal Pell Grant. Because of his need, Henley qualified for a Pell.

AMOUNT: $2,675

Work-Study. He can work up to 19 hours a week from his two campus office gigs.

AMOUNT: $2,600

Federal Supplemental Educational Opportunity Grant. Henley also qualified for additional funding based on need.

AMOUNT: $2,400

Parents Pitch In

“I have no money, and that’s fine, but somehow I’m always able to scrounge up enough money to do what I want,” says Mary Mider, a freshman at Virginia Polytechnic Institute and State University, better known as Virginia Tech, in Blacksburg. “Things always seem to work out.” A biology major and Spanish minor, the 18-year-old plans to study abroad, go into the Peace Corps, and be a marine biologist. One of five kids in a farming family from Berryville, Virginia, pop. 2,000, Mider has found ways to fund everything from whale-watching in Magdalena Bay, Mexico, to traveling through Wex-ford, Ireland. Now she’s paying for her college education. “That’s money that I’ve either earned myself or has been generously donated by people,” Mider says.

Private Scholarship. Mider filled out an application and wrote an essay to win her high school’s Selena Lewis Aylor Scholarship.

AMOUNT: $5,000

Federal Stafford Loan. Because of need, she qualified for a subsidized loan.

AMOUNT: $2,400

Parent Contribution. Ever since Mider and her siblings were little, their parents have set aside money for college. “I got a few bucks one month; my brother got a few bucks another month. They put it in stocks and special college accounts, and it just added up.”

AMOUNT: $1,274

TOTAL: $8,674

Brain Power Pays Off With College Award

The University of Miami in Coral Gables, Florida, is paying 75 percent of James Pasquale’s college education. The 18-year-old freshman, who is planning to major in biomedical engineering and go on to medical school, relied mostly on college merit-based scholarships. “Because of my academics in high school, the University of Miami is giving money away, Pasquale says. As a Filipino-American, he qualified for additional funding.

College Scholarships. The University of Miami presented Pasquale with two academic scholarships. His Bowman Foster Ashe Scholarship ($15,720) is awarded to only 2 percent of applicants. The Florida Georgia Louis Stokes Alliance for Minority Participation in Science, Engineering and Math Scholarship ($2,000) is intended to increase the number of minorities receiving Ph.D. degrees in science, engineering, and math, and is renewable with a GPA of 3.0 or above.

AMOUT: $17,720

State Scholarships. The Florida Bright Futures Scholarship Program encourages Florida high school students with good grades to stay in state.

AMOUNT: $2,000

Part-time Job. Pasquale spent his summer working in a clothes store at the mall and playing piano at a local church.

AMOUNT: $1,000

State Aid. The Florida Prepaid College Tuition Program encourages families to save for college tuition by raking the monthly payments families make to the program and adding state money.

AMOUNT: $800

Federal PL US Loan. This national program lets parents borrow the remaining difference between the cost of education and the amount of financial aid received.

AMOUNT: $782


Racing to Jobs to Meet College Costs

Kelly Warner is loving her freshman year at Malone College in Canton, Ohio. “I’m making all friends,” Warner says. “I’m in singing groups! I’m in sports! It’s so easy to get along with everybody!”. The 18-year-old communications major and aspiring TV broadcaster chose Malone because it’s close enough to home for her mom to watch her sing in concerts, and also because it’s a small, private Christian school. “I have three older brothers and sisters, and we’re all in college this year and dependent on my parents. So I got a break on financial aid,” she says. Warner’s paying for her freshman year with a variety of scholarships, loans, grants, and multiple part-time jobs squeezed in between her studies, track practice, and chorus rehearsals. “I get bored if I’m not on the go constantly,” she says. “My roommate never sees me at all. I’m nor here too often.”

College Scholarships. Warner won a merit-based J. Walter and Emma Malone Scholarship that is renewable with a 3.5 GPA. She also received a special $500 award from an anonymous faculty member who liked her college application.

AMOUNT: $5,000

Part-time Job. Warner’s continuing her summer job at the Friendly’s in her hometown one day a week and on weekends.

AMOUNT: $3,500

Federal Stafford Loan. Warner qualified for this subsidized loan.

AMOUNT: $2,625

Work-Study. She also works in Malone’s financial aid office for a maximum of 11 hours a week.

AMOUNT: $1,800

Federal Perkins Loan. Warner also took out this need-based loan.

AMOUNT: $1,800

Federal Supplemental Educational Opportunity Grant. In addition, she received this need-based grant.

AMOUNT: $1,400

State Grant. Warner also picked up an East Ohio Student Choice Grant because she chose to go to an in-state college.

AMOUNT: $990

Penny-pinching Supplements a Diverse Aid Package

An aspiring writer, Chris McLaughlin chose Randolph-Macon Woman’s College in Lynchburg, Virginia, because it was small, “writing-intensive” and just over 100 miles away from home. The 18-year-old native of Richmond, Virginia, plans to major in creative writing and minor in Greek civilization and culture. She’s funding her freshman year with a combination of scholarships, grants, loans, and summer and on-campus jobs. “But it really comes down to not wasting money,” McLaughlin says. “Shopping at Wal-Mart instead of high-priced stores, taking care of needs before wants, and setting up a budget. My parents don’t have the resources to help me with expenses, but whenever they get quarters with change, they put them aside in a jar for laundry days.”

College Scholarships.

McLaughlin won a large Founders Scholarship based on her high school grades and SAT scores. It’s renewable if she maintains a 3.0 GPA. She also won two Randolph-Macon Woman’s College grants.

AMOUNT: $12,200

Private Loan. McLaughlin borrowed the maximum amount from SallieMae’s Signature Loan program.

AMOUNT: $4,250

Federal Stafford Loan. She also qualified for this need-based loan and took out the maximum amount.

AMOUNT: $2,625

Virginia Tuition Assistance Grant. McLaughlin qualifed for this need-based grant by going to an in-state school.

AMOUNT: $2,600

Campus Part-time Job. McLaughlin works for the English department as a teaching and office assistant for the maximum of 12 hours per week.

AMOUNT: $1,860

Federal Pell Grant. She demonstrated significant need.

AMOUNT: $1,076

Federal Supplemental Educational Opportunity Grant. She also qualified for this grant, based on need.

AMOUNT: $1,000

Federal College Scholarship Assistance Grant. Her college recognized her need with this grant.

AMOUNT: $1,000

TOTAL: $26,611

Scholarships Make It Possible

New York City native Priscilla Law, 18, had to get used to the slower suburban pace of Lehigh University in Bethlehem, Pennsylvania. “It’s been an adjustment, but not a hard adjustment,” Law says. “It’s different at home than at school. Everything revolves around campus, there’s nothing outside of campus. I can’t just go shopping or to the movies; I have to see the schedule for the buses that bring you to the mall. And the eating hours are earlier than I’m used to.” She’s majoring in finance and minoring in accounting, and she expects that by graduation she’ll be offered a job in “a well-known company.” Law scrambled to find a college that would help fund her freshman year. “I knew I could never, by my own pockets, be able to afford a school like Lehigh. But my college advisor told me to try because I might receive a lot of financial help from the schools and other scholarships. So I did, and he was right. And Lehigh gave me the best financial aid package out of all the private schools I applied to.”

College Scholarships. Law won a Lehigh University Grant, which is based on both merit and need, and renewable as long as she maintains a 3.0 GPA. She also won an Albert Shanker Scholarship.

AMOUNT: $20,930

Private Scholarships. The Financial Women Association awarded Law a renewable scholarship, adjustable each year relative to her financial aid package. She also received a Starr Foundation savings bond, based on merit, financial need, and family circumstances.

AMOUNT: $4,100

Federal Pell Grant. She also qualified for this need-based grant.

AMOUNT: $2,175

Family Contribution. Law’s family is helping out.

AMOUNT: $1,000

Work-Study. Law will start her work-study job in spring semester.

AMOUNT: $515

TOTAL: $31,345

COPYRIGHT 2000 EM Guild, Inc.

COPYRIGHT 2000 Gale Group