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Top 10 Questions about Financial Aid
By Joe Yocavitch

1. My son probably doesn’t qualify for aid. Should he apply for it anyway?  

Yes. Many families mistakenly think they don’t qualify for aid and prevent themselves from receiving it by failing to apply for it. In addition, there are a few sources of aid such as unsubsidized Stafford and PLUS loans that are available regardless of need. The FAFSA form is free. There is no good excuse for not applying.

2. Do they need to be admitted before they can apply for financial aid at a particular university?

No. You can apply for financial aid any time after Jan 1. To actually receive funds, however, you must be admitted and enrolled at the university.

3. Why can’t my daughter submit her financial aid application before Jan. 1?

The need analysis process for financial aid uses the family’s income and tax information from the most recent tax year (the base year) to judge your eligibility for need-based financial aid during the upcoming academic year (the award year). Since the base year ends Dec. 31, you cannot submit a financial aid application until Jan. 1.

4. Does my child have to reapply for financial aid every year?

Yes. Most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, you may get more or less aid. After your first year, they will receive a “Renewal Application” which contains preprinted information from the previous year’s FAFSA. Note that your eligibility for financial aid may change significantly, especially if you have a different number of family members in college. Renewal of your financial aid package also depends on your making satisfactory academic progress toward a degree, such as earning a minimum number of credits and achieving a minimum GPA.

5. How can my son apply for a Pell Grant and other types of Federal need-based aid?

Submit a FAFSA. To indicate interest in student employment, student loans and parent loans, check the appropriate boxes. Checking these boxes does not commit someone to accepting these types of aid. They will have the opportunity to accept or decline each part of the aid package later. Leaving these boxes unchecked will not increase the amount of grants they receive.

6. Am I responsible for my child’s educational loans?

No. Parents are, however, responsible for the Federal PLUS loans. Parents will only be responsible for your educational loans if a child is under 18 and you co-sign the loan. In general, the loan taker is responsible for repaying educational loans. On the other hand, if you want to help pay off their loan, you can have your billing statements sent to your address. Likewise, if a lender or loan servicer provides an electronic payment service, where the monthly payments are automatically deducted from a bank account, you can agree to have the payments deducted from your account. But you are under no obligation to repay their loans. If you forget to pay the bill on time or decide to cancel the electronic payment agreement, they will be held responsible for the payments, not you.

7. Why is the family contribution listed on the S.A.R. different from the family contribution expected by the university?

The federal formula for computing the expected family contribution is different from those used by many universities. In particular, the federal formula does not consider home equity as part of the assets, yet many private colleges will take home equity into consideration for their institutional funds.

8. If my child takes a leave of absence for any reason, does she have to start repaying the loans?

Not immediately. The subsidized Stafford loan has a grace period of six months and the Perkins loan has a grace period of nine months before the student must begin repaying the loan. When you take a leave of absence, you will not have to repay your loan until the grace period is used up. If you use up the grace period, however, when you graduate you will have to begin repaying your loan immediately. It is possible to request an extension to the grace period, but this must be done before the grace period is used up. If your grace period has run out in the middle of a leave of absence, your son or daughter will have to start making payments on the student loans.

9. My child received an outside scholarship. Should he report it to the financial aid office?

Yes. If you someone is receiving any kind of financial aid from a university or government source, they must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some beneficial effects. At some universities outside scholarships are used to reduce the student loan level.

10. Is it legal for a 17-year-old student to sign a promissory note for a student loan, even though the student has not yet reached the age of maturity?

Normally, a minor cannot be held liable for a contract that they sign. However, in 1992 the Higher Education Act was amended to permit eligible students, defined as per Title IV regulations, to sign promissory notes for their own student loans. As such, student loans represent one of the few exceptions to the so-called “defense of infancy”.

Joe Yocavitch is a writer and a college strategies & macro-economic advisor from Cherry Hill, NJ. Contact him at jyocavitch @comcast.net  or visit www.jmlandassociates.com.