BankSITE® For Students Only: Grants, Loans and Scholarships

Two forms of financial aid that you do not need to pay back are grants and scholarships. Both must be used to defer college costs.

A scholarship is a lump sum given to you, usually on the basis of merit. A grant is a lump sum given to you, usually on the basis of need. If you're applying for financial aid, you will need to apply for a Pell Grant.

Scholarships

Scholarships are designed to award achievement and help you get an education. They are usually awarded on a competitive basis.

Once you are given a scholarship, you do not have to pay it back. However, it does effect your financial aid eligibility. The amount of money you receive in scholarships is deducted from the total amount of your financial need.

So be proud of your academic or athletic achievement, but don't expect scholarships to pave your way through school.

Pell Grants

If you're applying for financial aid, you must apply for a Pell Grant before colleges will even consider you for their own financial aid package.

A Pell Grant is a government grant designed to help individuals from families with very low income afford a college education. Most students don't qualify for a Pell Grant. But colleges want to know you've tried this source of funding before you come to them. So if you don't qualify, just chalk it up to one more thing you have to do to get financial aid.

Fortunately, applying for a Pell Grant isn't difficult. The application is included in the Free Application for Federal Student Aid (FAFSA) you are required to fill out when you begin the financial aid application process.

If you do qualify, there's good news. Once you've qualified on the basis of need and meet the eligibility criteria (see Are You Eligible?), you're guaranteed a grant.

A Pell Grant won't solve all your financial needs. Currently, Pell Grant awardees receive a maximum of only around $2000. So you will have to seek other sources of financial aid.

Education Loans
At last, you've received a financial aid package from the college you're planning to attend. And you've got your savings. But when you subtract the financial aid package and your savings from the cost of your college education, there's still a gap. Here's where education loans come in.

Education loans are one of the most common forms of financial aid which can help you meet the costs of college. They may be subsidized by the federal government, or unsubsidized. If you qualify for a subsidized loan, the government pays the interest on your loan until you start paying it back after you leave school. Unsubsidized loans require you to pay all of the interest on the loan, even when you're attending college.

Education loans may also be direct or indirect. With direct loans the money comes directly from the U.S. Department of Education. With indirect loans, you must work through a commercial lender.

Stafford Loan

The Stafford Loan is underwritten by the U.S. Government. It can be subsidized or unsubsidized, direct or indirect. The loan is granted to the student. Payment is deferred while the student is still in school.

Perkins Loan

This loan is like the Stafford Loan, but the interest rates are lower. It is always subsidized and made directly to the student.

PLUS Loan

This allows parents with good credit to borrow to pay their child's educational costs. Their child must be a dependent undergraduate.

Stafford Loan
The type of loan commonly called a Stafford Loan, or sometimes even just a Student Loan comes in many shapes and forms. Generally, it's offered under two, very different programs.

	Direct Loan Porgram	Pell Program
Where the money comes from	Directly from the US Department of Education	From a commercial lender (bank or other financial institution). The amount is underwritten by the US Government.
Eligibility	You must first apply for a Pell Grant. If you're denied a Pell Grant, you can still apply for a Stafford Loan.	You must first apply for a Pell Grant. If you're denied a Pell Grant, you can still apply for a Stafford Loan.
How to Apply	Fill out the current Free Application For Federal Student Aid. After this is completed, your school will let you know your complete loan eligibility.	Fill out the current Free Application For Federal Student Aid. After this is completed, your school will let you know your complete loan eligibility. You must then fill out the Federal Loan Application. You can get this from your school or a bank
When To Apply	You should complete every thing as soon as possible after January 1st.	You should complete every thing as soon as possible after January 1st. As soon as you are accepted to a school, find a commercial lender.
How To Find A Lender	You don't need to. Everything is done through your school and the US Department of Education.	Check our BankSITE Directory to find a bank near you that offers student loans.
How You Can Borrow	There are set limits on how much you can borrow each year, ranging from $2,625 in your freshman year to $5,500 in your senior year. You may borrow no more than $23,000 over the four years.	There are set limits on how much you can borrow each year, ranging from $2,625 in your freshman year to $5,500 in your senior year. You may borrow no more than $23,000 over the four years.
How You Receive Your Funds	The US Dept. of Education will transfer the money to your school, in at least two installments. It will be applied first to tuition and fees, room and board and other school charges. The remainder will be given to you by check or cash.	The lender will transfer your aid to your school either electronically or by check. Your school can then credit your school account or pay you directly by check. Some schools pay weekly, while other schools prefer monthly. Every school is different.
Interest Rate	1.3% over the Treasury bill rate with a maximum of 9%.	1.3% over the Treasury Bill rate with a maximum of 9%.
When You Begin Repayment	You'll begin repayment when you graduate, drop below half-time enrollment or leave school. You have a 6-month grace period to begin repayment.	You'll begin repayment when you graduate, drop below half-time enrollment or leave school. You have a 6-month grace period to begin repayment.
How You'll Repay	You'll have your choice of 4 repayment plans explained to you during counseling sessions at your school.	When you graduate, you'll make regular monthly payments. The amount you repay each month depends on the amount of your loan and the length of your repayment period. Everyone must pay their loan within 10 years.
Who To Repay	You'll repay the US Department of Education directly.	You'll repay the bank.

Perkins Loan
A Perkins Loan is similar to a Stafford Loan, but has two big advantages:

You pay a very low interest rate-only 5%.
The loan is always subsidized, so you don't pay interest while you're in school.

Perkins Loans are for both graduate and undergraduate students with exceptional financial need. You must be the recipient of a Pell Grant. Your school becomes your lender. You must repay this loan.

Perkins Loans are the sole responsibility of the student. You must start to pay back the loan nine months after you graduate and will make a monthly payment. Repayment terms are the same as those with Stafford Loans. Your monthly payment will depend on the size of your debt and length of repayment time you've chosen. Late payments result in late charges.

Under certain circumstances, you can receive a deferment or postponement in repaying your loan, but you must make formal application for these. Be sure you continue to make your regular payments until you hear your deferment is approved.

Plus Loan
PLUS Loans are available to parents with good credit. They must use this loan to pay the cost of education for their children. The children must be dependent undergraduates attending school at least half time.

The yearly limit on a PLUS loan is equal to your cost of attending college minus any other financial aid for which you are eligible. For example, if your cost of attendance is $5,000 and you are eligible for $3,000 in other financial aid, your parents could borrow up to but no more than $2,000.

Parents must start to pay back the loan within 60 days after final loan disbursement. There is no grace period for these loans.

To apply for a Direct PLUS loan, parents need to fill out a Direct PLUS Loan Application And Promissory Note. These are available at your school's financial aid office.

Work Study Program
Work Study provides students with jobs, so they can earn money to pay for their education. The program usually consists of community service work or work related to your area of study. It is available to both graduates and undergraduates.

The amount of money you can make depends on the school's funds, the amount of your need, and when you apply. You are also limited to the number of hours you can work. This limit varies within each school.

Work study programs are offered both on- and off-campus. On-campus jobs have you working directly for the school. Off-campus jobs vary, depending on the school you attend. But they need to be related to your course of study.

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