Paying for your college education: a primer of financial aid terms

Relatively few college students are in a financial position that allows them to simply write a personal check for college expenses. Most rely on some sort of financial aid – and it’s available in many forms.

Grants and scholarships are “free money” that doesn’t have to be repaid (unless a grant stipulates that repayment is required if a recipient quits college). Scholarships are usually awarded on the basis of academic or other achievement. They may be funded by a college or other organization.

Pell Grants are awarded to students who have financial need. Interestingly, the percentage of students receiving Pell grants at Iowa private colleges is almost double that of students at the public universities, says Gary Steinke, president of the Iowa Association of Independent Colleges and Universities (IAICU).

“The maximum Pell Grant for the upcoming year is $5,730. That makes a huge difference,” Steinke says.

Iowa Tuition Grants (ITG) were established by the Iowa General Assembly in 1970 as a cost-effective way to help financially needy Iowa students at any of Iowa’s independent, nonprofit colleges and universities. The ITG maximum grant has been increased 10 percent from last year, to $4,550 for the upcoming school year.

The grants are provided directly to the student – not the institution – and must be matched by the institution. Last year, nearly 15,000 Iowa students received Iowa Tuition Grants.

“The Iowa Tuition Grant is a tremendous bargain for the State of Iowa,” Steinke says. “The ITG provides access to college for thousands of Iowa students at great institutions.”

With a Pell grant or Iowa Tuition Grant, students are likely to be surprised at how affordable an Iowa independent, nonprofit college or university really is, Steinke says.

More information about the Iowa Tuition Grant program can be found at www.iowacollegeaid.gov.

Loans are another financial aid tool – and they must be repaid, says Tristan Lynn, director of financial aid at AIB College of Business in Des Moines.

“A Federal Subsidized Loan is awarded based on a student’s financial need,” Lynn says. “It’s ‘subsidized’ because the federal government pays the interest while a student is in college. A Federal Unsubsidized Loan is not based on a student’s financial need, and interest is not paid by the federal government while the student is in college.”

PLUS loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses. The U.S. Department of Education makes Direct PLUS Loans to eligible borrowers through colleges participating in the Direct Loan Program. Repayment begins immediately, unless the loan is deferred. Interest will accrue on the loan during the deferment.

Loans made through the Federal Perkins Loan Program, often called Perkins loans, are low-interest federal student loans for undergraduate and graduate students with exceptionalfinancial need.

Private student loans are nonfederal loans made by lenders such as banks, credit unions, state agencies or a college.

Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study.

To be eligible for any federal student aid, students must submit a Free Application for Federal Student Aid (FAFSA). For more information, go to www.studentaid.ed.gov.

Still have questions? Try visiting AIB’s Financial Aid FAQ’s and Helpful Links on Financial Aid.