Loan
Can somebody tell me how the school loan work? And also, how a school can offer loan or scholarship to its students? Thank you!
Rachael,
Having a basic understanding is great but the best practice to to leave the heavy lifting to Financial Aid.
Patty Aronoff
I used to do financial aid so I think you want a basic understanding even if you should not go this deep. I get you want to understand it.
Simply, a student and their parent(s) would do a FAFSA (free financial aid application) to determine need. The higher the need the more a student could qualify for. After submitting the FAFSA it generates a code called an EFC which means Expected Family Contribution. At a O EFC this means the family can't really afford to contribute anything so they most likely would qualify for Full Pell. The maximum amount a student can qualify per FAFSA award year is $5550.Basically, if they were there a full term (900 clock hours for my Cosmetology school) they would get $5550 in "free money" which would reduce their tuition by that much. So if your school is $15,550 for an academic year you would reduce $15,550 - $5550 so they would then have a balance of $10,000. This is where loans come in to the picture. Dependent students can only qualify for a small amount of loans on their own and the students loans are not credit based and they start paying them back 6 months after they graduate or leave school. For example if it was $4000 you would reduce the $10,000 balance by $4000 resulting in a $6000 gap. So now the question becomes how does a dependent student (student who can't answer yes to any question that determines whether a student is Independent or Dependent(uses parent(s)info). Basically, the government in this situation feels that a student who is dependent should have the family saving money for their education. Sometimes that happens but most of the time it doesn't. At this point the parent will be asked to complete a PLUS loan application for the $6000 used in this example. If they are approved they will then proceed with the PLUS loan process. If they are denied then the government basically says thank you for trying Mr. or Mrs.Parent but seeing as how you were denied we will now be able to offer your son/daughter loans as if they were Independent which is $3500 Subsidized/ $6000 Unsubsidized per FAFSA year (first year. They would basically be able to cover the $6000 gap with their student loans or their parents PLUS if they were approved. This is just a rough break down of the process so you have an idea what financial aid is doing with them behind those closed doors. Definitely appreciate what your financial aid department does as they work very hard with the breakdown process above, verifications, certifying of loans, exit interviews, disbursements, and r R2T4's if the student were to unfortunately drop at some point. I know our job as Admissions employees can be very stressful at times but don't lose sight of how hard every other department in your school is working. It takes an Army to raise a child and the same goes with our students. Imagine a school like a team of horses where if one falls we all fall.Hope this helps Cleophat : )
Alice,
Absolutely! We are best serving the student by having them speak to the experts.
Patty Aronoff
From admissions point of view, if a student had that question, I believe a representative can explain the difference briefly but should refer the student to a financial counselor. Always let the expert do their job, it will prove beneficial in recruiting a student. Agree?
CLEOPHAT,
Loans are just that...loans. The amount borrowed has to be paid back. Scholarships do not.
Patty Aronoff
