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Common Terms in Financial Aid That You Should Know

It is important to understand the various terms used in discussions and applications regarding financial aid in order to avoid any misunderstandings.
By GPA Admin

Common Terms in Financial Aid That You Should Know

Award Letterthe official notification of an award offered by an institution to a student, stating the type and amount of the award.

Demonstrated Need:  the difference between the total cost of education and the amount that a student’s family is able to contribute towards that cost.

Expected Family Contribution (EFC)the amount that a student and his or her family is expected to contribute towards the education costs.  

Grantsmoney awarded that is need-based or project-based, does not have to be paid back and are mostly awarded by the state and federal governments.

Institutional Aid (or Campus-Based Aid) financial aid given by a college or university, usually need-based or merit-based.

Loans or Student Loansmoney given to students that must be paid back.  There are different types of loans but the federal government loans such as the Stafford Loan and the Perkins Loan are the best options as they have low interest rates and students don’t have to start paying them back until they graduate.  Loans are also available through private banks and credit unions but their interest rates are typically higher.

Merit Aid:  financial aid awarded by an institution based on a student’s achievements and talents.  For a full listing of availabilities, go to www.meritaid.com.

Need-Based Aidfinancial aid awarded based on the student’s and the family’s ability to pay for education.

Scholarships:  money for education that does not have to be paid back.  It is awarded based on specific criteria such as academic performance, artistic and creative achievements, extracurricular activities, ethnicity, etc.  Scholarships are awarded by various entities including colleges, private organizations, states and churches.

Work Studyfinancial aid that comes in exchange for work usually on campus.  In most cases, a student must submit a FAFSA to qualify for a work study program. This is usually available to students who are U.S. citizens or permanent residents only.

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