10 Terms To Know Before Submitting The FAFSA

Filling out the Federal Application for Federal Student Aid, or FAFSA, should be on every college student’s annual to-do list. The free application, which is due at the end of June each year, determines if a student will qualify for federal financial aid for college, trade school or graduate school expenses for the upcoming school year.  

If you’re a first-time applicant, you may come across several unfamiliar terms during this process. Even if you’re a returning applicant, you may benefit from a refresher. See below to read our top 10 FAFSA terms to know. 

1. Cost of attendance (COA) 

This is the total cost of attending school, including tuition, fees, housing, meals, transportation, books, supplies and any other school-related expenses. Generally, you are allowed financial aid up to the estimated total cost of attendance (COA). 

2. Dependent student 

A student who is claimed as a dependent on another person’s (typically their parents’) tax forms is referred to as a dependent student. Their parents’ financial information is then assessed along with the student’s financial information to get a full picture of available financial resources.  

3. Independent student 

A student who will report their own financial information is known as an independent student. An independent student is at least 24 years old and one of the following: a graduate or professional student, married, a veteran, a member of the armed forces, an orphan, a ward of the court, someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless. 

4. Direct loans 

Direct loans are issued by the Department of Education and offer borrower benefits, including affordable fixed interest rates as well as options for loan forgiveness. 

• Subsidized loan: A federal loan that does not accrue interest while you’re still in school. 
• Unsubsidized loan: Unlike a subsidized loan, the federal government does not pay the interest for your loan while you’re in school. Interest on direct unsubsidized loans begins accruing as soon as the loan is taken out. 
• PLUS loan: A loan made by the U.S. Department of Education to graduate or professional students and parents of dependent undergraduate students. The borrower is fully responsible for paying interest regardless of loan status. 
• Consolidation loan: Anyone with eligible federal student loans who wants to combine any number of those loans into a single loan. 

5. Disbursement date 

This is the date funds are paid out, or credited to the student, either applying the loan funds directly to the student, to the student’s school, or both. 

6. Expected family contribution (EFC) 

For dependent students claimed on their parents’ tax forms, the entire family’s financial strength will be evaluated using a formula established by law to calculate how much they are predicted to contribute. This contribution prediction will influence how much aid you are granted. 

7. FSA ID 

This is an account username and password needed to gain access to the U.S. Department of Education’s online systems and StudentAid.gov. A student’s FSA ID can also be used as a legal signature when generating electronic documents. Keep this information safe and handy. The student will need to be able to verify account ownership. 

8. Grace period 

The time between when a student either graduates, leaves school, or drops below half-time enrollment, and the date they are required to start making payments toward their loans. This period is typically six months but can vary depending on the loan. 

9. Grant 

A form of financial aid that generally does not have to be repaid and is awarded on a need-basis. Grants are often called “gift aid.” There are several types of grants you can apply for: 

• Federal Pell Grants 
• Federal Supplemental Educational Opportunity Grants (FSEOG) 
• Iraq and Afghanistan Service Grants 
• Teacher Education Assistance for College and Higher Education (TEACH) Grants 

However, most of the grants (listed above) are only awarded to students with financial need. 

10. Work-study 

Part-time jobs on or off campus that help undergraduate, graduate, and professional students earn money to pay for school. Work-study funds are awarded on a first-come, first-served basis, so be sure to complete the FAFSA application as early as possible. 

Understanding these financial aid terms will help students and their families determine the best way to finance their education. The FAFSA can also guide you in applying for student loans, grants, and other financial aid to make your schooling more affordable. Visit studentaid.gov* for more information. 

*Please Note: There are external links included in this article that will take you to a website that Bankers Trust does not control. Bankers Trust has provided these links for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of external websites.