After submitting the application for financial aid (FAFSA), you will be informed of your financial aid eligibility via an award letter. The award letter specifies the elements of your financial aid package. Your package is an assortment of the different types of aid available from the U.S. Department of Education and/or the school (if eligible). Financial aid was established to assist students with covering the financial difference between their own contribution and the cost of attending college.
The U.S. Department of Education promotes students reviewing two different elements that factor into the cost of college:
- Net cost is the difference between the cost of attending the school (COA) and the financial aid package. This amount tells you how much money is needed from your own resources or from borrowed loans to pay the remainder of the tuition bill that has not been covered by gifted aid, such as grants or scholarships.
- Out of pocket expense is the difference between the COA and the gifted aid. Out of pocket expense measures how much attending college is actually going to cost you. This cost will provide you with how much you will need to draw from your savings, borrow in loans, or utilize from your current income.
Once you have reviewed the award letter, reject any financial aid that is not necessary to cover the cost of college. You should start by reducing loans. Federal student aid (FSA) loans are intended to help families pay for the portion of college costs that are covered by the expected family contribution (EFC). These loans are available to everyone, regardless of financial need, and they must be repaid to the government. This loan debt is a federal legal obligation; ignoring the loans is not a way to avoid repayment. In addition, filing bankruptcy is not a valid option, as many FSA loans are not typically allowed to be written off through bankruptcy.
Most students choose FSA loans to cover the difference between the cost of attending college and what gifted aid will pay. Federal student loans offer lower interest rates and have more flexible repayment options. To lower your obligation toward college expenses, try exploring other options before applying for FSA loans. Examples include: inquiring about less expensive schools, community colleges, online schools, or in-state schools, searching for scholarship and/or grants, reviewing your budget, and changing your spending habits. Think about how much you are borrowing, and track your student loans to make sure your new career will adequately support the monthly payments.
If the loans exceed your school’s charges, you will receive a refund. This refund is only to pay for educational expenses. Educational expenses include, but are not limited to, tuition, room and board, fees, books, supplies, equipment, dependent child care expenses, transportation, and the rental or purchase of a personal computer. Misuse or abuse of financial aid loan refunds is not tolerated and must be reported.
As a reminder, FSA loans are a legally-binding agreement and must be repaid even if your financial situation becomes difficult. There are options available to you as a loan borrower if financial hardships occur. Keep your loan servicer informed of your situation, and they will assist you so that you can continue to honor your financial obligation.
U.S. Department of Education Federal Student Aid. (2010). Your Federal Student Loans: Learning the Basics and Manage Your Debt. Washington, D.C.: U.S. Department of Education.
By Tangene Umstead
Senior Default Prevention and Compliance Specialist at American Public University
Ready When You Are
At American Public University, students are priority one. We are committed to providing quality education, superior student resources, and affordable tuition. In fact, while post-secondary tuition has risen sharply nationwide, the university continues to offer affordable tuition without sacrificing academic quality.