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How the Federal Government Can Help
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Federal Student Aid Available

The U. S. Department of Education supports a variety of student financial aid programs in the form of grants, loans, and subsidized work experiences that will provide almost $43 billion to nearly 8 million postsecondary students in academic year 1998-99. The Federal student aid programs can help pay for the courses you need to be licensed if they are part of an eligible program offered by an eligible institution such as a community college. The Federal student aid programs may also be available to pay for continuing education courses if they are a part of an eligible program.

Pell Grants

The Pell Grant Program is the largest grant program that the U.S. Department of Education offers to students enrolled in postsecondary education. A Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded to undergraduate stu dents who have not earned a bachelor's degree.

Amount Available

The maximum Pell Grant award for the 1997-98 award year (July 1, 1997 to June 30, 1998) is $2,700. The maximum Pell Grant award for the 1998-99 award year will depend on program funding, but is expected to be $3,000.

How much of a Pell Grant award you receive will depend on the amount your family can contribute toward your education, your cost of attending school, and how long you are enrolled. For example, if you are enrolled in a short training program (e.g., one th at is 600 clock hours in duration), the maximum amount you may receive is currently $1,200. If you enroll in a class or two (less than half time), and you are otherwise eligible, you can receive a Pell Grant; however, you won't receive as much as if you w ere enrolled full-time.


Who is Eligible

To receive a Pell Grant, you must have financial need. To determine if you have financial need, the U.S. Department of Education uses a standard formula that produces an Expected Family Contribution (EFC). If your EFC is below a certain amount, you'll be eligible for a Pell Grant. The calculation of EFC considers the student's income, assets (if any), and family size. The amount of a student's Pell Grant will be larger when his or her EFC is smaller. A student with an EFC of zero can receive the maximu m award depending on his or her educational cost for the year. Put simply, financial need = cost of attendance - expected family contribution (EFC).

Student Loans

The Federal student loan programs are also available to students enrolled in postsecondary education. Unlike Pell Grants, student loans must be repaid. Also, unlike Pell Grants, you may receive a student loan whether you have financial need or not. Studen ts that have financial need receive subsidized loans while those that do not receive unsubsidized loans. Student loans are available to both undergraduate and graduate students.

Stafford Loans are the Department's major form of self-help aid. Stafford Loans are available through the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program. The terms and conditions of both type s of Stafford Loans are similar. The major differences between the two are the source of the loan funds, some aspects of the application process, and the available repayment plans. Under the Direct Loan Program, the funds for your loan are lent to you dir ectly by the U.S. government. If your school does not participate in Direct Loans, the funds for your loan are lent to you from a bank, credit union, or other lender that participates in the FFEL Program.

Amount Available

The maximum student loan varies by what year you are in school, whether you are dependent on your parents, and whether you are enrolled full or part time.

If you're a dependent undergraduate student you can borrow up to: $2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year; $3,500 if you've completed your first year of study and the remainder o f your program is at least a full academic year; and $5,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year. Most parents of dependent students can also borrow under the PLUS program.

If you're an independent undergraduate student (or a dependent student whose parents are unable to get a PLUS Loan), you can borrow up to: $6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (only $2,625 of this amount may be in subsidized loans); $7,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (only $3,500 of this amount may be in subsidized loans); and $10,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year (only $5,500 of this amount may be in subsidized loans).

For periods of study that are less than an academic year, the amounts you can borrow will be less than those listed above.


Loan Charges

You'll pay fees of up to 4 percent of the loan. These fees are deducted proportionately from each disbursement of your loan and are used, at least partially, to reduce the costs of loans to the Federal government. Also, if you don't make your loan paym ents when they're scheduled, you may be charged collection costs and late fees.

Repaying the Loans

After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a "grace period." During the grace period on a subsidized loan, you don't have to pay any principal, and no interest wi ll be charged. During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will be charged. You can either pay the interest or allow it to be capitalized. After you leave school or drop below half-time enrollment, yo u'll receive information about repayment and will be notified of the date repayment begins.

Four repayment plans are available to borrowers of Direct Stafford Loans to help you manage your student loan debt. You may choose one of the following repayment plans: Standard, Extended Graduated, and Income Contingent. The Income Contingent Repa yment Plan bases your monthly payment on your yearly income and your loan amount. As your income rises or falls, so do your payments. After 25 years, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.

Three repayment plans are available to borrowers of FFEL Stafford Loans. All the repayment plans require you to repay the loan within 10 years. You may choose one of the following repayment plans: Standard, Graduated and Income-Sensitive.


General Eligibility Requirements

To receive any Federal student financial aid, you must meet a number of general eligibility requirements. You must:

Cost of Attendance

Your school determines your cost of attending school. Your cost of attendance will include: tuition and fees, room and board (or living expenses if you do not contract with the school for room and board), books, supplies, transportation, and miscellaneous personal expenses. It can also include an allowance for care of your dependents, and, if you have a disability, an allowance for expenses related to your disability.

If you attend school less than half time, your cost of attendance may include only tuition and fees, books, supplies, transportation, and an allowance for dependent care expenses.

How to Apply

To apply for Federal student financial aid, you have to fill out a Free Application for Federal Student Aid (FAFSA). The FAFSA is available in paper form, on the Internet (FAFSA on the Web), and as a computer software program (FAFSA Express). In come case s, your school can submit your FAFSA for you electronically. After your completed FAFSA has been submitted, you'll receive a Student Aid Report (SAR) in the mail that will report the information from your application and your EFC.


Tax Benefits Available

Many new tax benefits for adults who want to return to school and for parents who are sending or planning to send their children to college will be available due to the balanced budget signed into law in August 1997. These tax cuts effectively make the fi rst two years of college universally available, and they will give many working Americans the financial means to go back to school if they want to choose a new career or upgrade their skills. When fully phased in, 12.9 million students are expected to ben efit --5.8 million under the "HOPE Scholarship" tax credit, and 7.1 million under the Lifetime Learning tax credit.

"HOPE Scholarship" Tax Credit

The "HOPE Scholarship" tax credit helps make the first two years of college or vocational school universally available. Students will receive a 100% tax credit for the first $1,000 of tuition and required fees and a 50% credit on the second $1,000. This c redit is available for tuition and required fees less grants, scholarships, and other tax-free educational assistance and will be available for payments made after December 31, 1997 for college enrollment after that date.

The credit is phased out for joint filers who have between $80,000 and $100,000 of adjusted gross income, and for single filers who have between $40,000 and $50,000 of adjusted gross income. The credit can be claimed in two years for students who are i n their first two years of college or vocational school and who are enrolled on at least a half-time basis in a degree or certificate program for any portion of the year. The taxpayer can claim a credit for his own tuition expense or for the expenses of h is or her spouse or dependent children.

Lifetime Learning Tax Credit

The Lifetime Learning tax credit is targeted to adults who want to go back to school, change careers, or take a course or two to upgrade their skills and to college juniors, seniors, graduate and professional degree students. A family will receive a 20% t ax credit for the first $5,000 of tuition and required fees paid each year through 2002, and for the first $10,000 thereafter.

Just like the "HOPE Scholarship" tax credit, the Lifetime Learning tax credit is available for tuition and required fees less grants, scholarships, and other tax-free educational assistance; families may claim the credit for amounts paid on or after Ju ly 1, 1998 for college or vocational school enrollment beginning on or after July 1, 1998. The maximum credit is determined on a per-taxpayer (family) basis, regardless of the number of post-secondary students in the family, and is phased out at the same income levels as the "HOPE Scholarship" tax credit. Families will be able to claim the Lifetime Learning tax credit for some members of their family and the "HOPE Scholarship" tax credit for others who qualify in the same year.


To Get More Information

For additional information, call the Federal Student Aid Information Center between 8 a.m. and 8 p.m. (Eastern Time), Monday through Friday: 1-800-4-FED-AID (1-800-433-3243). This is a toll-free number.

Additional information on the Federal Student Aid Programs can be found at the Department of Education's Office of Postsecondary Education (OPE) web site at: http://www.ed.gov/offices/OPE/
or in the 1997-98 Student Guide. The Student Guide can be accessed via the OPE web site, and is also available at most public libraries and postsecondary institutions.

Additional information on the tax benefits described here and other tax benefits available to students enrolled in postsecondary education and their families can be found via the Department's web site at: http://www.ed.gov/offices/OPE/PPI/HOPE/ -###-


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