Five Points of Light

What are called the “Five Points of Light in financial aid” can be a little perplexing for so many college bound students.

The process starts with the FAFSA (Free Application for Federal Student Aid) which is maintained by the Department of Education at http://www.fafsa.ed.gov.

The FAFSA is required for college students interested in seeking Title IV Federal Financial Aid to cover the costs of tuition, semester education fees, books, and other costs. When the FAFSA is completed, a SAR is emailed to the student. The SAR (Student Aid Report) is a complete summary of the information entered in the FAFSA by the student and depending on the Schools entered by their School Code, this information is available to the schools that the student authorizes in the School Location area of the FAFSA application.

One of the highlights of doing the FAFSA is determining your EFC (Estimated Family Contribution) number which unlocks opportunities to receive a Pell Grant (maximum for 2012 is about $5,550 per an academic year).

Depending on your status as a freshman, sophomore, junior or senior in college, you may be eligible for Stafford Student Loans. At the undergraduate level, the aggregate limits of student loan aid can get a little tricky. Generally speaking, as a college student moves from one status to the next (i.e sophomore to junior), the aggregate limits for the total amount of Stafford Student Loan aid available becomes more flexible.

The Third Point of Light are alternative sources of aid such a private loan companies such as Sallie Mae and other companies. In most instances, alternative sources of aid are available and decisions are credit-based. There can be a lengthy application process and in some cases, a co-signer may be required to secure a more competitive interest rate on the private loan. Private loan companies have clamped down quite a bit in recent years and implemented more strict policies for underwriting of private student loans.

Another area of interest are grants and scholarships received directly from the institution you plan to attend. As tuition continues to rise at an alarming rate, some of the best colleges and universities are boosting the amount of grants and scholarship offered to students in their Financial Aid Award Package.

The Fifth Point of Light is monthly payment plan options. In the past few years, so many companies have been formed to finance the portion of a student’s financial aid package NOT covered by pell grant, stafford student loans, grants and scholarships and alternative sources of aid. You can think of it in another way: you purchase an extended warranty on your car and you are able to make small payments on the 36-month/36,000 miles in lieu of paying the full amount for the Extended warranty. You can finance your monthly payment plan over 17 months or some kind of similar arrangement.

Many students get concerned about how to factor their scholarships into the FAFSA. Simply put, more and more foundations are requesting a copy of the FAFSA along with the usual letters of recommendation and references.

Quite a few scholarship sources don’t require the FAFSA so if you receive a scholarship from a foundation or corporation, the reporting policies of the scholarship may be left up to the interpretaion of the recipient.

Try to find those Five Points of Light and make them work for you!

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