President’s Two New College Affordability Proposals
Understanding how the financial aid distribution works can be confusing. Typically it will match the college’s main semesters learning periods. This is normally two or three semesters depending on the college.
The school timing will begin with the fall semester. This is because the fiscal year for the Federal Government and the Department of Education starts July 1 and ends June 30th of each year. For parents, this adds some additional complexity since the school year and the tax year do not match up. Understanding the differences can help you maximize the education tax credits.
This amount of the financial aid disbursement is based on three major factors: merit aid, need based aid, and academic progress. As an example the Stafford Loan limit amount increases as you get closer to graduation each year. The amount that is subsidized verses unsubsidized will be determined by the amount of financial need the student needs each year.
Many schools do break out the financial aid disbursement amounts by semester in their financial award letter. Since there is no standard award letter format this level of detail will vary by college.
The funds are typically distributed to the school directly first. Any credit balance is normally refunded to the student directly. This is an important factor to understand. Any overpayment will go to the student and not the parent. These credit balances normally occur when a family is financing though the Parent Plus or Private Student loan.
When selecting a school and determining financial need, the school uses a Cost of Attendance number. Along with tuition, room and board, it will include books, travel and some personal living expenses. The school bill will consist of only tuition, fees, room and board. How you pay for the entire cost of college that year will determine the credit balance. Depending on your financing approval and the schools processing will determine when the credit balance will be available.