Whether you’re a college student or the parent of one, you’re likely to encounter several different terms when it’s time to pay for college classes. From student loan applications to tuition payments, it can be helpful to learn more about some of these terms.
Here are five terms you need to know if you’re paying for college:
Cost of Attendance (COA)
The Cost of Attendance (COA) is the total cost of attendance for one year at college. This not only includes tuition but also other variable expenses, so it is important to just use this cost as an estimate. The Cost of Attendance includes an average for other expenses, such as housing, books and supplies, and transportation. The cost of attendance will usually differ for students living on campus versus off campus or at home. If your cost of attendance is higher than anticipated, there are ways to cut back on various expenses to bring that cost down. For example, renting or purchasing used textbooks can help significantly. A meal plan at school may possibly be more efficient and may make more sense financially and can help you cut down on food costs (as long as you maximize it and don’t buy extra food off campus). Also, carefully consider your choice of housing if you’ll be leaving home for school. Dorm rooms at your school may be more expensive than off-campus housing, but if you can eliminate the need for a car, you can save considerably on transportation costs.
Satisfactory Academic Progress (SAP)
While many college students will find that they’re initially eligible for financial aid and/or federal student loans (and some private student loans), it’s important to know that students must maintain eligibility through Satisfactory Academic Progress (SAP). This means that in order to continue receiving offers for financial aid and many student loans while you’re in college, you’ll need to maintain a certain GPA and continue to meet the minimum requirements for college course credits. Every college will have their own Satisfactory Academic Progress policy, so be sure to check with your school to learn more about the specific details.
Annual Percentage Rate (APR)
From credit cards to auto loans, Annual Percentage Rate (APR) is a term that all consumers quickly get familiar with when it comes to borrowing money. This rate can help you understand the cost of your loan for one year, and how much you’ll spend in interest. Annual Percentage Rates vary significantly based on the type of loan—for example, whether it’s a personal loan or a credit card. Rates can be as low as zero percent during the introductory period, or can be as high as 30 percent – or even beyond that in some cases. There are other factors that are also taken into consideration, such as the applicant’s credit score, income, payment history, and more.
Once a borrower has shopped around for comparable loan products, the APR for each loan can be one way to help narrow down choices even further. Annual Percentage Rates can also be fixed or variable, which means they’ll either stay the same or they’ll fluctuate. With a variable APR, the rate goes up and down over time depending on the financial index it’s based on; that also means the monthly payment can go up and down over time. Variable rates usually start lower than fixed rates. Fixed APR loans are usually better choices for those who prefer set payments and would rather know exactly what they’ll be paying each month, even if it means accepting a higher interest rate from the start.
Free Application for Federal Student Aid (FAFSA)
All college students are encouraged to fill out the Free Application for Federal Student Aid, or FAFSA, when they enroll in school. Most students are eligible for some form of federal assistance, whether in the form of financial aid or federal student loans. The only way to know for sure is by filling out a FAFSA, which is simple, fast, and free. The FAFSA can easily be completed online, but students also have the option of mailing in their applications as well.
Before filling out the FAFSA for the first time, you’ll want to make sure you have all the necessary documents ready to go. This includes your Social Security number and tax return information (or your parents’ if you’re a dependent student), your driver’s license number, and other financial records that may be helpful. It may be a little daunting the first time, but when you reapply each year, the process will be much easier if most of your information remains the same.
Remember to always check deadlines on the FAFSA website to ensure that you’ll be able to complete your application on time, and don’t forget that you’ll need to reapply for each school year, as eligibility can change. Check with your college too; some schools have their own deadline for submissions that’s earlier than the federal timeline.
Expected Family Contribution
At some point during the FAFSA process, you’ll likely see something regarding your Expected Family Contribution, or EFC. This is one component that can help determine your eligibility for aid, and it is the estimated amount that applicants are expected to pay towards their college expenses. A formula is used to calculate this amount, and it is based on financial information that you provide on your FAFSA.
Income, home equity, cash, and other assets are taken into consideration when determining EFC. For dependent students, the EFC takes the parents’ financial information into consideration.
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