Insufficiency of incomes to meet the education expenses has been evident in the US society, or for that matter, in most societies of the world. Realizing this reality, the federal government of the US has tried to make higher education more affordable over the years. This realization has taken the form of financial aid for students. The US Department of Education offers various student grants, work- study funds and student loans through Title IV of the Higher Education Act (1965) to help students pursue their careers and fulfil their ambitions.
This financial aid can help a student pay for his/ her college or institution and meet some necessary expenses during the education. This financial aid can come from the Federal government or the state where the student is living, his/ her college or institution or any non-profit, private organization working towards the cause of education. Such financial aid can be very helpful for people in meeting their education expenses but at the same time, the student should try and keep the dependence on such aid minimal.
Federal Student Aid
About $150 billion of grants, student loans at low rates of interest and work- study funds are provided by the US Department of Education to help over 15 million students every year. Federal student aid can be used by a borrow to pay for expenses such as tuition fee, transportation, books and various indirect expenditures such as computer and living costs. Federal student loan can be in the form of Grants, Loans and Work- study.
These three forms are different from each other. Grants are a type of financial help that does not require a repayment, unless the borrower owes a refund due to withdrawal from school. Student loans on the other hand are a type of financial help that need to be paid back with interest after the student starts working. Various loan repayment plans such as income repayment plan, income- contingent repayment, pay as you earn repayment plan, standard repayment et cetera are available to a borrower to facilitate such repayment. The third form of financial aid is a Work- study program which is a work program by which a student can earn and pay for his education expenses.
Grants: This is a need- based financial help by the federal government and is also referred to as ‘gift aid’ because they do not require a repayment. There are several types of grants available such as Federal Pell Grants, Federal Supplemental Education Opportunity Grants, Teacher Education Assistance for College and Higher Education Grants and Iraq and Afghanistan Service Grants. In order to avail a student grant, the student needs to complete and submit the Free Application for Federal Student Aid (FAFSA).
An important point to be noted here is that this application form is meant to be free (as the name itself suggests), hence, a student should become alert if an agent asks for any extra charges for this application form. After this, the student needs to work with his/ her institution to see how much of grant can be availed and by when. Along with grants, there are merit based scholarships that are available not just to student with good scores, but also to students who are good at sports or are active in social service etc.
Student loans : The US Department of Education offers two types of loans, namely, William D. Ford Federal Direct loan and Federal Perkins Loan program. There are four types of Direct loans available- Direct Unsubsidised loans, Direct Subsidized loans, Direct Plus Loans and Direct consolidated loans. Federal Perkins loan is available to undergraduates and graduates who are in exceptional need of financial help. An undergraduate student can avail up to $5500 under the Federal Perkins Loan program and $5,500 to $12,500 under the Direct Unsubsidized or subsidized loan program.
A graduate student can take out up to $8000 under the Federal Perkins loan and up to $20,500 under the Direct loans. Federal student loans are funded by the federal government. Interest rates on a federal loan are fixed and in some cases, tax deductible. With the passing of time, the horizons of student loan programs have been further broadened to benefit more people in genuine need.
Work- study program : Such a program is available to undergraduates, graduates and students of professional studies. A work study program provides a student enrolled in school (part-time or full- time) with part- time employment. This program is managed by the schools who are participants of the Federal work- study programme. Such a program encourages employment in civic education or in some field which is related to the course that the student is pursuing.
The employment can either be with the school itself, which is referred to as on campus placement or a student would be asked to work in public interest for a private non-profit agency. Salary paid to the student depends on whether he / she is an undergraduate or a graduate. Undergraduates are paid as per hours of work and graduates can be paid either for hours of work or as a salary. Although, both must be paid directly at least once in a month.
Other than the aforementioned student financial aid programmes, the federal government and other no- profit organizations also offers aid for providing military services or if someone is a spouse or child of a veteran. Financial aid can take the form of tax benefits for education. There are two tax credits that a student can use to pay off the education expenditures.
These two forms of tax credit are American Opportunity Credit that allows a student to claim an amount up to $2,500 per year to pay towards his education cost and the Lifetime Learning Credit that allows for a claim of $2,000 for paying for college fee, books and other equipments necessary for studies. Financial aid is also available as an Education award for community service with American Corps. Educational and Training vouchers are also accessible for former and current foster youth. A
lso, there is a provision for scholarships and options of loan repayment via the department of health and human services. For people who might not be eligible for federal student aid due to some reasons, they might avail the state financial aid for which the state grant agency needs to be contacted. Also, most schools and colleges provide financial aid to their students for which the school where the student is studying needs to be contacted and the application needs to be completed.
These grants or loans can be an effective means of meeting those additional expenses, however, every student is advised to kept these expenses minimal, especially in case of loans because they demand a repayment. A higher student loan taken out during school can act to be a huge financial burden when the time comes to pay it back.
There is no doubt about the fact that the federal government has left no stone unturned to promote higher studies in the US economy. This not only helps willing students to realize their dreams, rather help in the building up of a strong economy with strong human resource structure. Be it in the form of financial aid programmes, almost personally tailored repayment plans or forgiveness and discharge plans, the government via the US Department of Education aims to strengthen the education sector.
However, what has been largely ignored by the policy makers is the need to curb the growing dependence on such programmes by capping the ever increasing costs of higher education. There is huge dependence on private institutions for graduate studies with almost no presence of government sector in the field. The tuition fee and other costs can be kept competitive with an eminent presence of the public sector in this field. Such a policy would correspond with the government’s objective of encouraging higher education in the society.