Financial Aid FAQs

Applying for Financial Aid

More about Student Loans

Taxes and Student Loans

Deferment and Forbearance

FAFSA – The Free Application for Federal Student Aid

What is financial aid?
Financial aid is a term used for all of the many federal, state and private programs designed to help students pay for higher education. This includes grants, scholarships, work-study aid and loans. There are even a number of federal tax credits and deductions that are part of the larger financial aid picture. The goal of all these programs is simple: to ensure that students and their families are able to find the money – whether through low-interest loans or grants, scholarships or tax breaks – to be able to afford an education.

Should I apply for financial aid?
Everyone is better off applying for financial aid. Even if you don’t end up qualifying for any scholarships or federal or school grants, you still may qualify for federal loan programs such as the Stafford loan which offer attractive interest rates and repayment terms. In order to get any kind of financial aid, however, you must fill out a Free Application for Student Aid (FAFSA) form. This is the only way to qualify for federal student aid, such a subsidized Stafford loan, SEOG (Supplemental Educational Opportunity Grant) or Pell Grant. Even if you don’t qualify for any grants, filling out a FAFSA will qualify you for unsubsidized Stafford loans and PLUS loans.

How do I apply for financial aid?
To apply for financial aid, you must fill out an application called the Free Application for Federal Student Aid, or FAFSA. If you are applying to a number of colleges, list those schools on your FAFSA form and it will be sent to the schools to which you’re applying. Many schools also have their own separate application forms that you must fill out – contact the school financial aid office at each school or check the school website to get all of the information you’ll need.

The information on your completed FAFSA will help your financial aid office determine your eligibility for both federal and school-specific aid programs. You must fill out a new FAFSA each year to receive financial aid. You can get a FAFSA form from your school’s financial aid office, online at, from your high school counselor, or even from a local community college.

You can also get a free copy of The Student Guide: Financial Aid from the US Department of Education:

800.FEDAID or 800.730.8913

Or write:
Federal Student Aid Info Center
P.O. Box 84
Washington D.C., 20044

How is my federal financial need determined? How much aid can I receive?
Your federal financial aid award is determined by reviewing the information reported on your Free Application for Federal Student Aid, or FAFSA. This form provides all the financial information that your school’s financial aid office needs to determine your financial need, including your eligibility for aid programs like the Pell Grant, Perkins and Subsidized Stafford loans, federal work-study aid, etc. The information on your FAFSA will also help your school determine how much institutional aid you qualify for.

Do I need to be admitted before I can apply for financial aid at a particular university?
Generally no. Once you fill out a FAFSA, your application information can be sent to multiple schools. Some schools will also request supplementary financial information, though you should verify this with your school’s admissions office.

Can I get financial aid if I’m a part-time student?
Yes – for the most part. You must be enrolled at least half-time to qualify for federal financial aid. However, some grants and scholarships require full-time enrollment. If you’re not enrolled at least half-time, you may qualify for some private or alternative student loans, or some scholarships, but you will not qualify for federal aid.

Do I need to advise my financial aid administrator that I have applied online for a federal student loan?
Your financial aid administrator will be working with you to help you apply for student loans, so they will be aware of all of your federal loan applications. You should not try to apply for any supplemental student loans without discussing it with your aid administrator first.

Are work-study earnings taxable?

What is a Free Application for Federal Student Aid form (FAFSA)?
The Free Application for Federal Student Aid on the Web (FAFSA) is just what it sounds like – an application for federal financial aid. In order to qualify for certain student loans, such as the Stafford and PLUS loans, you must fill out a FAFSA. You will need to have up-to-date financial information for you and your family in order to complete the FAFSA. Your school’s financial aid office uses this information, along with a formula determined by the federal government, to figure out how much money your family can be expected to contribute towards your education. Various student loan programs, grants, work-study aid and school-specific aid fill the gap between what you can pay and what your school costs.

Do I have to reapply for financial aid (FAFSA) every year?
Yes. Your family’s financial situation may change from year to year, so you are required to re-apply and submit the FAFSA every year if you’d still like to continue getting financial aid.

Where can I get a FAFSA form?
You can get a FAFSA form from one of several places:

  • Your financial aid office; local community college or high school guidance office
  • Directly from the Department of Education – 800-4-FED-AID (800-433-3243);
  • Or online at

Can I submit my financial aid application before January 1?
The FAFSA application is available starting January 1st every year. Several questions on the FAFSA form deal with your family’s financial situation for the previous year – requiring borrowers to wait until after January 1st to apply ensures that borrowers have access to complete financial information for the year in question. If you submit your FAFSA before you’ve filed your taxes – as many families do – you’ll be asked whether your answers to income-related questions are estimated. If they are, they will be verified once you do file your taxes. Remember, you will need to reapply for FAFSA every year if you would like to continue to receive financial aid.

What information do I need before I start my application for Federal Application for Free Financial Aid (FAFSA)?
You – and your parents, if you are a dependent student – need the following records to answer questions on the FAFSA:

  • Your Social Security card
  • Your driver’s license
  • Your Alien Registration Receipt Card (if applicable)
  • Your W-2 Forms and other records of money earned
  • Your latest income tax return (see the FAFSA instructions if you have not yet completed your latest tax return)
  • Records of untaxed income including Social Security, Temporary Assistance to Needy Families, welfare, and veterans benefits
  • Records of child support paid
  • Records of taxable earnings from Federal Work-Study or other need-based work programs
  • Records of student grant, scholarship, and fellowship aid, – including AmeriCorps awards – that were included in your (or your parents’) AGI (Adjusted Gross Income)
  • Stock, bond, and other investment records
  • Business and farm records
  • Current bank statements

If you are a dependent student, you will need all the records listed above from your parents except for their driver’s licenses.

What’s the difference between an independent and dependent student?
A student is considered independent if he or she meets one or more of the following criteria:

  • At least 24 by December 31 of award year
  • Orphan or ward of the court until he or she reached 18
  • Veteran of the US Armed Forces or serving active duty in the US Armed Forces or National Guard.
  • Student is a graduate or professional student (regardless of whether student is claimed as an income tax exemption by his or her parents)
  • Student is married
  • Student has legal dependents other than a spouse
  • Other special circumstances documented by financial aid administrator (very rare)

Can I go online to check the status of my FAFSA after I submit it?
You can check the status of your FAFSA and print a copy of your Student Aid Report at

What does Expected Family Contribution or EFC mean?
When the Department of Education calculates the amount of financial aid for which you qualify, they also figure out how much your family can be expected to pay for your education for that year. The Expected Family Contribution is the amount you and your family are “expected” to contribute from your and your family’s yearly earnings, under the assumption that they will remain consistent with last year’s total. So, for instance, if your school costs $40,000 this year, and your family can be expected to contribute $8,000, then you should qualify for $32,000 in loans, grants or other aid.

Cost of attendance $40,000
Expected Family Contribution -$8,000
Total Financial Aid Need =$32,000

What qualifies as “costs of attendance” for the purposes of financial aid?
Costs include tuition, fees, room, board, books, equipment, and other necessary expenses, such as transportation or professional certification.

What can I do if my family cannot pay the Expected Family Contribution (EFC)?
If your family cannot pay the EFC, you should work with your financial aid officer to explore other options. You may, for instance, be able to increase the number of federal work-study hours you work. Your parents might consider taking out a PLUS loan to help cover the cost of the EFC. If you are not borrowing the maximum amount in unsubsidized Stafford loans, you could consider increasing that loan amount. You could also apply for a private loan.

My credit rating is not good. Will this hurt my chances or my child’s chances of getting a student loan?
The eligibility for most federal student loans does not require a credit check. However, it may affect your ability or your graduate student’s ability to qualify for the Federal PLUS Loan for parents of Undergraduate Students and Graduate/Professional Students. In addition, most private loans require a satisfactory credit history and/or a credit-worthy adult as a co-borrower.

What is a promissory note?
A promissory note is a required piece of the loan application. It is a legally binding contract that you must sign when taking out a student loan. The promissory note essentially says that you understand the terms of the loan that you are taking out, and that you promise to repay the loan in full according to the loan repayment terms set forth by the lender.

What is a Master Promissory Note (MPN)?
The MPN is the common application for a Stafford loan for students. It is a contract between you and your lender. A signed MPN is required before a Stafford loan can be processed and can be used for multiple years.

As of July 1, 2000, all borrowers of Federal Stafford Loans must use the new Master Promissory Note (MPN), which replaces the previous Federal Stafford Loan Application Promissory Note (common application). The MPN is different from the old promissory note in several ways.

Multi-year Feature
The MPN has a multi-year feature that allows students to complete the note just once, and then take out new student loans each year during enrollment without completing additional paperwork. The Free Application for Federal Student Aid (FAFSA) serves as your loan application each year. The loan process begins when you answer “yes” to the FAFSA question of whether you are interested in student loans. With the multi-year feature, a freshman student can complete an MPN at a four-year college and receive a Stafford Loan each year without signing a new Promissory note. That student can go on to graduate school and continue to borrow with the same lender using the MPN she signed as a freshman. Some schools may not be authorized to use the multi-year feature of the MPN. For those schools, you would have to complete a new MPN for each loan. You also have to complete a new MPN if you change lenders.

Commitment to Repay
The MPN is a legally binding document that sets the terms of your loans. When you sign the MPN, you are promising to repay your student loans regardless of whether you graduate, drop out of school, are unsatisfied with your education, or can’t find a job.


  • If you do not take out a loan and no disbursements are made, the MPN will expire 12 months after you signed the note. If you do take out a loan and receive disbursements, the MPN expires ten years from the date it was signed.
  • You may revoke your MPN at any time by sending a written notice to the lender. You will still have to repay any loans disbursed on the MPN before it was revoked

Note: even if you sign a Master Promissory Note you must nevertheless re-apply for financial aid each year. The Master Promissory Note reduces paperwork for you and your school, but you still must fill out a new FAFSA each year.

What if I transfer schools? Will my student loans be transferred automatically?
Financial aid is not transferable. Although you may often qualify for the same types of aid once you transfer, you may not be eligible for the same amounts. You must apply at each college you attend since each campus receives an allocation of financial aid funds for their own institution to award. Because of these individual allocations and varying costs of education, your financial aid awards may vary from school to school. In order to figure out what you will be eligible for in student aid or to receive financial aid at your new school, contact FAFSA at 800.4.FED.AID (800.433.3243) and tell them which school you will now be attending. FAFSA will recalculate your need according the to cost of attendance at the new school. Within a few days a new award letter will be sent out.

Who is eligible for the student loan interest rate deduction?
Taxpayers who have taken out loans to pay the cost of attending an eligible educational institution for themselves, their spouse, or their dependents generally may deduct some of the interest they pay on their student loans (subject to certain income restrictions). Talk to your tax advisor or visit the IRS website for details.

How do I know how much interest I can deduct?
The loan must have been used to pay the costs of attendance at an eligible educational institution for a student enrolled in a program leading to a degree, certificate, or other recognized educational credential. The maximum deductible amount varies per tax year. In addition, there are income restrictions that may reduce the amount of interest you may deduct. Talk to your tax advisor or visit the IRS website for details.

In addition, there are income restrictions for the deduction. To claim the maximum deduction, a taxpayer must have modified adjusted gross income of $40,000 or less ($60,000 for married taxpayers filing jointly). The amount of the taxpayer’s deduction is gradually reduced for taxpayers with modified adjusted gross income between $40,000 and $55,000 (between $60,000 and $75,000 for married taxpayers filing jointly). Talk to your tax advisor or visit the IRS website for details.

What is a deferment?
A deferment allows you to temporarily postpone payments on your loan. All federal loans and many private loans are eligible for some form of deferment under certain conditions. Contact your educational finance provider to find out more about your particular situation.

What are the necessary conditions for deferment of Federal Student Loans?
A student loan borrower is eligible for federal deferment under the following conditions:

Deferment Condition Stafford Loan & Plus Loan Perkins Loan
Borrower is at least half-time study at a post-secondary school Yes Yes
Study in an approved graduate fellowship program or economic hardship training program Yes Yes
Unable to find full-time employment Up to 3 years Up to 3 years
Engaged in Loan Forgiveness Program No Yes

You may also qualify if:

  • You have dependents and are not able to meet their needs.
  • You have a temporary disability.
  • You are employed by the military or the police.

Note: If you are in default on any of your student loans, you cannot qualify for deferment.

Will I have to pay interest on my loans while in deferment?
If you have a federally subsidized loan, including Perkins loans & Stafford, you will not be charged interest during the deferment. For all other loans it is likely that interest will accrue during the deferment – although you are not required to make any payments. If you don’t pay the interest as it accrues, it will be capitalized and increase the amount you will have to repay, so if you can at least make interest payments while in deferment, it’s a good idea to do so.

How do I renew my deferment?
As the end of your deferment period approaches, contact your education finance provider (the organization that collects your loan payments) and request a new deferment application.

What is forbearance?
If you are temporarily unable to meet your repayment schedule but are not eligible for a deferment, you may contact your loan servicer to request forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, you will be charged interest while in forbearance. If you don’t pay the interest as it accrues, it will be capitalized. Each individual situation is different and forbearance is not granted automatically or to everyone who requests it.

What can I do if I encounter an economic hardship that interferes with my ability to repay my loan?
If you encounter economic hardship during your loan repayment period, you have several options. Contact your loan servicer – the organization that collects your loan payments – and ask about loan deferment and forbearance programs. You may apply for economic hardship deferment, which will allow you to cease making loan payments for a certain period of time, usually one year. If you do not qualify for loan deferment, you should consider forbearance, which may enable you to reduce or eliminate loan payments for a certain period of time as determined by your education finance provider.

When should I fill out the FAFSA form?
Fill out the FAFSA and any other student financial aid applications as soon as possible after January 1. Since a large amount of financial aid is awarded on a first-come basis, the earlier the better. But don’t submit your application before January 1 – it won’t be considered.

Where do I get the FAFSA form?
You can get a paper FAFSA — in English or Spanish — from your local library or high school, the college you plan to attend, or from the U.S. Department of Education by calling 800.4.FED.AID (800.433.3243).

Is there a FAFSA form I can fill out online?
Yes. Just go to Completing the form electronically helps you make fewer mistakes, simplifies the application, provides faster processing — and you might even save a tree!

I want to fill out my FAFSA, but I don’t know how much money I made this year. I haven’t filed my tax return yet, so what should I do?
Estimate your income as accurately as possible and complete the relevant section.

My parents are divorced. Whose information do I include on my FAFSA form?
If you’re a dependent student, you’ll need to complete the FAFSA using information about the parent you lived with most of the time during the year prior to completing the application. If you didn’t live with either parent, or if you lived with each parent an equal number of days, use information from the parent who provided the greater financial support during the 12 months’ prior to filling out the FAFSA. Your step-parent’s financial information is also required on the FAFSA.

I finished the FAFSA. Now what? Should I give it to my Financial Aid Administrator?
No. Send your completed FAFSA form to the address indicated on the application.

What is the Student Aid Report (SAR) and Expected Family Contribution (EFC)?
The Department of Education will send you a report, called a Student Aid Report, or SAR, through the mail or the Internet. The SAR lists the information you reported on your FAFSA, and will tell you your Expected Family Contribution (EFC). They will also provide you with access information to your electronic Student Aid Report (SAR).

It is important to review your SAR when you receive it. Make sure all of your information is correct. Make any necessary changes or provide additional information.

How much aid do I get?
Your EFC, along with the rest of your FAFSA information, is made available to all the schools you list in Step Six of the FAFSA. The schools use your EFC to prepare a financial aid package to help you meet your financial need. Financial need is the difference between your EFC and your school’s cost of attendance (which can include living expenses), as determined by the school.

If you or your family have special circumstances that should be taken into account, contact your school’s financial aid office. Some examples of special circumstances are: unusual medical or dental expenses, or a large change in income from last year to this year.

What is the difference between loans and grants?
The simple answer is that you don’t have to repay grants, and you do have to repay loans.

How will the proposed budget cuts affect Cal Grants for students?
The CalGrant program will remain an entitlement for students who qualify. Through this program, students receive thousands of dollars toward tuition and fees at nearly every California college – public and private – including vocational schools and community colleges.

  • Especially for lower income students, the CalGrant program will remain virtually unchanged.

  • The money does not have to be paid back. But to receive a CalGrant award, qualified students must submit their applications by March of each year. That’s why it’s crucial for students and their parents to file the FAFSA as soon as possible after January 1st.

  • Students who have completed the FAFSA will be able to apply for federal financial aid including Pell Grants, student loans, and work study grants. So even if they think they will not qualify for a CalGrant, it’s important for students to file the FAFSA.

  • For financially needy students attending community colleges, fees will be waived, even if the fees are increased.

Do I have to fill out the FAFSA every single year?
After you’ve applied for the first time, you might be able to apply more quickly and easily next time with the Renewal FAFSA. This form lets you fill out only the info that’s changed from the previous award year. You can also complete the Renewal FAFSA online.

I sent in my FAFSA already, but I haven’t heard anything yet. Is there any other way to figure out what my family is going to have to pay?
You can estimate your Expected Family Contribution with our easy-to-use calculator.

This entire thing is making me crazy with anxiety. I still need help!
Relax. The Department of Education website is a great resource for help. Check out its Before Completing the FAFSA section, or FAQs for more answers to frequently asked questions. You can also call the Federal Student Aid Information Center at 800.4.FED.AID (800.433.3243).

How much tax credit can I claim for the Hope Scholarship?

Taxpayers may be eligible to claim a nonrefundable Hope Scholarship Credit against their federal income taxes. The Hope Scholarship Credit may be claimed for the qualified tuition and related expenses of eachstudent in the taxpayer’s family (i.e., the taxpayer, the taxpayer’s spouse, or an eligible dependent) who is enrolled at least half-time in one of the first two years of postsecondary education and who is enrolled in a program leading to a degree, certificate, or other recognized educational credential. The amount that may be claimed as a credit is generally equal to: (1) 100 percent of the first $1,000 of the taxpayer’s out-of-pocket expenses for each student’s qualified tuition and related expenses, plus (2) 50 percent of the next $1,000 of the taxpayer’s out-of-pocket expenses for each student’s qualified tuition and related expenses. Thus, the maximum credit a taxpayer may claim for a taxable year is $1,500 multiplied by the number of students in the family who meet the enrollment criteria described above.

The amount a taxpayer may claim as a Hope Scholarship Credit is gradually reduced for taxpayers who have modified adjusted gross income between $40,000 ($80,000 for married taxpayers filing jointly) and $50,000 ($100,000 for married taxpayers filing jointly). Taxpayers with modified adjusted gross income over $50,000 ($100,000 for married taxpayers filing jointly) may not claim the Hope Scholarship Credit. Both the dollar limitation on the expenses for which the credit may be claimed and the modified adjusted gross income limitation will be indexed for inflation in 2002 and years thereafter. The Hope Scholarship Credit may be claimed for payments of qualified tuition and related expenses made on or after January 1, 1998, for academic periods beginning on or after January 1, 1998. Therefore, the first time taxpayers will be able to claim the credit is when they file their 1998 tax returns in 1999.

When can you first make a withdrawal from an IRA to pay for higher education expenses?

On or after January 1, 1998, an individual can make withdrawals from his/her IRA to pay for qualified higher education expenses for academic periods beginning on or after January 1, 1998, without paying the 10 percent early withdrawal tax. The 10 percent early withdrawal tax does not apply to a distribution from an IRA to the extent that the amount of the distribution does not exceed the qualified higher education expenses for the taxpayer, the taxpayer’s spouse, and the child or grandchild of the taxpayer or the taxpayer’s spouse at an eligible educational institution. For purposes of this rule, the term “qualified higher education expenses” means tuition, fees, books, supplies and equipment required for the enrollment or attendance of the student at an eligible educational institution. Qualified higher education expenses also include room and board if the student is enrolled at least half-time. Qualified higher education expenses paid with an individual’s earnings, a loan, a gift, an inheritance given to the student or the individual claiming the credit, or personal savings (including savings from a qualified state tuition program) are included in determining the amount of the IRA withdrawal which is not subject to the 10 percent early withdrawal tax. Qualified higher education expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are excluded.

How much can I deposit in a Coverdale ESA?

Taxpayers may deposit up to $500 per year into an Education IRA for a child under age 18. Parents, grandparents, other family members, friends, and a child him/herself may contribute to the child’s Education IRA, provided that the total contributions for the child during the taxable year do not exceed the $500 limit. Amounts deposited in the account grow tax-free until distributed, and the child will not owe tax on any withdrawal from the account if the child’s qualified higher education expenses at an eligible educational institution for the year equal or exceed the amount of the withdrawal. If the child does not need the money for postsecondary education, the account balance can be rolled over to the Education IRA of certain family members who can use it for their higher education. Amounts withdrawn from an Education IRA that exceed the child’s qualified higher education expenses in a taxable year are generally subject to income tax and to an additional tax of 10 percent. The Hope Scholarship Credit and Lifetime Learning Credit may not be claimed for a student’s expenses in a taxable year in which the student takes a tax-free withdrawal from an Education IRA.