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Terri Adam
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Paying for College

The cost of college should not discourage you from going to college and
everyone should apply for financial aid.

Today, there is more financial aid available than ever before—more than $135 billion – and about 80% of Maine college students receive some kind of financial aid in the form of grants, scholarships, student employment, or loans. And, some Maine colleges actually turn loans into grants so their students are debt-free upon graduation.

Click here for a chart of state and federal financial aid resources.

Getting Started

Often the first step in seeking financial aid for higher education is filling out the Free Application for Federal Student Aid (FAFSA). First, get a PIN, then fill out the FAFSA online at or call 1-800-4-FED-AID to request that a paper FAFSA be mailed to you.

The U.S. Department of Education’s Federal Student Aid (FSA) programs are the largest source of student aid in America. These programs provide more than $80 billion a year in grants, loans and work-study assistance. Learn more about FSA and how to apply for this aid at The National Association of Student Financial Aid Administrators offers a range of resources to help students, parents and counselors navigate the college aid process. For information, visit their Web site.


FAFSA
To file a FAFSA, first get a PIN, then fill one out online or call 1-800-4-FED-AID to request a paper version be mailed to you.

“Sticker Price” vs. Affordability
In reality, most students don’t pay the full “sticker price” for college. Financial aid is intended to make up the difference between what your family can afford to pay and what college costs. The financial aid system is based on the goal of equal access - that anyone should be able to attend college, regardless of financial circumstances. Here’s how the system works: students and their families are expected to contribute to the cost of college to the extent that they’re able (Expected Family Contribution). If a family is unable to contribute the entire cost, financial aid is available to bridge the gap.

The EFC Works in Your Favor
The EFC, or the amount your family is able to contribute, is determined by whoever is awarding the aid - usually the federal government or individual colleges and universities. The federal government and financial aid offices use “need formulas” that analyze your family’s financial circumstances (things like income, assets and family size) and compare them proportionally with other families’ financial circumstances. Most families can’t just pay the EFC out of current income alone. But, not to worry - the formulas assume that families will meet their contribution through a combination of savings, current income and borrowing. Second, financial aid is limited. The formulas therefore measure a particular family’s ability to pay against other families’ ability to pay.

Don’t Rule Out Colleges with Higher Costs
Say your EFC is $5,000. At a college with a total cost of $8,000, you’d be eligible for up to $3,000 in financial aid. At a college with a total cost of $25,000, you’d be eligible for up to $20,000 in aid. In other words, your family would be asked to contribute the same amount at both colleges.

Grants, Scholarships, Work-Study, and Loans
Grants and Scholarships. Also called gift aid, grants don’t have to be repaid and you don’t need to work to earn them. Grant aid comes from federal and state governments and from individual colleges. Scholarships are usually awarded based on merit. Click on these links to find out if you are eligible for a Federal Pell Grant or Academic Competitiveness Grant. For more information on scholarships, or NASFAA.

Work-Study. Student employment and work-study aid helps students pay for education costs such as books, supplies and personal expenses. Work-study is a federal program that provides students with part-time employment to help meet their financial needs and give them work experience.

Loans. Most financial aid (54%) comes in the form of loans to students or parents, aid that must be repaid. Most loans that are awarded based on financial need are low-interest loans sponsored by the federal government. These loans are subsidized by the government so no interest accrues until you begin repayment after you graduate. Read on for more information about different types of loans:

Opportunity Maine Tax Credit Program

The Opportunity Maine Program provides a state income tax credit for student loan payments made by degree earners who live, work and pay taxes in Maine following graduation. Alternatively, the tax credit would be available to Maine businesses that make their employees' educational loan payments. Please see your college's financial aid office for more information about signing up.


Parent Loans
Federal PLUS Loans. The PLUS Loan program is the largest source of parent loans. Parents can borrow up to the full cost of attendance minus any aid received, and repayment starts 60 days after money is paid to college.

Private parent Loans. A number of lenders and other financial institutions offer private education loans for parents. These loans usually carry a higher interest rate than PLUS Loans.

College-Sponsored Loans. A small number of colleges offer their own parent loans, usually at a better rate than PLUS. Check each college’s aid materials to see if such loans are available.

Federal Student Loans
Perkins Loans. Perkins Loans are need-based loans and are awarded by the financial aid office to students with the highest need. The interest rate is very low – 5 percent – and you don’t make any loan payments while in school.

Subsidized Stafford or Direct Loans. Subsidized Stafford Loans are need-based loans with interest rates in the 4-6 percent range. The federal government pays the yearly interest while you’re in school. This is why they’re called “subsidized” loans.

Unsubsidized Stafford or Direct Loans. Unsubsidized Stafford Loans aren’t based on financial need and can be used to help pay the family share of costs. You’re responsible for paying interest on the loan while in school. You may choose to capitalize the interest. The advantage of doingthis is that no interest payments are required. The disadvantage is that the interest is added to the loan, meaning that you will repay more money to the lender.

Grad PLUS Loans. This is a student loan for graduate students sponsored by the federal government that is unrelated to need. Generally, students can borrow Grad PLUS loans up to the total cost of education, minus any aid received. The advantage of this loan is that it allows for greater borrowing capacity. However, we recommend that students consider lower-interest loans, such as the Subsidized Stafford or Unsubsidized loans prior to taking out a Grad PLUS loan.

Other Student Loan Options
Private Student Loans. A number of lenders and other financial institutions offer private education loans to students. These loans are not subsidized and usually carry a higher interest rate than the federal need-based loans. The College Board private loan program is an example of a private education loan for students.

College-Sponsored Loans. Some colleges have their own loan funds. Interest rates may be lower than federal student loans. Read the college’s financial aid information.

Other Loans. Besides setting up scholarships, some private organizations and foundations have loan programs as well. Borrowing terms may be quite favorable. You can use Scholarship Search to find these.