Harris: Need-to-know financial aid facts in February

By Charlestien Harris

February is Financial Aid Awareness Month. With all that is going on right now, this is a great time to highlight the importance of understanding and accessing financial aid resources. This is the perfect opportunity to explore the various scholarships, grants, and loan options available to help make your education more affordable. It’s also a good time to look into what has changed about the payment process when it comes to paying back and knowing your current status of those student loans. 

Below is what I have found in my search for answers to the many questions you may have as a student loan borrower. Here are a few facts you should be aware of:

• The Federal Student Aid website can be found at studentaid.gov, and you can also find out who your loan servicer is at studentaid.gov/manage-loans/repayment/servicers. These are very important sites to familiarize yourself with if you are going to stay current on critical information regarding your student loans. It is also a great site to visit to gain additional information about FAFSA, which stands for Free Application for Federal Student Aid. It’s a form that students can use to apply for financial aid from the federal government. From time to time, there are free workshops to assist you with completing the application.
• There are four main types of financial aid: grants, loans, scholarships, and work-study programs. Knowing the difference can help you decide which one works best for your educational needs. Each type has different eligibility requirements, and some have repayment terms:

• Grants
  • Generally don’t need to be repaid
  • Sometimes called gift aid
  • The Federal Pell Grant is a type of grant awarded to students who demonstrate financial need
• Loans
  • Borrowed money that must be repaid with interest
  • Federal Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans are available
• Scholarships
  • Don’t need to be paid back
  • Can be based on financial need, merit, or other factors
• Work-study
  • A federal program that allows students to earn money to help pay for school
  • Considered earned money, so it doesn’t need to be repaid

Students can apply for federal student aid, including grants, work-study, and loans, by completing the Free Application for Federal Student Aid (FAFSA). Other sources of financial aid include state and local governments, social organizations, professional associations and organizations, educational institutions, and private sources. You can potentially lower your education financial price tag significantly by applying early for those scholarships, grants, or work-study slots.

• Learn more about the different repayment plans. There are several repayment plans available, so try to learn the details about each and which one might be the best for your financial situation. You can pick from repayment plans that base your monthly payment on your income or that give you a fixed monthly payment over a set repayment period. If you don’t pick a repayment plan, your loan servicer will place you on the Standard Repayment Plan (a 10-year fixed payment repayment plan). This plan might result in a higher monthly payment for you. You can visit the Federal Student Aid website mentioned in this article to get more detailed information about the repayment plans that are available. Note: A federal court has issued an injunction preventing the U.S. Department of Education from implementing parts of the Saving on a Valuable Education (SAVE) Plan and other IDR plans, including—for example—SAVE’s monthly payment formula and loan forgiveness under the SAVE, PAYE, and ICR Plans. The website StudentAid.gov/save will continue to update information and any additional actions taken by the current administration.
• Garnishments could become more frequent. Borrowers could see tax refunds, wages, and Social Security checks garnished. When borrowers default on their federal student loans, they could face harsh consequences, including the risk that their tax refunds, wages, and Social Security checks will be garnished to repay the debt. That collection activity has been paused for more than four years as part of pandemic-era programs aimed at getting struggling student-loan borrowers on track, but it’s likely that collection on defaulted loans will ramp up sometime during 2025 if the current administration moves forward with their sweeping changes. Make sure you stay current with your payments and keep up with your account activity to document your payment history. Check your account regularly for accuracy.

This article only addresses a snippet of the vast amount of information that is available on the Federal Student Aid official website. I hope I have piqued your curiosity about financial aid. Be sure to visit the site frequently to stay on top of the latest updates and changes that are taking place right now. 

For more information on this and other financial topics, you can contact me by emailing me at Charlestien.Harris@banksouthern.com or call me at 662-624-5776.

Until next week – stay financially fit! 

Charlestien Harris is our financial contributor, a financial expert with Southern Bancorp Community Partners whose articles are seen in a number of publications around the region.