Financial Aid Award Letters

Author: Jessica Bortolus

Registered for fall courses in e-Services? Check. Submitted your FAFSA for the 2018-19 school year using your 2016 tax information? Check. Reviewed and responded to your financial aid award letter? Check, but you are not completely sure what is what and their differences. This is an extremely common point of confusion; we are here to break it down for you. Overall, financial aid can be broken down into three buckets: free money, borrowed money, and earned money.

  • Free money

Free money, as the name implies, is money you do not have to pay back. They usually include grants and scholarships.

There are two primary types of grants: the Minnesota state grant and the Pell grant. By submitting your FAFSA application, you are automatically considered for these grants and are awarded based on income eligibility.

Scholarships are funds awarded by an organization to a student based on the organization’s specified eligibility and the student’s application. Scholarships range from local to international. Usually, the wider the geography and the higher the award amount, the more competitive a scholarship is. Scholarship eligibility be based on a student’s field of study, demographic information, association to an organization (e.g. Lion’s Club, Kiwanis, local unions, etc.), hobbies, leadership positions, volunteering experiences, and/or academic merit.

The Duluth Superior Area Community Foundation and the Lake Superior College Foundation are two primary organizations that students may be eligible to apply for. Applications are usually due in early spring to be considered for funding. Students can also explore scholarship options by researching opportunities online and in the local community.

  • Borrowed money

Borrowed money is money that must be paid back to lender, usually with interest. Interest is a percentage of the amount of money borrowed that is added to the total amount of money owed to the loan lender. High interest rates can make loans harder to pay off as they add a high amount of money to the total amount a student owes.

The first type of educational loans are direct loans. These loans are offered through Department of Education after a student completes their FAFSA. Theses loans are offered at a fixed interest rate from the federal government. Now, the time the loans starts accruing interest depends on the type of direct loan. With subsidized direct loans, the interest is paid by the federal government until after you are no longer registered for at least six college credits and/or out of school for longer than six months. On the other hand, unsubsidized direct loans begin collecting interest as soon as they are disbursed. Overall, the maximum lifetime amount students may take out in direct loans is $31,000 for dependent students and $57,000 for independent students.

The second type of loan is a Parent PLUS loan. This loan, like a direct loan, is also offered by the Department of Education after a student completes their FAFSA. A Parent PLUS loan is in the parent’s name, not the student’s. Therefore, the parent borrower is legally responsible for repaying the loan. Repayment generally begins after disbursement although the parent may request a deferment of payments until after their child is no longer registered for at least six college credits and/or out of school for longer than six months.

The final type of loan a student may take out is a private loan. Private loans should be an absolute last resort as interests are generally high and require payments almost immediately. Different financial institutions have different private loan packages and will be dependent on the student’s credit score or the credit score of the student’s co-signer (if the student’s credit score is too low).

  • Earned money

Earned money are funds that a student must work in a given position for. While off-campus positions are an option to earn money, income-eligible students may choose to accept federal work study in their award letter. It is important to note that just accepting federal work study does not guarantee a student a position on-campus or a certain number of hours of work. LSC students with federal work study can review posted student employment opportunities and apply following the direction on the LSC Student Employment page. Positions, hours, work schedules and pay will vary.


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