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Originally published October 26, 2007 at 12:00 AM | Page modified November 1, 2007 at 3:17 PM

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The new landscape of financial aid

It's been a year of major change in the world of financial aid. We've had a national scandal involving financial-aid directors at several...

Special to The Seattle Times

Major sources of financial aid

Find more details from Web sites listed in the accompanying story.

Work-Study

Federal and state governments provide money to colleges to pay students to work during the academic year (part-time) and in the summer (full-time).

Federal Pell Grants

For low-income students. Maximum award for 2007-08: $4,310.

Stafford Student Loans

Low-interest student loans, in two forms: subsidized, need-based (government pays interest until six months after you graduate), and unsubsidized, non-need-based (you pay the interest). First-year undergrads eligible for up to $3,500; second year, $4,500; third, fourth and fifth year, $5,500. Students pay 2.5 percent in fees. Interest rate for 2007-08 is 6.8 percent; some lenders discount the rate or offer other incentives.

Institutional Grants and Scholarships

The largest source of scholarships is colleges themselves.

Federal Perkins Loans

Low-interest loans — currently at 5 percent — for students with the most need. Maximum amount: $4,000 per year for undergraduates. Repayment begins nine months after graduation.

Supplemental Educational Opportunity Grants

Federal grants of $100 to $4,000 per year for low-income students. Disbursed by the schools, the money goes fast, so it pays to apply early via Free Application for Federal Student Aid, or FAFSA.

Washington State Need Grants

State and federal aid to low-income students. Maximum amounts for 2007-08 full-time students vary by type of school, from $2,500 for community and technical colleges to $5,798 for private four-year colleges.

Federal PLUS Loans

Unsubsidized loans made to creditworthy parents. Lets you borrow up to the cost of college, minus what you receive in financial aid. Rates are now fixed at 7.9 percent for Direct PLUS Loans and 8.5 percent for FFEL (Federal Family Education Loan) PLUS Loans — schools may offer one or both. Repayment begins 60 days after you receive the loan; fees are 4 percent. Some lenders discount the rate or offer other incentives.

Merit Scholarships

Based not on need but on a student's academic or personal talents. Sometimes referred to as "discounts," the scholarships often are used to entice students to attend.

Western Undergraduate Exchange

Washington residents may be eligible for a tuition discount at some out-of-state schools in the West: 150 percent of the school's in-state tuition. Qualifications differ among schools, but many consider test scores and high-school GPA. www.wiche.edu/sep

It's been a year of major change in the world of financial aid. We've had a national scandal involving financial-aid directors at several prominent colleges, whose recommended lenders showered them with gifts. New student-aid bills passed in Washington, D.C., and in Washington state. Then there's the recent federal half-point interest-rate cut.

What does it all mean for students trying to pay for their college education? While there are some new twists in the financial-aid picture, the best course of action remains the same, says Janet Cantelon, director of student financial services at Seattle University.

Students should obtain every federal and state-backed grant and loan they can before contemplating private loans. Even with the federal half-point interest-rate cut made in September, private loans will likely still offer substantially higher interest rates and less-flexible terms than federal or state loans.

Notes on a scandal

News that a few financial-aid directors' lists of favored lenders were tainted by potential conflict of interest may have left some students wary of taking their school's loan advice. But none of the accused directors were from Washington state colleges, notes John Klacik, director of student financial assistance for the state's Higher Education Coordinating Board.

"I have full confidence that the preferred lender lists put forth in our state were constructed, really, with the student's interest in mind," Klacik says.

Students should bear in mind these are merely suggestions, created to help them navigate the more than 200 lenders offering student loans. Students are always free to borrow from any lender.

In response to the scandal, some schools have ceased offering recommended-lender lists. At Seattle U., Cantelon says, the order in which lenders appear on the list's online version now rotates, to make clear that no lender is being ranked above the others.

She also suggests that before signing with any lender, it's worth comparing the loan with others, something easily done on several Web sites.

What the lists really signify, Cantelon says, is that these lenders do a lot of business with that particular school, so the lender is familiar with the needs of students at that school. School-aid officers frequently have established relationships with managers at the lender, which can be a boon if you run into trouble getting a loan and want school officials to help you.

Klacik recommends always checking with your desired school's financial-aid office in addition to the admissions office. Financial-aid officers can help with information on how to apply for all forms of financial aid a student might be qualified to receive.

"When you make that contact," he says, "a whole variety of offices and people will go to work for the student to get them through the rest of the process."

Federal breaks

The Democrats prioritized student-loan reform after rates soared last year. In September, President Bush signed their bill, which offers a range of new breaks for student borrowers. Among the goodies:

• Rate cuts to Stafford Student Loan program: From 6.8 percent this year, the interest rate goes down to 6 percent next July, and continues shrinking annually until it hits 3.4 percent in 2012.

• Federal Pell Grants: For low-income students, more grants will be available, and at higher amounts: They rise from $4,310 this year to $5,400 in 2012.

TEACH (Teacher Education Assistance for College and Higher Education) Grants: These provide $4,000 a year to eligible students who agree to teach full time at a high-need school in an in-demand field for four years. Starts in 2008-09.

Klacik says there could be additional student-loan breaks coming before the year is out, as Congress reconsiders ground rules for federal student-loan programs.

(More on these and other federal programs: www.federalstudentaid.ed.gov.)

New state aid

Washington state legislators have also been focused on student aid. Here are some of the programs they've added or expanded. (More info: www.hecb.wa.gov/Paying/index.asp.)

Opportunity Grants: $2,500 grants for those pursuing degrees in high-demand fields; now being made available at all the state's community and technical colleges.

State Need Grants: Family-income limit increases to an all-time high of $50,500 for a family of four.

College Bound: Scholarship program focused on 7th- and 8th-graders eligible for free or reduced-price lunches, who pledge to graduate high school with at least a C average. Offers early promise of financial aid to encourage college aspirations.

GET (Guaranteed Education Tuition) Ready for Math and Science: Conditional scholarships to high-achieving math and science students who agree to work in the field in Washington state for at least three years after graduation.

Passport to College for Foster Youth: For students who have been in foster care, this fills the gap between other scholarships and total college costs, and can provide health-care coverage and housing stipends. Begins in 2008. Info: www.independence.wa.gov

Gear Up Scholars Project: Promotes a college-bound culture in schools with high numbers of students from low-income families; expands now to more schools.

Copyright © 2007 The Seattle Times Company

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