Financial Aid 101

Financial aid terms you need to know

As you begin learning about financial aid, you’ll probably encounter some words and terms you’ve never heard before. Don’t worry—we’re here to help.

Cost of attendance

All the direct and indirect costs of your education, including tuition and fees, room and board, books and supplies, personal expenses, and transportation.

Dependent

You are considered a dependent if you are under 24 years old and you are not any of the following:

• A graduate or professional student
• A veteran or member of the armed forces
• An orphan or ward of the court
• Homeless or at risk for becoming homeless
• An emancipated minor

Expected Family Contribution

The Expected Family Contribution (EFC) in index number that colleges use to determine how much financial aid you’re eligible to receive. Your financial need is calculated by subtracting your EFC from your estimated cost of attendance. Your EFC is calculated based on your family’s taxed and untaxed income, assets, and benefits, as well as family size and the number of family members attending college during the year. It is not the amount of money your family will have to pay for college.

FAFSA

The Free Application for Federal Student Aid (FAFSA) is a form you need to complete before each year of college to determine your eligibility for federal loans, work-study, and grants, as well as some scholarships.

Federal student aid

Aid from the government in the form of grants, loans, and/or work-study. You’ll find out about federal student aid eligibility on your IU financial aid statement or notification letter.

Federal work-study

Part-time jobs for undergraduate and graduate students with financial need. Work-study programs encourage community service work or work related to your chosen area of study.

Grant

A monetary gift for people pursuing higher education. Grants do not have to be repaid (unless you withdraw from school).

Loan

Student loans include federal loans (awarded by the federal government) and private loans (awarded by an external lender, such a bank, credit union, state agency, or school).

Federal loans are based on the FAFSA and are the most common type of federal aid available to students who demonstrate financial need. Government loans can be “subsidized” (where the interest is paid for you until six months after you graduate) or “unsubsidized” (where the interest begins accruing right away).

Private loans require separate applications, carry varying terms and conditions set by the lender, and are often more expensive than federal loans.

Pell Grant

The Pell Grant is the most common grant given by the federal government. The current maximum Pell Grant award is $5,775, for students who are attending school full-time and demonstrate financial need.

Merit-based scholarship

Money awarded to help pay for your education based on good grades, high test scores, athletic performance, or aptitude in a certain area (does not have to be repaid).

Need-based scholarship

Money awarded to help pay for your education based on financial need (does not have to be repaid).

State aid

Financial assistance for eligible in-state residents to help reduce educational costs.