1. FAFSA
What it is: This acronym stands for the Free Application for Federal Student Aid, which is managed by the Department of Education and is used to determine your eligibility for federal, state, and institutional financial aid.
Why it matters: Any student, regardless of income, should consider filling out the FAFSA in order to be considered for federal, state, and school financial aid programs, such as work-study.
Tip: If you’re a California resident, your FAFSA submission can be used to apply for Cal Grants, which are California-specific financial aid allocations that do not need to be paid back.
2. Student Aid Index (SAI)
What it is: A number calculated based on the FAFSA or other financial aid applications that estimates your financial need (it replaces the previous Expected Family Contribution, or EFC).
Why it matters: The SAI helps colleges determine your eligibility for financial aid by assessing your ability to pay for your education. Understanding this metric is key to planning your financial aid strategy.
Tip: Your SAI is not a dollar amount of aid you’ll receive, what your family is expected to provide, or your final financial aid offer.
3. Cost of Attendance (COA)
What it is: The total estimated cost of attending a school for one year, including tuition, fees, room, board, books, supplies, and personal expenses.
Why it matters: COA is used to calculate your financial need and guide budgeting decisions.
4. Indirect Costs vs. Direct Costs
What they are: Direct costs are expenses paid directly to a college, such as tuition, fees, and on-campus housing. Indirect costs are other expenses related to your education. These may include books, art supplies, materials, transportation, and off-campus housing.
Why they matter: Understanding the difference between these costs can help you budget effectively and plan for expenses beyond your tuition. Financial aid typically covers both types of costs, but knowing what to expect can reduce financial stress.
Tip: Commuting from home can save a lot of money over the course of your degree. If you go this route, you should exclude any costs related to campus housing and food plans from your direct costs.
5. Grants vs. Loans
What they are: Grants are funds you don’t have to repay and are typically need-based, such as Federal Pell Grants or Cal Grants. Loans are borrowed money that you must pay back, usually with interest.
Why they matter: Knowing the difference will help you prioritize funding sources and manage post-college debt.
Tip: Shop around for different private loan options using tools like Sparrow.
6. Subsidized Loans vs. Unsubsidized Loans
What are they: Subsidized loans are need-based federal loans in which the government pays the interest while you’re in school at least half-time, as well as during your grace period and during any deferments. Unsubsidized loans are not need-based, and you are responsible for the interest from the time the loan is disbursed, even while in school.
Why they matter: Choosing between these loans can significantly impact your total repayment amount after graduation. Subsidized loans save you money on interest, while unsubsidized loans offer more borrowing flexibility regardless of financial need.
Tip: Subsidized loans should be considered before unsubsidized loans.
7. Work Study
What it is: A federally-funded program that provides part-time jobs for students with financial need on campus and at select community partners.
Why it matters: Work study can help offset education costs while gaining work experience.
Tip: On-campus work study jobs are flexible with your school schedule.
Understanding these key financial aid terms is a crucial step in taking control of your education funding. With this knowledge you can better advocate for yourself, make informed decisions, and focus on achieving your academic and creative goals.
Get started by completing your FAFSA today. Otis College’s financial aid counselors at the One Stop are able to assist if you have any questions. Connect with them at onestop@Otis.edu or by calling 310-665-6999.
