The college admissions and college funding processes can be confusing and frustrating. This is made worse by the fact that colleges and universities often speak their own languages and expect those of us trying to fight through the four or five years it takes to get our children through school to know their language up front. So, to help you become a native speaker, we’ve created a quick guide to some of the most common terms that you’ll run across in the college funding process.
Upromise – Save money for college.
529 plan – a savings program sponsored by either a state or educational institution, typically managed by a bank or financial service provider, which allows the family to save money towards eligible education expenses and receive certain tax benefits. 529 plan rules vary by state and by institution so it is important to talk to a financial professional in your area about these plans and the benefits and drawbacks for your specific circumstances.
Accreditation – accreditation is a measure of the quality of a college or university or one of its programs. Institutions are accredited by one of the six regional accrediting agencies:
The Middle States Association of Colleges and Schools – http://www.msche.org
New England Association of Schools and Colleges – http://www.neasc.org
North Central Association of Colleges and Schools/Higher Learning Commission – http://www.ncahigherlearningcommission.org
Northwest Commission on Colleges and Universities – http://www.nwccu.org
Southern Association of Colleges and Schools – http://www.sacs.org
Western Association of Colleges and Schools – www.wascweb.org).
Institutions may also have programs that are accredited by various professional organizations such as the American Bar Association which certifies legal education programs or the American Medical Association which certifies medical programs. While accreditation is not a guarantee of a quality education, an institution without accreditation is almost certainly a guarantee of a lack of quality. In addition, many scholarships, grants, and loan programs require that the student attend a regionally accredited institution (i.e. – an institution that holds accreditation with one of the agencies listed above).
Advanced Placement Credit – Advanced Placement or AP credit, is credit earned, by taking and earning a specific score on a subject matter exam. AP courses are offered by many high schools or by distance education for students who are home schooled or students whose schools do not offer advanced placement courses. In order to earn AP credit the student must meet the passing score on the AP Exam and the institution where the student is going to school must accept that AP exam for credit in one or more of their courses. Be sure to check before taking an AP course that the institutions the student is considering accept AP credit for that exam for a course the student will need to take.
Coverdell Education Savings Account – the Coverdell ESA, which was formerly called an Education IRA, is a special savings account that allows families to contribute up to a maximum amount per year per child (at the time of this writing that was $2000 per year per child). There are certain tax benefits to placing money in a Coverdell ESA, and if the money is not used for college, the funds turn into a traditional IRA for the child after he/she reaches a certain age. Coverdell ESAs may be contributed to by various family members, but each child may have no more than the maximum allowable amount contributed per year (so mom and dad can’t each contribute $2000 per child – the child can only have $2000 per year contributed into their account). It’s important to talk with a financial planner or adviser about the benefits and drawbacks of this type of savings plan.
Dual Credit – dual credit is credit awarded by a college or university for work completed in a high school course. The student also earns credit in the high school towards his/her graduation requirement. Dual credit programs vary greatly from state to state and from school to school, but in many cases dual credit is available at little or no cost to the student.
Expected Family Contribution – the EFC, is the amount the federal government (more specifically the United States Department of Education) estimates a family can commit to a child’s education based on the information the student and the family submit on the FAFSA. The EFC is used to determine federal aid eligibility as well as many state and institutional aid programs.
Free Application for Federal Student Aid – the FAFSA, is the most important document for students and parents to fill out to determine eligibility for federal financial aid. Most states and many institutions also use the data collected on the FAFSA as a means of determining eligibility for financial need based awards. While the FAFSA is still available as a paper document from some colleges and universities, many institutions now require that you complete the FAFSA online at http://www.fafsa.ed.gov. Students and their parents will also use this same web site to submit a renewal FAFSA each year they plan to attend college. The FAFSA has specific due dates, which should be obtained from http://www.fafsa.ed.gov. The institution may have FAFSA due dates that are earlier than the federal governments, so be sure to check the college or university’s FAFSA deadline to be sure your application receives priority status.
Grant – a financial award that typically does not have to be paid back and is most often awarded based on data provided by the student and the student’s parents or guardians on the FAFSA. Grants are often awarded as a part of the financial aid package from either the state or the federal government and are typically awarded to those students with the greatest financial need.
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Hope Scholarship Tax Credit – the name of this one is confusing as this is not a scholarship, but a federal tax credit that is subtracted from the amount of tax a family owes (unlike a tax deduction which is subtracted from the family’s taxable income). This tax credit is available for up to two years the student is in college. Speak to your financial advisor or tax professional for more information on whether this tax credit will be available to you.
Lifetime Learning Tax Credit – a tax credit (like the hope tax credit this is subtracted from the tax owed, not taken as a deduction from income) awarded to eligible individuals who file tax returns. Unlike the Hope Scholarship Tax Credit, the Lifetime Learning Tax Credit is available every year for those who meet financial eligibility requirements (a certain adjusted gross income on the federal taxes). Speak to your financial advisor or tax professional for more information on whether this tax credit will be available to you.
Renewable Awards – a term that most often is applied to a scholarship, is an award that the student may receive multiple times, usually if they continue to meet eligibility requirements. Renewable awards may be renewable only one time or may be renewable multiple times. A non-renewable award is simply a scholarship or other award that is given only one time.
Student Aid Report – the SAR, is a document the student receives after completing the FAFSA. The SAR restates the information on the FAFSA and provides the student and his/her parents with information on eligibility for certain aid programs as well as the expected family contribution (EFC). It’s important that this is reviewed for accuracy and if there are changes that need to be made that you update the FAFSA.
Scholarship – a financial award that does not have to be repaid. Scholarships may be awarded based on academic or athletic talent as well as on financial need. Scholarships may also be awarded based on a specific achievement (winning a science award or earning a position in the top 10% of a graduating class) or because a student or their parent/guardian is a part of a population which is eligible for the award (such as because the parent is a member of the local Lion’s Club or the student is a female and is entering a male dominated field).
Transfer Credit – credit earned at one institution that will count either for a specific course or as an unassigned general credit towards the graduation requirement. Whether or not a transfer credit will be accepted is determined, in most cases, by the institution accepting the credit and institutions are often very choosy about whether or not they will accept transfer credit so it’s important to do your homework early (before you take that math class at another institution) to ensure that your institution will accept it and will accept it for the class you want and not just as unassigned general credit hours towards graduation.
Tuition Discounting – a (somewhat) controversial practice of offering different tuition prices to different students. Tuition discounting is most common in private schools, but does occur in many public colleges and universities as well. While the practice may be controversial, it never hurts to ask the financial aid representative if the institution offers different tuition rates to students who don’t qualify for other aid programs or for students who have significant financial need.
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