Glossary: Understand Financial Aid Definitions

The terminology used in college financial aid award letters can be confusing. Here’s a quick guide to some frequently used terms:

FAFSA: The Free Application for Federal Student Aid tells you, based on your family’s income and expenses, what you’re expected to pay out of pocket for your son or daughter’s first year of college.

EFC: Expected Family Contribution, or the amount you and your student are expected to pay out of pocket for his or her first year of college.

Grant: An amount awarded for financial aid, either from the federal government (federal grant) or from a college (institutional grant) to attend that college. A grant is “free money,” meaning you don’t have to pay it back.

Pell Grant: Need-based free money from the federal government.

Perkins Loan: An amount of money a college will allow you to borrow from the federal government at a lower interest rate than other federal loan types.

Stafford Loan: An amount of money a college will allow you to borrow from the federal government at an interest rate the government sets. These can be subsidized (no interest accrues—is added to the balance—while the student is in college) or unsubsidized (interest accrues while the student is in college).

Parent PLUS Loan: An amount of money a college will allow parents to borrow from the federal government, at an interest rate the government sets, for their son’s or daughter’s coming year of college.

Private loan: An amount of money parents or students can borrow from a financial institution—if they’re credit-worthy—for the student’s coming year of college. The financial institution sets the interest rate and credit unions are usually the best deal. Unlike federal loans, you have to make payments on private loans while the student is in college.

Work study: An amount of money a college will pay a student for working at a qualifying job at that college. The student must find and apply for his or her own job.

Institutional scholarship: Free money you don’t have to pay back that a college offers you to attend that school for the coming year. These scholarships can be merit-based (awarded because of your accomplishments in academics, a sport, music, or another area) or need-based (to supplement your EFC).

Private scholarship: A scholarship you apply for from an outside organization. Did you know that Hopewell Federal Credit Union offers a scholarship?  It’s not too late, apply at http://www.hopewellfcu.org.

 

The 3 Things You Need to Know Before You Buy a New Car

There are many things to consider before purchasing ANY car, but a NEW car might spark particular questions. There are pros and cons to buying new cars, just as there are pros and cons to buying used cars.

First off, when purchasing any vehicle, ask yourself “Why am I buying this car?” Is it for daily use, will you need a lot of storage space, seating space? Make sure the makes and models you narrow your search down to are practical reflections of how you will use the car.

You may love the look of a larger vehicle, but if you don’t have five children, you might not need that much space and that particular car may not be right for your daily commute and errands.

After you’ve considered the personal aspects of which car to buy, move on to the less subjective parts of the process:

1. Depreciation
Most cars depreciate at about 15% per year. With new cars, there is a 20% depreciation rate as soon as you drive off the lot. You want to consider this before you decide to buy a new car, especially if you can’t put much money down as a down payment. Chances are you’ll be upside down on your car loan almost immediately if you’re financing the entire cost.

2. Cost-to-own
Also, consider the true cost to own the car you’re eyeing. These costs include insurance, fuel, maintenance, and more. Maintenance costs vary by manufacturer and model. Do your research—some manufacturers have better reputations than others. Some new cars even come with “free” maintenance plans for the first couple of years or for a certain number of miles.

3. How much can you afford?
Don’t guide yourself solely by what the dealership is willing to lend you. And, don’t be blindsided by an attractive low monthly payment—oftentimes tied to a super-long loan term. Consider all aspects of financing—the total amount you are going to end up paying for that vehicle when it’s all said and done. That’s what matters.

Visit Hopewell Federal Credit Union before you even step on the lot. As a not-for-profit financial cooperative, we can approve you for an auto loan that fits your circumstances—and your budget. We won’t put you into a loan you can’t afford, and we’re happy to explain everything to you away from the high-pressure of the dealership