CEP Financial Aid and Scholarships 3 — Questions and Answers
Question 1: What is the maximum annual subsidized Stafford loan amount for a dependent undergraduate freshman?
- $5,500
- $3,500 (Correct answer)
- $7,500
- $2,000
Correct answer: $3,500
Dependent freshmen can borrow a maximum of $3,500 in subsidized Stafford loans per academic year.
Question 2: Which federal loan program allows graduate students and parents of undergraduates to borrow up to the full cost of attendance?
- Perkins Loan
- Direct Subsidized Loan
- Direct PLUS Loan (Correct answer)
- Direct Unsubsidized Loan
Correct answer: Direct PLUS Loan
Direct PLUS Loans (Graduate PLUS and Parent PLUS) can cover the cost of attendance minus any other financial aid received.
Question 3: A student takes out a Direct Unsubsidized Loan. Interest begins accruing:
- Six months after graduation
- Only if the student drops below half-time enrollment
- Immediately upon disbursement (Correct answer)
- After the student earns their first $10,000 in income
Correct answer: Immediately upon disbursement
Unlike subsidized loans, interest on unsubsidized loans begins accruing at the time of disbursement, even while the student is enrolled.
Question 4: The Expected Family Contribution (EFC) is now officially called what under the FAFSA Simplification Act?
- Financial Need Index (FNI)
- Student Aid Index (SAI) (Correct answer)
- Family Contribution Formula (FCF)
- Net Price Contribution (NPC)
Correct answer: Student Aid Index (SAI)
The FAFSA Simplification Act renamed the EFC to the Student Aid Index (SAI) to better reflect that it is not necessarily the amount a family will pay.
Question 5: When comparing financial aid offers, an educational planner should advise a family to calculate the 'net price' by:
- Subtracting total loans from tuition only
- Subtracting all grants and scholarships from the total cost of attendance (Correct answer)
- Adding the EFC to the total loan package
- Subtracting work-study earnings from tuition and fees
Correct answer: Subtracting all grants and scholarships from the total cost of attendance
Net price equals the total cost of attendance minus all gift aid (grants and scholarships), representing what the family must actually fund.
Question 6: Which of the following is NOT a typical eligibility requirement for federal financial aid?
- Being a U.S. citizen or eligible noncitizen
- Maintaining satisfactory academic progress
- Enrolling in an eligible degree or certificate program
- Graduating in the top 25% of your high school class (Correct answer)
Correct answer: Graduating in the top 25% of your high school class
Federal aid does not require students to have graduated in any class rank; high school rank is not part of Title IV eligibility criteria.
Question 7: A student received a scholarship that exceeds their tuition and fees. The excess scholarship funds are generally:
- Returned to the scholarship provider automatically
- Taxable as income to the student (Correct answer)
- Applied to room and board at no tax cost
- Transferred to a 529 plan for future use
Correct answer: Taxable as income to the student
Scholarship amounts that exceed qualified education expenses (tuition, fees, required books) are generally taxable income for the student.
CEP Financial Aid and Scholarships 3
What is the maximum annual subsidized Stafford loan amount for a dependent undergraduate freshman?