03.13.07 | Does FAFSA have anything to do with Credit?
Today I received a phone call from a very distressed parent…the financial aid office at her daughter’s school was asking for her social security number in order to get a loan so her daughter won’t be forced to leave school. She could not understand why the school needed HER social…when she is not the one going to school. I explained to her how the FAFSA works; I explained that because her daughter was 23 and an undergraduate student, she was considered a “dependent” of hers. Therefore, the school needs the parents’ information filled out in the FAFSA in order to determine whether her daughter can in fact take out the Federal Stafford Loan or the Federal Perkins Loan…This particular mom was very concerned that the school needed her social security number to run her credit, and use that to apply for a loan for her daughter, but in her name. Attaining Federal loans in the students name is not credit based…the eligibility for those is strictly based on the students financial need exhibited from the FAFSA results. Don’t get me wrong, there are some aspects of Federal Financial aid that have to do with your credit. For example, if the student’s Stafford loan is not enough to cover the tuition, then the school usually suggests the parents apply for a Parent Plus Loan…this IS credit based, not NEED based (like the Stafford loan)…the same goes for the Graduate Plus loan for graduate students. So to reiterate, the FAFSA determines the students eligibility for financial aid, Stafford loans, and Perkins loans…a parent may apply for the Parent plus loan if he/she chooses to, but this is not part of the federal aid in the students name…however the FAFSA form does need to be filled out before a parent can apply for such a loan, simply because the parent plus loan is a Federally guaranteed loan…you can’t get a federally guaranteed loan without having an up to date FAFSA on file.
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