Quiz | March 2013

Test Your Knowledge of College Financial Aid

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Applying for financial aid can seem as daunting as taking college-entrance exams. But don't worry. You'll find plenty of answers to your questions at our Paying for College special report. Or you can take this ten-question quiz. Whether you're a parent or a college-bound student, we hope it will help you understand the process better.

Quiz

Test Your Knowledge of College Financial Aid

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Question 1 of 10

What's the form you have to fill out to apply for college financial aid from the federal government?

A. Government College Aid Form (GCAF)
B. Free Application for Federal Student Aid (FAFSA)
C. Federal Student Loan Application (FSLA)

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Quiz

Test Your Knowledge of College Financial Aid

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Question 1 of 10

What's the form you have to fill out to apply for college financial aid from the federal government?

You're right! B. Free Application for Federal Student Aid (FAFSA) is correct.

Sorry, wrong! is incorrect.

The right answer is B. Free Application for Federal Student Aid (FAFSA).

FAFSA is the starting point not only for government-sponsored loans and grants but also for state aid and merit awards from colleges and universities. You can fill out the form online at www.fafsa.ed.gov. Or you can print out a form and send by U.S. mail.

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Test Your Knowledge of College Financial Aid

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Question 2 of 10

Is it worthwhile for a higher-income family to submit financial aid forms?

A. Yes
B. No

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Test Your Knowledge of College Financial Aid

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Question 2 of 10

Is it worthwhile for a higher-income family to submit financial aid forms?

You're right! A. Yes is correct.

Sorry, wrong! is incorrect.

The right answer is A. Yes.

Absolutely. Even if your family isn't likely to receive need-based aid, submitting student aid forms often opens doors to finding merit-based aid. Several states offer sizable scholarships to residents who attend state colleges and have good high school grades or scores -- regardless of financial need. And some expensive private schools have huge endowments and give out more money than you might expect.

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Test Your Knowledge of College Financial Aid

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Question 3 of 10

Does the "you" on the FAFSA refer to the parent or student?

A. Parent
B. Student

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Test Your Knowledge of College Financial Aid

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Question 3 of 10

Does the "you" on the FAFSA refer to the parent or student?

You're right! B. Student is correct.

Sorry, wrong! is incorrect.

The right answer is B. Student.

The "you" referred to throughout the form refers to the student only. That can get confusing because the form asks for both the student's and parent's information, as well as that of the student's spouse, if any. Parents entering their own information -- say, their Social Security number -- instead of their student's will stall the application.

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Quiz

Test Your Knowledge of College Financial Aid

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Question 4 of 10

Your son or daughter won't be eligible for need-based aid if you saved money in a 529 college-savings plan.

A. True
B. False

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Quiz

Test Your Knowledge of College Financial Aid

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Question 4 of 10

Your son or daughter won't be eligible for need-based aid if you saved money in a 529 college-savings plan.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Money in 529 accounts factors into the financial aid formula but it doesn't disqualify your child. The accounts are considered parental assets. As such, up to 5.6% of the savings in the accounts are factored into the amount parents are expected to pay toward a child's education. If grandparents own the 529, the assets don't count in the financial aid formula.

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Quiz

Test Your Knowledge of College Financial Aid

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Question 5 of 10

If one of your children receives merit-based aid or a scholarship and doesn't need the money you saved in a 529 plan, what are your options for using that money tax- and penalty-free?

A. Transfer the 529 money to another family member
B. Let your child use the money for grad school
C. Either option is open to you

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Quiz

Test Your Knowledge of College Financial Aid

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Question 5 of 10

If one of your children receives merit-based aid or a scholarship and doesn't need the money you saved in a 529 plan, what are your options for using that money tax- and penalty-free?

You're right! C. Either option is open to you is correct.

Sorry, wrong! is incorrect.

The right answer is C. Either option is open to you.

Money in a 529 account must be used for qualified college expenses. Otherwise, withdrawals will be subject to a penalty and you'll have to pay taxes on the earnings portion of the withdrawal. To avoid taxes and penalties, you could name another family member as beneficiary of the plan or let your child use the money for graduate school.

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Test Your Knowledge of College Financial Aid

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Question 6 of 10

Which loan usually is the better deal?

A. Federal student loan
B. Student loan from a bank or private lending institution

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Test Your Knowledge of College Financial Aid

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Question 6 of 10

Which loan usually is the better deal?

You're right! A. Federal student loan is correct.

Sorry, wrong! is incorrect.

The right answer is A. Federal student loan.

Federal student loans have a fixed rate, offer flexible repayment terms and, in some cases, a government subsidy for part of the interest. Private-loan interest rates, which are variable, depend on the prime rate or other benchmarks as well as the borrower's credit rating. So it's best to max out the federal options first.

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Test Your Knowledge of College Financial Aid

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Question 7 of 10

If you must borrow money for college, which federal loan offers the best deal?

A. Perkins loan
B. PLUS loan for parents
C. Subsidized Stafford loan
D. Unsubsidized Stafford loan

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Quiz

Test Your Knowledge of College Financial Aid

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Question 7 of 10

If you must borrow money for college, which federal loan offers the best deal?

You're right! C. Subsidized Stafford loan is correct.

Sorry, wrong! is incorrect.

The right answer is C. Subsidized Stafford loan.

The best option is a subsidized Stafford loan, which has a 3.4% for the 2012-13 school year, lower than an unsubsidized Stafford loan or a PLUS loan for parents. A Perkins loan has a fixed 5% rate and is available to only the neediest students. But be aware, subsidized Stafford loans disbursed on or after July 1, 2013 may carry a higher interest rate.

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Test Your Knowledge of College Financial Aid

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Question 8 of 10

Under what circumstances can borrowers postpone repayment of their federal student loans?

A. If they can't find a full-time job
B. If they go to grad school
C. If they experience economic hardship
D. All of the above

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Test Your Knowledge of College Financial Aid

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Question 8 of 10

Under what circumstances can borrowers postpone repayment of their federal student loans?

You're right! D. All of the above is correct.

Sorry, wrong! is incorrect.

The right answer is D. All of the above.

You can defer payment on your federal loans if you find yourself in any of these circumstances. If you are employed but struggling, you can lower payments by stretching out the loan term. These are more of the advantages of federal student loans.

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Quiz

Test Your Knowledge of College Financial Aid

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Question 9 of 10

You can write off student-loan interest on your federal tax return only if you itemize deductions.

A. True
B. False

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Test Your Knowledge of College Financial Aid

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Question 9 of 10

You can write off student-loan interest on your federal tax return only if you itemize deductions.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

You don't have to itemize to take advantage of this deduction. You can write off up to $2,500 of student loan interest paid during the year, assuming you are not being claimed as a dependent on your parents' tax return. This includes interest on private loans and loans taken out by parents. However, the right to claim this deduction phases out at higher income levels.

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Quiz

Test Your Knowledge of College Financial Aid

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Question 10 of 10

You are eligible for getting your federal student loans forgiven after working ten years as a...

A. Public school teacher
B. Police officer
C. Prosecutor
D. Social worker
E. All of the above

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Quiz

Test Your Knowledge of College Financial Aid

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Question 10 of 10

You are eligible for getting your federal student loans forgiven after working ten years as a...

You're right! E. All of the above is correct.

Sorry, wrong! is incorrect.

The right answer is E. All of the above.

As a result of the College Cost Reduction and Access Act of 2007, the government forgives the balance on federal loans for people who have worked in public service jobs for at least ten years. To be eligible, you must have made 120 monthly loan payments. And the only payments that count are those made on or after October 1, 2007, as part of the federal Direct Loan program.

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Test Your Knowledge of College Financial Aid

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Quiz | March 2013

Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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Test Your Knowledge of College Financial Aid

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