A Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded usually only to undergraduate students who have not earned a bachelor’s or a professional degree. (In some cases, however, a student enrolled in a post-baccalaureate teacher certification program might receive a Pell Grant.) Pell Grants are considered a foundation of federal financial aid, to which aid from other federal and nonfederal sources might be added.

Starting July 1, 2009, the maximum Pell grant annual allowance will increase from $4,731 to $5,350 for the 2009-10 school year, the largest increase since the program began.  It will increase again to $5,550 for the 2010-11 school year.  The increased grant will cover approximately one-third of the total annual cost of attendance, room and board included, at the average public, four-year in-state school, or about 15 percent of one year at the average private college or university, according to the College Board.  The increased Pell grant doesn’t just sweeten the pot for those who already qualify for the award; it also means a greater number of students are now eligible for the grant.

The maximum amount can change each award year and depends on program funding. The amount you get, though, will depend not only on your financial need, but also on your costs to attend school, your status as a full-time or part-time student, and your plans to attend school for a full academic year or less.

The school the student is attending can apply Pell Grant funds to your school costs, pay you directly (usually by check), or combine these methods. The school must tell you in writing how much your award will be and how and when you’ll be paid. Schools must disburse funds at least once per term (semester, trimester, or quarter). Schools that do not use semesters, trimesters, or quarters must disburse funds at least twice per academic year.

As nervous as college freshmen may be, their cash-strapped parents are probably trembling more.  Disciplined savings using any or a combination of the options mentioned above may not cover the full expense of a college education.  As they have for the last ten years, college costs rose faster than inflation this year.  For the 2009-10 school year, a college freshman can expect to pay anywhere between $15,000 and $60,000 for a full year of tuition, room and board, books, etc.

But many college students don’t pay full sticker price.  63% of students receive some form of aid, either loans, grants, or both, according to the National Association of Student Financial Aid Administrators.

This year’s College Board data on financial aid show that almost $143 billion in student aid was distributed in academic year 2007-08-almost $10 billion more than the previous year. In addition, students borrowed almost $19 billion dollars from nonfederal sources to help finance their education.  On average, undergraduate students received an average of $8,896 in aid in the form of grants and tax benefits.  Graduate students received an average of $20,320 in aid.

College financial aid departments will require the Department of Education’s Free Application for Federal Student Aid (FAFSA) form, available at www.fafsa.ed.gov, which provides financial details of the parents and student.  It is important to file the FAFSA form early as some grants are given on a first-come-first-serve basis.

Financial aid is intended to make up the difference between what a family can afford and what college costs. The federal government and all public college financial aid offices use a “need formula” that analyzes a family’s financial circumstances and compares them with other families.  The results will vary by college and by state, but the Expected Family Contribution (EFC) formula assumes family contributions are met with savings, income and borrowing.  If a shortfall of college funds does exist, financial aid is awarded. This aid can be in the form of grants, loans, and work-study programs.

On June 22, 1944, President Franklin Roosevelt signed into law one of the most significant pieces of legislation ever produced by the United States government: The Servicemembers’ Readjustment Act of 1944, commonly known as the GI Bill of Rights. By the time the original GI Bill ended in July 1956, 7.8 million World War II veterans had participated in an education or training. Today, the legacy of the original GI Bill lives on in the Montgomery GI Bill, the centerpiece of military education benefits.

The United States Department of Veterans Affairs website, www.gibill.va.gov offers more details on each of the bills available.

Montgomery GI Bill – Active Duty (MGIB – AD)

This MGIB program provides up to 36 months of education benefits. This benefit may be used for degree and certificate programs, flight training, apprenticeship/on-the-job training and correspondence courses. Remedial, deficiency, and refresher courses may be approved under certain circumstances. Generally, benefits are payable for 10 years following your release from active duty. This program is also commonly known as Chapter 30.

You may be an eligible veteran if you received an Honorable Discharge, AND you have a High School Diploma or GED or, in some cases 12 hours of college credit, AND you meet the requirements of one of the categories below:

CATEGORY I

• Entered active duty for the first time after June 30, 1985
• Had military pay reduced by $100 a month for first 12 months
• Continuously served for 3 years, OR 2 years if that is what you first enlisted for, OR 2 years if you entered Selected Reserve within a year of leaving active duty and served 4 years (“2 by 4″ Program)

CATEGORY II

• Entered active duty before January 1, 1977
• Served at least 1 day between 10/19/84 and 6/30/85, and stayed on active duty through 6/30/88, (or 6/30/87 if you entered Selected Reserve within 1 year of leaving active duty and served 4 years)
• On 12/31/89, you had entitlement left from Vietnam Era GI Bill

CATEGORY III

• Not eligible for MGIB under Category I or II
• On active duty on 9/30/90 AND separated involuntarily after 2/2/91,
• OR involuntarily separated on or after 11/30/93,
• OR voluntarily separated under either the Voluntary Separation Incentive (VSI) or Special Separation Benefit (SSB) program
• Before separation, you had military pay reduced by $1200

CATEGORY IV

• On active duty on 10/9/96 AND you had money remaining in a VEAP account on that date AND you elected MGIB by 10/9/97
• OR entered full-time National Guard duty under title 32, USC, between 7/1/85, and 11/28/89 AND you elected MGIB during the period 10/9/96, through 7/8/97
• Had military pay reduced by $100 a month for 12 months or made a $1200 lump-sum contribution

Effective August 1, 2008 Veterans who served on active duty for three years or more, or two years active duty plus four years in the Selected Reserve or National Guard, will receive $1,321 a month in basic benefits for 36 months (full-time institutional training). Those who enlist and serve for less than three years will receive $1,073 a month. VA will pay an additional amount, commonly called a “kicker,” if directed by the Department of Defense. Rates are lower for Apprenticeship and On-Job training, or for less than full-time training programs.

Montgomery GI Bill – Selective Reserve (MGIB – SR)

The MGIB-SR program may be available to you if you are a member of the Selected Reserve. The Selected Reserve includes the Army Reserve, Navy Reserve, Air Force Reserve, Marine Corps Reserve and Coast Guard Reserve, and the Army National Guard and the Air National Guard. This benefit may be used for degree and certificate programs, flight training, apprenticeship/on-the-job training and correspondence courses. Remedial, deficiency, and refresher courses may be approved under certain circumstances.  Under the MGIB-SR, you may receive up to 36 months of education benefits, with tuition payments sent directly from the VA to your learning institution.

Your benefit entitlement from MGIB-SR ends 14 years from the date of your eligibility, or on the day you leave the Selected Reserve. If your eligibility to this program began on or after October 1, 1992, your period of eligibility ends 14 years later, or on the day you leave the Selected Reserve. If your eligibility to this program began prior to October 1, 1992, your period of eligibility ends 10 years after, or on the day you leave the Selected Reserve.

The Post-9/11 GI Bill

In July of 2008 the Post-9/11 GI Bill was signed into law, creating a new robust education benefits program rivaling the WWII Era GI Bill of Rights.  The Post-9/11 GI Bill is for individuals with at least 90 days of aggregate service on or after September 11, 2001, or individuals discharged with a service-connected disability after 30 days. You must have received an honorable discharge to be eligible for the Post-9/11 GI Bill. The Post-9/11 GI Bill will become effective for training on or after August 1, 2009. This program will pay eligible individuals:

• Tuition & fees directly to the school not to exceed the maximum in-state tuition & fees at a public Institution of Higher Learning.   All non-resident tuition and fees must be paid for out-of-pocket by the veteran if you are admitted as a non-resident student.
• Monthly housing allowance based on the Basic Allowance for Housing for an E-5 with dependents at the location of the school.
• Annual books & supplies stipend of $1,000 paid proportionately based on enrollment
• One-time rural benefit payment for eligible individuals

This benefit is payable only for training at an Institution of Higher Learning (IHL). If you are enrolled exclusively in online training you will not receive the housing allowance. If you are on active duty you will not receive the housing allowance or books & supplies stipend. This benefit provides up to 36 months of education benefits.  Generally benefits are payable for 15 years following your release from active duty.

You may receive benefits for any approved program offered by a school in the United States that is authorized to grant an associate (or higher) degree.  You may also receive benefits for tutorial assistance or up to $2,000 for the reimbursement of one licensing or certification test.

If you transferred to the Post-9/11 GI Bill from the Montgomery GI Bill – Active Duty, Montgomery GI Bill – Selected Reserves, or the Reserve Education Assistance Program, you may also receive Post-9/11 GI Bill benefits for flight training, apprenticeship or on-the-job training programs, and correspondence courses.

If you are a member of the Armed Forces on August 1, 2009, the Department of Defense (DoD) may offer you the opportunity to transfer benefits to your spouse or dependent children. DoD and the military services will issue policy on entitlement to transferability in the coming months.

Legislation over the past ten years has brought about numerous savings and funding opportunities for members of the military and their families.  These options, along with other programs already available, have made the daunting task of saving for college much more attainable for our military members.

The Military Officers Association of America (MOAA) is the nation’s largest and most influential association of military officers. It is an independent, nonprofit, politically nonpartisan organization.  Through MOAA’s website (www.moaa.org) you will be able to find information on the vast offerings of their services and benefits.  One such area of assistance is with college savings and funding resources.

The Vanguard 529 College Savings Plan

For starters, MOAA provides servicemembers a flexible, competitive, and tax-advantaged college savings option by partnering with The Vanguard Group to offer The Vanguard® 529 College Savings Plan.  In this plan, Vanguard will waive the $3,000 minimum investment fee, so you can get started with as little as $50.  The plan offers identical benefits as all other state-sponsored 529 plans explained earlier.  Account owners will have the same investment options available to them as well as the same tax benefits offered by 529 plans.

On November 11, 2003, President George Bush signed the Military Family Tax Relief Act of 2003 (HR 3365). Among other items, the Act provides that attendance at a U.S. military academy will be treated as a scholarship for purposes of the 10% penalty on nonqualified withdrawals from a 529 plan or Coverdell ESA. The value of the no-cost education (as determined under the U.S. military code) can be withdrawn penalty-free from a 529 plan or CESA, although the earnings portion will continue to be taxable.