Paying for College -Practice Test

1. Which of the following statements is TRUE about the value of a college degree?

• A high school graduate can expect to earn about the same as a college graduate

• Every college graduate can expect to have a starting salary over $60,000 right after college

• A college graduate can expect to earn, on average, more than a high school graduate over a career

• A college graduate typically earns less than someone with a high school diploma for the first 10 years

Answer explanation

A college graduate typically earns more than a high school graduate over their career due to higher qualifications and skills, leading to better job opportunities and higher salaries.

2. During a period of financial hardship, you can apply for this to pause student loan payments while interest still accrues…

• Grace period

• Grants and scholarships

• FAFSA

• Forbearance

Answer explanation

Forbearance allows you to pause student loan payments during financial hardship, although interest continues to accrue. This is different from a grace period, which is a temporary break before payments start.

3. Which of these options lists the types of financial aid from MOST attractive to LEAST attractive?

• Private loans, Federal loans, Work-study, Grants/Scholarships

• Grants/Scholarships, Work-study, Federal loans, Private loans

• Work-study, Grants/Scholarships, Federal loans, Private loans

• Federal loans, Grants/Scholarships, Work-study, Private loans

Answer explanation

Grants/Scholarships are the most attractive as they do not need to be repaid. Work-study provides income while studying. Federal loans have lower interest rates than private loans, which are the least attractive due to higher costs.

4. In order to qualify for financial aid, which application must you submit?

• FAFSA

• PLUS

• SAVE

• SAI

Answer explanation

To qualify for financial aid, you must submit the FAFSA (Free Application for Federal Student Aid). This application is essential for determining your eligibility for various financial aid programs.

5. Which of the formulas below correctly calculates net price?

• Sticker price - student loans = net price

• Grants and scholarships + student loans = net price

• Sticker price - grants and scholarships = net price

• Sticker price + grants and scholarships = net price

Answer explanation

The net price is calculated by subtracting grants and scholarships from the sticker price. This reflects the actual cost a student needs to pay after financial aid, making 'Sticker price - grants and scholarships = net price' the correct formula.

6. The federal government makes interest payments on __________ while you’re enrolled in school at least half-time, for the first six months after you leave school, and during any period of deferment.

• Work-Study

• Subsidized federal loans

• Unsubsidized federal loans

• Grants

Answer explanation

The federal government makes interest payments on subsidized federal loans while you're enrolled at least half-time, for the first six months after leaving school, and during deferment periods, making them the correct choice.

7. Which of the following is considered a direct cost of attendance?

• Travel expenses

• Cell phone bill

• Tuition

• Food and entertainment

Answer explanation

Tuition is a direct cost of attendance as it is a mandatory fee paid for education. In contrast, travel expenses, cell phone bills, and food and entertainment are considered indirect costs.

8. Who receives and uses the information submitted in your FAFSA?

• Your employer to see if you’ll still be able to work while attending college

• Your parents to keep track of your progress at college

• The federal government for tax purposes

• The schools you’ve applied to and your state government to determine your eligibility for financial aid

Answer explanation

The correct answer is that the schools you’ve applied to and your state government receive your FAFSA information to assess your eligibility for financial aid, not for tax purposes or tracking by parents or employers.

9. What types of money are used in paying for college and in what order should you use them?

• Your money, borrowed money, free money

• Borrowed money, your money, free money

• Your money, free money, borrowed money

• Free money, your money, borrowed money

Answer explanation

The correct order to use money for college is free money (grants/scholarships), your money (savings), and then borrowed money (loans). This minimizes debt and maximizes available resources.

10. Although it’s not a type of financial aid, how can transferring credits from a community college help save you money on college costs?

• It reduces amount of credits you’ll have to pay for at your 4-year college

• Colleges will pay you for any credits transferred from a community college

• The cost of community college credits can be deducted on your taxes

• Transferring credits from a community college makes you eligible for lower interest rates when taking out federal student loans

Answer explanation

Transferring credits from a community college reduces the number of credits you need to complete at a 4-year college, which in turn lowers your overall tuition costs, making it a smart financial choice.