The process of applying for and paying off college financial aid is absolutely deplorable for everyone. There’s just no other way around it. And to be quite honest, who even knows how to do financial aid? What does college financial aid even mean? If these questions boggle your brain half as much as they do mine, I can assure you you’re not alone. Luckily I have learned some financial aid tricks-of-the-trade while I was in school, thanks to my remarkably wonderful parents who helped me out along the way. And although it is still a concept that makes me feel dizzy and sleepy simultaneously, I hope to shed some light on the basics of financial aid that still confuse so many people to this day. Keep reading for the ultimate freshman guide to financial aid!
Financial aid isn’t available to just anybody. Not everyone can simply hop on the computer and submit an application like they’re registering for a Starbucks membership card. However, many more students than ever before are applying for financial aid because of the outrageous cost of attending colleges today. It is by no means something to be ashamed of. In fact, ¾ of college students receive financial aid. The biggest mistake people make is not applying because they don’t think they will be approved. So really, it’s kind of like becoming a part of an elite club that everyone is in on but don’t necessarily speak publicly about.
To put it simply: any student whose personal worth as well as their expected family’s contribution is not enough to cover the cost of attendance can apply, and most likely receive, financial aid.
Sorry can you say that again?
Sure. Any student whose personal worth (how much they have in their savings/checking accounts), in addition to their expected family’s contribution (income, assets, etc.), is still not enough to cover the cost of attending the school of their choice (yearly tuition, room and board, travel expenses, food expenses, books and materials, etc.), may apply for financial aid.
Warning: This paragraph may make you nauseous.
Every year is like a fresh, delicious, new recipe for the amount of money you can receive that year based on your current financial standing and any financial changes that happened to you within that past year. This means any change in occupation, any relationship change such as divorce or death, the number of children enrolled in college under one household, can relate to that year’s financial aid.
According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities. Remember, (and take a deep breath for this one) that is the price for only one year. I don’t know about you, but I figure that attending college for more than one year is probably a good idea.
So let’s say you find some middle ground and happily decide to opt for a public university even though you are an out-of-state resident. The average estimated price it would be to attend your college for four full years is 5K shy of $100 grand. (Again, deep breaths.)
Not to rub it in, but with this money you could easily purchase four cars or a house with that kind of money…
Most famously known is the Free Application for Federal Student Aid otherwise known as FAFSA. This application is used to “determine the amount of money a family is expected to contribute to the price of attending a post-secondary institution.” The results of the FAFSA are used in “determining any scholarships, student grants, work studies, and loan amounts.” (But don’t let the “Free” in FAFSA fool you, you will still most definitely have to pay for an application for financial aid one way or another.)
This is mostly because almost every college or university requires both the FAFSA and the college scholarship service, or the CCS. This is the application distributed by the college board that allows students to apply for financial aid.
Additionally, some colleges (but not many) require a third financial aid application form as well. These forms are usually created specifically by their school and tailored only to their school. Providence College is a school to do this, for example.
The “standard” un-subsidized loans are the loans that the government lends us that have a 6% interest rate on them. (Meaning the price of the initial loan will rise by 6% the longer you put off paying it.) For some perspective: A 6% interest rate of an average year’s worth of tuition costing $23,893 is an additional $1,500. So pay them off ASAP! I agree that this interest rate seems absolutely outrageous when you figure that the interest rate for a loan for a house is averaged at 4%. But a bank can always re-possess your house as collateral if you are late with your payments, and it’s a little harder for the government to essentially “re-posses” an education.
A “subsidized” loan has a lower than 6% interest rate.
The beautiful thing we call a “gift aid” is a loan you don’t need to pay back (Score!) because they are in the forms of either grants or scholarships.
Grant– based on financial standing.
Scholarship– based on merit, achievements, and financial standing or simply on financial standing.
Work Study- a type of financial loan in which the student obtains some type of job on campus as part of the deal.
First of all, I would like to acknowledge that if you find the concept of applying for financial aid not only terrifying, but absolutely confounding, you’re not alone. In many ways applying for financial aid is like filing your taxes. You have to do it each year, you have to file your tax return before making an application, and, (similar to an accountant) there are people whose freakin’ occupations are to apply for financial aid for you. (…I know what you’re thinking…who would ever want that job?!) But have some minor comfort in that thought, though. This is definitely not an easy task!
Tip: Any money you have saved in your bank account, (whether it is 10K from your summer high school babysitting gig or the $500 check your Grandma deposited in your account last Christmas), any money you have in your checking or savings account is money that schools assume you can and should use totally for your tuition.
Womp womp womp…
Therefore: If you have any debts that you are saving money to pay off for at the moment, pay those babies off ASAP and don’t let that money just sit in your account. If you do, colleges will see that money and assume that this money should be used completely towards your education. Oh, and all those glorious graduation checks you received from your friends at family at your grad party? Wait to deposit those too, because College Board is sneaky and ruthless and even asks whether or not you received any money for Graduation.
Tip: Luckily, they will not touch upon the money you have that is the value of your home OR any money you have in a retirement fund or 401K.
Therefore: You are better off putting your money into a retirement fund before paying for tuition because no, unfortunately there is no such thing as a “retirement loan.”
Still with me so far? (If you are, give yourself a pat on the back. This stuff isn’t easy.)
OK- So you have done your math, you understand where you stand financially, and you decide you do, in fact, need financial aid. Finally you are ready to apply. But, before you send little Timmy to the family desktop with strict instructions to apply for his financial aid, you may want to think again…
Why you may ask?
Well, it’s virtually impossible for a student to fill out the financial aid applications, at least by themselves. In fact, even my amazing mother (who is one of the most intelligent people I know and even turned down Harvard) had a difficult time filling out the applications last year for my sister, and that was her fifth year doing it. Yes, the applications are done from the “students’ point of view,” but they are compiled predominantly of questions regarding the parent’s personal and financial information.
Like I mentioned earlier, you will need to file your tax return before making your application.
After you fill out the necessary financial aid applications that each school requires, ( and you should apply for anything you can get: your financially need based loans and your scholarship or merit based loans) you will wait ever-so-patiently to be accepted from each school.
If you’re accepted into a school then the college will send you your financial aid “package” which contains all the necessary information regarding what they are loaning you. It is common for a university to give you a mix of different loan opportunities bunched together.
When looking through your financial aid packages, (and I advise taking your time to do this) make sure you are reading between the lines. Nothing in life comes for free. It is highly crucial that you measure up the cost of admission you calculated previously for each school and study it beside the amount of money they are willing to loan you. (If you have received a scholarship, for instance, make sure you know whether or not this scholarship is for one year or all four years of your enrollment.) Are there possibilities of applying again for these scholarships if they don’t cover all four years? Be smart about interpreting your financial aid offers.
Tip: you may be able to negotiate your financial aid package.
This may seem incredibly daunting, and rightfully so. But you can do it, so have faith. I recommend that once you or your child has graduated, to compile a list of all the different student loans you have left over to pay, (some subsidized and some not) as well as the interest rates for each one.
Then, once you have created this positively captivating list, pay off the loans with the higher interest rates first. You can also look into consolidating all of your loans to a lower interest loan by refinancing your student loans. You can check out this website for different refinancing options.
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