Understanding Your Financial Aid

What types of financial aid are you being offered? Is it free money like scholarships or grants, a job or a loan you need to repay? If it is a scholarship or grant, do you need to do something to renew it each year? Some scholarships, for example, require you to maintain a certain grade point average or to take part in events sponsored by the organization that awarded the money. If you have a Work-Study job, there may be a requirement that says you can’t work somewhere else in addition to your Work-Study job. Loans, too, have very specific obligations, especially in terms of repayment. Understanding your financial aid will help you ensure you continue to meet the eligibility requirements and help you determine exactly how much additional money you will need to pay for your education.

Keep Looking for Financial Aid

Scholarships, grants, Work-Study jobs and loans aren’t given only to incoming freshmen. You can keep applying for financial aid all the way through college. You may think that applying for a scholarship is a lot of work, but look at it this way: If you spend five hours working on a scholarship application and it pays $250, you’ve earned $50 an hour for your time ($250/5 = $50). Where else can you get a job that pays $50 an hour?!

Stay on top of financial aid every year that you’re in college. First, be sure you know what you need to do to keep the aid you already have! Then take these steps:

• Ask about scholarships available to students in your major.
• Apply for every form of aid you may qualify for regardless of the amount. Even a small grant will help pay for lab fees or books.
• Reapply for aid you didn’t receive last year if your personal situation has changed, such as a sibling starting college or a drop in family income due to a job loss.
• Circle the dates! The most common mistake students make when applying for financial aid is missing deadlines. Mark important dates on your calendar so you don’t miss them.
• Talk to your financial aid office. The professionals in the financial aid office are there to counsel and advise you. Talk to them – they can help you!
• Check out the Internet. Here are some websites to visit:
  • U.S. Department of Education (www.ed.gov)
  • Federal Student Aid (www.studentaid.ed.gov)
  • FinAid! – The Smart Student™ Guide to Financial Aid (www.finaid.org)
  • Fast Web – financial aid search (www.fastweb.com)
  • College Board (www.collegeboard.org)

Watch Out for Scholarship Scams

To avoid becoming a victim of a scholarship scam:

• Don’t fall for guarantees or claims that someone has information you can’t get anywhere else.
• Know that legitimate scholarships never charge fees and the application information is available to everyone.
• Legitimate scholarship organizations have eligible students coming to them for scholarship dollars. Question any company that seeks you out with offers of awarded money, when you haven’t applied to them first.
• Look for valid contact information on websites and publications, such as active telephone numbers and actual mailing addresses (not just P.O. boxes).
• For more information visit www.studentaid.ed.gov.

Use Loans As A Last Resort

Think of student loans this way: They are an investment in your future, but they also will put you into debt. Many students spend 10 or 20 years repaying their college loans. As just one example, if you borrow $31,000 in a Federal Stafford Loan, you will have to pay $356.75 every month for 10 years. (This assumes a 6.8 percent interest rate and a 10-year payback period.) By the time you pay back the $31,000 plus interest you will have shelled out $42,810! There are many different types of student loans, including those provided by the federal government and those provided by private lenders. Interest rates for Federal Stafford Loans may vary depending on when the borrowing occurs.

To find out the current interest rates for new student loans, visit the Federal Student Aid website at www.studentaid.ed.gov. Private student loan rates and terms vary widely, therefore, research, read, and understand all of the terms prior to borrowing.

To graduate with as little debt as possible, keep looking for scholarships and grants—it’s like finding “free” money. Also, use your summer work earnings to pay for college expenses. If you do take out a student loan, use it only to pay for school expenses. A student loan isn’t money to blow on spring vacations or to pay off your credit cards. On the other hand, a Federal Stafford Loan that charges no more than 6.8 percent interest is always a better deal than putting your tuition bill on a credit card that charges 16 percent to 22 percent interest.

Editorial by the National Endowment for Financial Education, www.smartaboutmoney.org/40moneytips.