The financial aid process is inherently complex. But we’ve made it simpler with a list of Top Tips — our best advice for helping you maximize financial aid eligibility and “ace” the financial aid process.
Most families that have been through the financial aid process will say they should have started the process sooner. Even in high school, there are important steps you can take to prepare for college. If you’ve already graduated high school, start the process now—scholarships are snatched up quickly, and you’ll want to have your FAFSA submission ready by early January to ensure your place in the federal aid queue.
Submit your FAFSA as early as possible (after January 1). The amount of need-based financial aid available is limited, and is awarded on a first-come, first-served basis. Don’t wait until you’ve filed your tax return; estimate the required tax information and file an amendment to your FAFSA later if the actual numbers are significantly different. You can also shave weeks off the process by submitting your FAFSA online at www.FAFSA.ed.gov.
Submit your FAFSA carefully and submit it correctly. If your application contains errors or incomplete responses, it will be returned to you. The correction process could take weeks—weeks that will move you further back in the financial aid queue. Since most need-based financial aid is awarded on a first-come, first-served basis, these few weeks could seriously impact your financial aid package. See Tips on Completing the FAFSA for more information.
While family assets are a factor in financial aid eligibility, it still makes sense to save for college. In the Expected Family Contribution calculation, only 5.6% of a family assets and 20% of a student assets are considered “available for college contribution”. In other words, your savings will reduce the amount of aid you can receive, but not by much. More importantly, you will be expected to contribute some amount of money toward college, and it cheaper to use savings than to borrow against credit cards or home equity.
Students are expected to contribute 20% of their own money toward college costs. The less money the student has, the lower your Expected Family Contribution. If you’re planning any big purchases, consider using money currently held in the student name instead of parent savings or consumer credit.
While there are potential tax benefits to saving in your child name, there are also potential financial aid implications. Parent assets are factored into the Expected Family Contribution at a low rate—5.6%, while student assets are assessed at 20% of assets and 50% of after-tax income over $1,750.
Now is the time to build up retirement savings. These funds are shielded from the EFC calculation, so you can contribute as much as you want to IRAs or other retirement accounts without impacting financial aid eligibility.
A 529 savings plan, such as the Scholar EdgeTM plan, allows you to contribute to a tax-deferred account established for the student, but in the parents’ name.
You can also save money in accounts held in other family members’ names. Only parent and student assets are considered in the EFC calculation.
The federal government aid programs were designed to help families pursue their college dreams, and reward those that have more than one Dependent student enrolled at the same time. In fact, your Expected Family Contribution may drop as much as 50% if more than one family member attends college.
If you’re not happy with the financial aid packages you’re offered—negotiate. The final packages are developed by school financial aid officers, and they may not fully understand your financial situation. Talk to them. Ask them how they arrived at the final numbers. Help them understand your position. Each school package may be different, so don’t give up until you’ve tried them all.
Start looking for scholarships and apply for grants and work-study as soon as possible, and don’t stop looking until graduation looms near. Your financial situation or academic record could change over the years, and these changes could impact your eligibility. And, free money is awarded for a variety of reasons—not just financial need or GPA, so you may already be eligible for more than you think. To find free money, check out the Scholarship Search Engine, one of the most comprehensive databases of over 2.4 million awards totaling more than $3.4 billion.
Just about every family is eligible for some financial aid—even those that think they earn too much or don’t know enough about their options. Fill out the FAFSA and let the Department of Education determine the amount of financial aid you’re eligible to receive. They’ll consider a number of factors—including college costs, financial need, and non-need based criteria, such as academic performance, ethnicity or nationality, and special aptitude for athletics, music, art, leadership or other criteria.
You’ll need to fill out the FAFSA for any type of funding; there is no other way to get government help. Remember, some sources of aid, such as unsubsidized Stafford and PLUS Loans, are available regardless of need.
Focus first on the lowest-cost aid, such as scholarships, grants and work-study. These cost you nothing because they don’t have to be repaid. If free money isn’t enough to pay for college, look next to low-cost student loans, such as the Federal Stafford Loan, next. Rates for these loans are among the most favorable, and repayment is deferred until after graduation. Your next best bet is Federal Parent PLUS Loans, followed by private, or alternative, loans. Avoid high-cost financing, such as home equity loans or credit cards—not only do these carry a high rate of interest, they also require immediate repayment and can jeopardize your financial status.
Don’t turn your back on your dream school just because it expensive. Your Expected Family Contribution (EFC) is based on your financial situation and is the same regardless of the school you attend. Your financial aid package, on the other hand, is based on the cost of attendance minus your EFC so that a more expensive school may result in a more substantial financial aid package.
You can initiate a student loan at any time by applying online for a Federal Stafford, Federal Parent PLUS or Private loan. Even if you haven’t submitted the FAFSA, you can get the process started, and complete it when you receive your financial aid package. Once you receive that package, usually in April, you’ll have just a few short months to before school starts to secure your loans.
Federal consolidation is one of the smartest, most economical repayment tools available. This program allows you to consolidate one or more eligible loans into a single new loan at a great, low rate—and no additional fees. Right now consolidation Loan rates are as low as 4.5%. For most, this means a savings of more than 60%, plus the convenience of making a single payment and possibly extending the repayment period for even lower monthly payments.
The financial aid process can be long, and there are so many things to remember. Make photocopies of all forms and applications, and keep them in a handy file. And sign up for NextPath, the customized message service that notifies you about important financial aid deadlines, tells what you should be doing and when, and offers up-to-date student loan news so you won’t miss out on college funding opportunities.
Unless you’re a financial aid officer, you probably have questions about the process and the types of aid available. Call us. We have professionally trained Education Finance Advisors who can answer just about any question you may have about financial aid, and who will be happy to guide you through your loan applications.