Common Mistakes Students Make With Financial Aid

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Flickr user Mike Poresky

With the cost of college tuition increasing every year, it has become uncommon for families in America to self-fund their students’ college education. Most students need at least some financial aid to help cover their tuition fees. Fortunately, there is plenty of financial aid available in the form of scholarships, grants and loans. Unfortunately, many students can make mistakes that cost them dearly.

These are some of the more common mistakes that students make with financial aid:

Not Applying For Financial Aid

It may sound completely unbelievable, but there are many students and their families who are unaware of all of the financial aid opportunities available to them. Then there are many others who know about financial aid but do not apply because they think they may not qualify for any type of aid, and still others hesitate because they do not like the idea of being ‘indebted’.

The fact is, the majority of students today fund their college education with some form of financial aid, whether it is federal loans, private loans, scholarships, grants, or institutional aid. Each of these opportunities comes with their own unique stipulations. Some are free and don’t need to be paid back. Others are loans that you will need to pay back with interest. While you may not be eligible for all financial aid opportunities out there, it is important stay informed and explore your options so you can make informed decisions.

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Not Filling the FAFSA

Filling and submitting your FAFSA is the first step towards getting any type of financial aid. The colleges that you apply to use the information that you provide on the FAFSA to put together a financial aid package for you. If you do not submit the FAFSA, you will lose out on a substantial financial aid that you are in fact eligible for.

Taking Too Long to Submit Your FAFSA

Your FAFSA can be submitted anytime between October 1st and the 30th of June. However, some colleges have earlier due dates. If you wait to submit your FAFSA at the last minute, you could miss individual college financial aid deadlines.

As a general rule, submitting your FAFSA at a date closest to 1st January gives you the best chance of receiving the highest amount of financial aid. This is because some aid is awarded on a first-come, first-serve basis.

Not Checking for Errors on Your Loan Application

Your financial aid package is calculated based on the information you submit on your loan application. While you can apply to get the errors corrected, the corrections can take a couple of weeks, delaying the whole process.

Not Exploring Free Money Opportunities

Free money for your college education comes primarily from two sources—grants and scholarships. You may have to meet certain criteria to get money through grants and scholarships but if you are eligible and you are awarded the money, you do not have to return it.

Scholarships are awarded for anything from academic merit and athletic ability, to knowledge of a foreign language, or belonging to a certain culture or community. There is no limit to the types of scholarships out there. What’s more, you can apply for as many awards that you qualify for. It’s worth spending time doing extensive research into all types of scholarships that you may be eligible to apply to.

Accepting All the Financial Aid You’re Offered

Not accepting all the financial aid you’re offered may seem like contradictory advice. After all, any money you get will help to make your life that much easier. However, a financial aid package typically includes a combination of scholarships, grants, and loans. Scholarships and grants are free money so of course you should go ahead and accept all of it without hesitation.

Loans, on the other hand, have to be paid back and they often come with hefty interest rates. By the time you finish paying off your loans, you will have paid thousands of dollars more than what you borrowed. Keeping that in mind, it makes more financial sense to borrow only what you need and nothing more.

Not Asking for More Aid if You Need It

Maybe you did not get as much you were hoping for. One of the lesser-known facts about financial aid is that you can negotiate the package that is awarded to you by calling the school’s financial aid office and explaining your situation to them. Some colleges may have excess aid because other students declined the offer and they would be happy to award it to anyone who asks. It doesn’t hurt to ask. If they don’t have the funds, they will say no but you never know, you could get lucky.

Taking Private Loans Without Exhausting Federal Loan Options

Private loans are much more expensive than federal loans. Their interest rates are much higher, terms more rigid and there are no forgiveness options. Always, always exhaust all your federal loans options before looking into private loans.

Private loans can help you recognize your goals if the federal loans offered to you fall short of your requirements. But they should be considered as a last resort.

Choosing a Loan Based Only On Rate of Interest

Yes, the rate of interest has a major bearing on how much interest you will need to pay back over the life of the loan. However, that is not the only factor you need to take into consideration. You must also read the fine print and look at the term of the loan, repayment policies and most important of all, the penalties for late or non-payment.

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