Choosing a College Based on Financial Aid
The basis of financial aid eligibility for college begins with the completion of the FAFSA form in a timely manner, a topic I find myself repeating constantly this time of year. By now, many colleges have responded to the FAFSA information by sending their admitted students an award letter, listing all financial aid and scholarship eligibility.
This is a critical time for future college students because they are asked to make an important and weighty decision about the future. Because college costs are very high, the financial aid offered by a school is a key component to the admissions process. The schools are aware of the high costs and as a result have integrated financial aid offers as part of the admissions process.
Schools recognize that a student's choice of school is more heavily predicated on financial constraints than ever. When faced with a choice of schools, the student will consider the financial aid offered as a major deciding point. Here are some key points to remember when comparing financial aid before choosing a school.
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- Filing the FAFSA early is the best help: You should file the FAFSA around the Feb. 15 date preceding the next fall semester. This is to retain eligibility for the maximum amount of financial aid available. This is especially true as more students are applying for aid but less and less is being offered.
Financial aid is like a piggy bank. As students apply for it, money is taken from the piggy bank so that those who apply late have nothing left to gain. Each school and state may have different deadlines for the FAFSA to be filed, so there may still be time to get the FAFSA in without penalty now. If you have not yet filed the FAFSA, do not delay any further.
- Federal student loans are in fact considered financial aid: I can already hear groaning from students and parents that hate the term "financial aid" being used to describe a student loan. However, because federal Stafford loans are backed by the government and credit approved for all students without a credit check, it has to be categorized as financial aid.
Understand that federal loans still need to be repaid, just like any other loan. Based on the FAFSA, a student may qualify for a subsidized Stafford loan where the government pays the interest that accrues on the loan while the student remains enrolled. Also, the Perkins loan has a similar interest subsidy for students.
Ultimately, government loans offer a guaranteed option with fixed interest rates, making them appealing. The problem is that there are no options for a better rate and no recourse for negotiation. Whether the student has great credit or no credit, they get the same rate on the Stafford loan, currently 6.8% for unsubsidized and 3.4% for subsidized loans being disbursed in the 2011-2012 academic year.
- Not all awards are the same: After reviewing several offers from many schools, the student may notice a lack of consistency. That is because each financial aid office has the ability to operate under their own policies and procedures as long as they meet standard federal guidelines per the Education Department.
So, for example, the federal supplemental educational opportunity grant (FSEOG) may be offered for a different amount at each school. This is due to the amount of FSEOG funding available at the school and reflects the average financial need of all students currently attending. The school must use a degree of parity to account for an equal distribution of FSEOG to the most needy of students first.
- There is room for negotiation: As a result of each institution being able to act with some degree of autonomy, there is a bit of wiggle room available for many students. However, this can be a tricky process with many students vying for maximum funding.
Just remember, certain items are flexible while other funding options are not negotiable from the college's perspective. Merit-based scholarships have the most flexibility because they are awarded at the discretion of the school based on personal merits. All grants are awarded based on financial need and are only negotiable considering actual family financial circumstances. Programs like FSEOG, work-study, and Perkins loans may have some flexibility depending on how much money is available in the school's budget. Federal Stafford loans are capped at $5,500 to $12,500 per year based on student dependence/independence grade level.
- Be ready for an appeal if needed: An appeal is a written request for a review of student circumstances to increase college funding. There are two versions of appeals that can be submitted. First, a student can appeal for an increase in merit-based scholarship funding. This is done through a written appeal process. When trying to increase need-based financial aid, a different appeal outlining a reduction in family income is required.
Ken O'Connor is a financial aid expert and the director of student advocacy at cuStudentLoans.org. Learn more about credit union private student loans and college planning by visiting his blog.
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