Mistakes Were Made
We asked experts to name the financial aid blunders families tend to make. Here are the top 10 and how to avoid them
A sure sign of trouble? Businesses that guarantee at least $2,625 in aid, the Stafford loan amount for which every freshman is eligible. "If you have to pay money to get money, it's probably a scam," says Kantrowitz. Instead, look to the Department of Education's website for detailed instructions on filling out the forms.
6. READING THE WRONG BOTTOM LINE
You've got three aid packages in hand. One school has low tuition but offers only loans, a more expensive one dangles a merit scholarship, while the third, whose price tag is laughably high, gives your child nothing but a good shot at graduating in four years. It's no wonder, then, that families mistakenly compare schools using the amount of aid rather than what the actual cost to them will be. But there's a simple way to avoid this common error.
Take each school's "expected cost of attendance," which typically covers tuition, room and board, and books as well as estimates for incidentals like transportation and laundry. Subtract the "free money" of grants and scholarships. The remainder is your actual cost of attendance.
Now look at how each school plans to help you cover that cost. You will probably be offered loans, but some debt may be costlier than others. Needier students will be offered subsidized Stafford loans, which don't accrue interest until six months after graduation. Unsubsidized loans, on the other hand, accrue interest while the student is still in school.
Consider the repayment options as well, for the loan with the bargain rate may not be the cheapest in the long term. Many lenders offer a lower rate if the student meets a designated number of on-time payments after graduation. Miss a few, and you forfeit the discount. Other loan repayment plans, like those offered by the Education Department's direct loan program, can be tied to income, leaving you more leeway on your monthly payments if your salary is low.
Your package may also include work-study, a federal program that allows students to work for part of their expenses. However, keep in mind that some students find it difficult to find work for the amount of the award, which is usually less than $3,000.
7. PASSING UP THE CHANCE TO NEGOTIATE
There's a right way and a wrong way to negotiate for more aid. Marching into a financial aid office brandishing competing aid packages is the wrong way--unless the office is at Carnegie Mellon University, which encourages students to fax in offers from other schools.
Explaining how the FAFSA didn't capture your family's special circumstances, on the other hand, might get you some results. In fact, it has a name--professional judgment review--and is even encouraged by financial aid officers. "People expect the financial aid office to intuit their circumstances strictly from the numbers," says Joe Paul Case, financial aid director at Amherst College. "You need to provide a narrative. We translate that narrative into dollars." They'll want to know about unusually high medical expenses, for example, or a family income that varies significantly from year to year. The FAFSA does not provide space for such detail, so aid officers suggest that families contact them with any extra information that may be relevant, including documents whenever possible. Roughly half of these appeals garner families more aid.
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