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Paying for college is a major challenge for new students and their families, what with the $32,410 average cost for one year at a private college, according to College Board — so it’s crucial to find legitimate college financial aid advice that will help you prepare for the costs of school.
To guide you through the process, we spoke with Mark Kantrowitz, financial aid expert and the publisher and VP of research at SavingforCollege.com. Here are his top five pieces of financial aid advice for students and new grads.
5 pieces of college financial aid advice
1. Understand the different types of financial aid
2. Know how to get the most financial aid
3. Have a plan if you run out of money during college
4. Avoid taking on too much student debt
5. Start developing savvy money habits today
Most students and their families don’t pay for college entirely out-of-pocket; instead, they get help through financial aid.
“Financial aid is provided by the federal government, state government, the college itself and private funding sources,” said Kantrowitz. To get aid, you must submit the Free Application for Federal Student Aid (FAFSA). Some colleges also require an additional form called the CSS Profile.
Although financial aid is sometimes referred to as an award, don’t assume that all financial aid is free money. Financial aid refers to both the money you don’t have to pay back (grants and scholarships) and the money you do (student loans).
If you want to know how to get the most financial aid, the date you submit the FAFSA could have something to do with it. Although the federal deadline is in June, you should fill out the FAFSA as soon as possible. It opens on Oct. 1 every year, and the earlier you apply, the more financial aid you could get.
“A dozen states award state grants on a first-come, first-served basis,” said Kantrowitz. “If you file later, you may miss out on state and institutional aid, and even some campus-based federal student aid.”
Since the government looks at annual income, you or your parents should also be strategic about how much you have in the bank.
“Avoid artificial increases in income during the base year, such as realizing capital gains or taking a distribution from retirement plans,” said Kantrowitz. That way, the government is less likely to overestimate your expected contribution.
Despite your efforts, though, your financial aid package still might not cover the full cost of college. The federal government, for instance, sets a federal loan limit of $31,000 for dependent undergraduate students, $57,500 for independent undergraduate students and $138,500 for graduate students.
So what is Kantrowitz’s financial aid advice for students whose aid package falls short? He recommends negotiating for more financial aid.
“If you have special circumstances that affect your ability to pay for college, appeal to the college financial aid office for a professional judgment review,” advised Kantrowitz.
And if you still have a gap, consider whether you want to take out private student loans.
Of course, first make sure you understand the terms of your agreement. If you take on too much debt, you could find yourself facing high student loan payments for 10 years or more after graduation.
Despite your best-laid plans, you might find yourself struggling to get by as a college student. If you run into financial hardship, speak with your college’s financial aid office about how to get help.
“Some colleges have emergency loan funds to help students who run into unanticipated problems,” said Kantrowitz. “The college’s financial aid administrator can also help you identify additional sources of funding.”
For instance, you can still apply for scholarships after you’ve started college. You could also consider a part-time job to make more money. Taking on additional loans is another option, but you should proceed with caution before adding to your debt.
Make sure to speak with a financial aid officer for advice. Taking out additional private student loans should usually be a last resort.
It’s all too easy to take out student loans without thinking about the long-term consequences. After all, you could take out a loan for freshman year four and a half years before you have to start repaying it.
But repayment will kick in eventually, and you don’t want the burden of huge student loan payments just as you’re starting your career. To help out your future self, minimize the amount you take out in loans.
“The most common mistake students make with student loans is to borrow too much money,” said Kantrowitz. “They then treat the financial aid ‘refund’ as though it were free money, even though it usually comes from student loans, which must be repaid — usually with interest.”
One way to avoid overborrowing is to estimate your first year’s salary out of college. Research a few jobs you’re interested in to get a sense of their average annual earnings.
“Aim to have total student loan debt at graduation that is less than your annual starting salary,” advised Kantrowitz. “Ideally, a lot less.”
He also encouraged college students to live cheaply. Cutting down costs as a student is easier to do in college than afterward.
“Live like a student while you are in school,” Kantrowitz said, “so you don’t have to live like a student after you graduate.”
Most of us never get a class in personal finance — we’re left on our own to sink or swim. That’s why you may need to take your money management into your own hands.
Find out if your school offers a financial literacy course, and rely on resources such as personal finance books and blogs.
“Read one of the books by Suze Orman or Beth Kobliner,” suggested Kantrowitz. “They are a great way to learn how to manage your money.”
He also encouraged students to record their spending. You don’t necessarily need to set goals at first — instead, become cognizant of how you spend your money.
“I often recommend creating a descriptive budget — as opposed to a prescriptive budget — where you track all of your spending every day by recording it in a spreadsheet or a program like Quicken or Mint,” said Kantrowitz. “Increasing awareness of your spending is the first step in exercising restraint.”
With practices like these, you’ll develop strong money habits for the rest of your life — plus, you’ll be that much more prepared when it comes time to repay your student loans.
For more college financial aid advice, here’s how to avoid taking out more student loans than you need.
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1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/2/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.
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3 Important Disclosures for Discover.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
4 Important Disclosures for Earnest.
5 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.88% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.78% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.95% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.88% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 11/04/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).
6 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
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7 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.17% effective Sep 1, 2020 and may increase after consummation.