5 Things This Financial Aid Expert Tells Every College Student

Rebecca Safier

Updated on June 10, 2020

June 10, 2020June 10, 2020Paying for CollegeBig Money Decisions, Featured1178Rebecca Safier

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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

1. Understand the different types of financial aid

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).

2. Know how to get the most financial aid

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.

3. Have a plan if you run out of money during college

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.

4. Avoid taking on too much student debt

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.”

5. Start developing savvy money habits today

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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The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including undergraduate and graduate loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of October 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. 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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. 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Ascent Disclosures 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. Competitive variable rates calculated monthly at the time of loan approval based on a margin plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 0.152%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes. Rates are effective as of 11/01/2020 and reflect an Automatic Payment Discount. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month.(See Automatic Payment Discount Terms & Conditions.) Undergraduate Loans: Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 2.69% and 12.98%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 3.58% and 14.50%. Rates reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. The following table shows a 48 month in-school period plus 9 months of grace prior to a full repayment term of either: 60-months (lowest fixed/variable rate), 144-months (highest fixed rate) or 180-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options.((See Undergraduate Loan repayment examples.) Graduate Loans (Graduate, MBA & Law): Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 3.65% and 12.40%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 4.62% and 13.54%. Rates reflect an Automatic Payment Discount of 0.25%. The following table shows a 36 month in-school period plus 9 months of grace prior to a full repayment term of either: 84-months (lowest fixed/variable rate), 144-months (highest fixed rate), or 180-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options. (See Graduate Loan repayment examples.) Medical: Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 3.65% and 12.40%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 4.62% and 13.54%. Rates reflect an Automatic Payment Discount of 0.25%. The following table shows a 48 month in-school period plus 36 months of grace prior to a full repayment term of either: 84-months (lowest fixed/variable rate), 144-months (highest fixed rate), or 240-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options. (See Medical Loan repayment examples.) Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress. Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment. (See Undergraduate Loan repayment examples.) Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000. Interest rate reduction of either 0.25% (for Credit-Based Loans) or 2.00% (for Undergraduate Future Income-Based Loans) applies only when the borrower and/or cosigner sign up for automatic payments and the payment amount is successfully deducted from the designated bank account each month. The amount of the discount is dependent upon the loan product and credit history of the borrower at the time of application. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of in-school, deferment, grace or forbearance, unless a regular payment amount has been arranged with the servicer. If you have two (2) consecutive returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the interest rate reduction.(See Automatic Payment Discount Terms & Conditions.) All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding. Eligibility, loan amount and other loan terms are dependent on several factors, which may include: loan product, other financial aid, creditworthiness, school, program, graduation date, major, cost of attendance and other factors. Aggregate loan limits may apply. The cost of attendance is determined and certified by the educational institution. The legal age for entering into contracts is eighteen (18) years of age in every state except Alabama where it is nineteen (19) years old, Nebraska where it is nineteen (19) years old (only for wards of the state), and Mississippi and Puerto Rico where it is twenty-one (21) years old. 1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation: The student borrower has graduated from the degree program that the loan was used to fund. The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate) The graduation date is more than 90 days and less than five (5) years after the date of the loan’s first disbursement. Any loan that the student has borrowed under the Ascent loan is not more than 30-days delinquent or in a default status as of the graduation date and until any Graduation Reward is paid. Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner. * Application times vary depending on the applicant’s ability to supply the necessary information for submission. ⁷ Important Disclosures for CommonBond. CommonBond Disclosures 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.