Survey Reveals Deep Misunderstandings About Financial Aid

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Key takeaways

  • Most students are unsure about the type of aid the FAFSA qualifies them for. Fifty-two percent of respondents think the FAFSA is only for federal financial aid, when in fact state programs, as well as colleges and private scholarship organizations, can also use the information submitted. When it comes to taking out private student loans, however, you would apply directly with the lender.
  • Unclear deadlines could lead to missing out on first-come, first-served aid. Seventy-one percent of respondents think they can submit their FAFSA anytime, so long as they meet the deadline. But in truth, there can be multiple different deadlines for federal, state, and college programs.
  • Students are confused about how their parents fit into their applications. For example, 35% of respondents believe they won’t get aid if their parents aren’t U.S. citizens. But Federal Student Aid only has a citizenship requirement for students.

Financial aid myths and misconceptions

College tuition is higher than ever, and most students and their families rely on financial aid to cover costs. But many are confused about how the financial aid process works, according to our new survey.

Almost 2 out of 3 people, for instance, are under the false impression that a high family income disqualifies them from receiving financial aid. And 71% of respondents think it doesn’t matter when they submit the FAFSA, when, in fact, some aid is distributed on a first-come, first-served basis.

Financial aid plays a huge role in paying for school, so it’s imperative you understand how it works. Find out if you share any of these common misconceptions and make sure to clear them up so that you don’t miss out on money for college.

52% think the FAFSA is only for federal financial aid


Although FAFSA stands for the Free Application for Federal Student Aid, it’s not solely used for federal financial aid. In fact, many state programs rely on the information you provide in the FAFSA to distribute merit- and need-based aid. Similarly, some colleges and private scholarship organizations look at the FAFSA before giving out awards.

“The FAFSA is used to apply for state and college aid, not just federal aid,” said Mark Kantrowitz, financial aid expert and publisher and vice president of research at Savingforcollege.com. “Less than 200 colleges and universities use a supplemental form, the CSS Profile form, to award their own financial aid. But they must still use the FAFSA for federal and state aid.”

This aid might come in the form of grants or scholarships, or it could be student loans you need to pay back. It could also involve work-study, which is a program that makes you eligible for a part-time job on campus.

Even if you don’t plan on accepting federal financial aid, submit the FAFSA so that you’re in the running for nonfederal aid as well.

71% don’t seem to be in a rush to submit the FAFSA


When it comes to submitting the FAFSA, 71% of respondents said it doesn’t matter when they hit submit as long as they meet the deadline. This misconception is dangerous for a couple of reasons. For one, the FAFSA could have several different deadlines, including federal, state, and college deadlines.

The federal deadline doesn’t fall until the end of the academic year for which you’re applying for aid, which is too late to be useful. College and state deadlines fall much sooner, and some scholarship organizations also want to see your FAFSA information well ahead of the federal deadline.

If you submit too late, you could miss out on aid. So make sure to check with both your state of residency and college for any FAFSA deadlines. What’s more, some sources distribute financial aid on a first-come, first-served basis until it runs out.

“It is best to file the FAFSA as soon as possible on or after Oct. 1,” said Kantrowitz. “Students who file the FAFSA in the first three months tend to get more than double the grants, on average, of students who file the FAFSA later.”

Instead of waiting around, try to complete it as close to the date it becomes available as possible. That way, you’ll have a better chance of receiving aid — and you’ll have one less task to worry about as you get ready for college.

62% believe a high family income disqualifies them from financial aid


Nearly two-thirds of respondents think they won’t qualify for financial aid if their parents make too much money. Although a high income might disqualify you from need-based financial aid, such as Direct Subsidized Loans or the Pell Grant, you can still qualify for merit-based aid from your state or college. Plus, any student attending an eligible school can qualify for Direct Unsubsidized Loans from Federal Student Aid, and creditworthy parents can take out a Parent PLUS Loan.

What’s more, your eligibility for financial aid doesn’t just depend on family income. It also takes into account your college’s cost of attendance.

“Financial aid is based on financial need, which is the difference between the cost of attendance (COA) and the Expected Family Contribution (EFC),” said Kantrowitz. “So, a wealthier student might qualify for financial aid at a high-cost private college even if they don’t qualify for financial aid at an in-state public college.”

Even if you don’t expect you’ll have any financial need, regardless of a college’s cost of attendance, it’s still a good idea to submit the FAFSA. Life can be unpredictable, and you don’t want to be left without options if your family’s financial circumstances change.

As long as you fill out the FAFSA, you can make changes throughout the school year. But if you never submitted it in the first place, you might need to wait until the following year to apply for aid.

Students are confused about how their parents fit into the FAFSA


If you’re an undergraduate student, you most likely have to include your parents’ information on the FAFSA. But our survey uncovered a lot of confusion about how parents fit into the FAFSA.

For instance, 59% of respondents believe they don’t have to include their parents’ information if they support themselves. But Federal Student Aid considers nearly all students younger than 24 to be dependents, regardless of whether they’re making money on their own.

Along similar lines, 56% of respondents believe they don’t need to include themselves in their parents’ household size if they don’t live with them. Unless you’re an independent, you do need to include yourself in household size, regardless of where you live.

Including yourself could work in your favor, as Federal Student Aid takes household size into account when determining your eligibility for aid. If your family has a lot of household members or more than one child in college at the same time, you could qualify for more aid.

“The parent contribution portion of the EFC is divided by the number of children in college,” Kantrowitz said. “When a family goes from having one child in college to two, it can be like dividing the parent income in half.”

Finally, over one-third of respondents think they don’t need to include a stepparent in the FAFSA. But if a divorced parent has remarried, you must include their spouse’s information on the FAFSA. And 35% believe they won’t get aid if their parents aren’t U.S. citizens, but Federal Student Aid only has a citizenship requirement for students, not for their family members.

If you’re an undergraduate, chances are your parents will play a big role in the FAFSA. So make sure you understand what information needs to be included so that you don’t lose any valuable financial aid.

40% think they must file their taxes before they can fill out the FAFSA


When your family fills out the FAFSA, they’ll include information about their taxes. In years past, this process was somewhat convoluted. The FAFSA wasn’t available until January, and most people hadn’t filed their taxes by then. As a result, they had to guess and make changes later.

“Previously, when the FAFSA was based on prior-year income, families were filing their federal income tax returns at the same time as the FAFSA, so there was a complicated song and dance about filing the FAFSA based on estimates and later updating it after the income tax returns have been filed,” said Kantrowitz.

Today, the process has gotten much easier. The FAFSA opens on Oct. 1, so most families will have already filed their taxes by then. Plus, they can provide “prior-prior year income,” so families applying for the 2018-19 academic year could fill in their tax information from 2016.

You can also use the IRS Data Retrieval Tool to import your information easily. Unlike families in years past, you and your parents probably don’t have to worry about timing your FAFSA and tax returns just right.

Educate yourself about financial aid so you don’t leave money on the table


Financial aid can be confusing, so it’s natural to have questions about the process. But it’s also important to find answers to those questions so that you don’t lose out on money for college.

While our survey revealed a lot of misconceptions about financial aid, it also revealed that many people are aware of their confusion. In fact, less than half of respondents said they felt confident or “very confident” in their knowledge of financial aid and how it works.

If you or your child is headed to college in the fall, spend some time learning about the financial aid process and timeline. And make sure that you don’t just rely on the FAFSA, but also take time to apply for external scholarships as well. By exploring every avenue for financial aid, you can access the funds you need to make college affordable for you and your family.

Methodology: This survey was conducted via SurveyMonkey on Aug. 15, 2018, with a nationally representative sample of 1,007 respondents who are in the process of or have previously applied for financial aid for themselves or their children.

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SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.85% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. 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.
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    See Consumer Licenses.
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  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
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3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.

5 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Rates and offer subject to change. All accounts, loans and services subject to individual approval.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
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6 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $36,500, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

7 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


8 Important Disclosures for Avant.

Avant Disclosures

*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 – August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.