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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LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 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 credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. 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.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. 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 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.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
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  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

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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 $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% 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.

6 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 & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 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. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** 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


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000

Visit Upstart

6.26% – 14.87%1$5,000 - $100,000

Visit SoFi

6.99% – 35.97%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

4.99% – 29.99%3$10,000 - $35,000

Visit FreedomPlus

5.99% – 18.99%4$5,000 - $50,000

Visit Citizens

15.49% – 34.49%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

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6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.