Financial Aid Tips

The financial aid process is inherently complex. But we’ve made it simpler with a list of top financial aid tips — our best advice for helping you maximize your financial aid eligibility, ace the financial aid process, and get the most money for college you can.

Tip: Get a jump on the process

Most families who have been through the financial aid process will say they should have started the process sooner. Even in high school, there are important steps you can take to prepare for college. If you’ve already graduated high school, start the process now — scholarships are snatched up quickly, and you’ll want to have your FAFSA submission ready by early January to ensure your place in federal, state, and school financial aid queues.

Tip: First-come, first-served

Submit your FAFSA as early as possible after January 1 each year you’re in school. The amount of need-based financial aid available is limited and is often awarded on a first-come, first-served basis. Don’t wait until you’ve filed your tax return; estimate the required tax information and file an amendment to your FAFSA later if your actual tax numbers are significantly different. You can shave weeks off the process by submitting your FAFSA online directly to the Department of Education at www.fafsa.ed.gov.

Tip: Accuracy counts

Fill out your FAFSA carefully and submit it correctly. If your application contains errors or incomplete responses, it will be returned to you. The correction process could take weeks — weeks that will move you further back in the financial aid queue. Since most need-based financial aid is awarded on a first-come, first-served basis, these few weeks could have a serious impact on your financial aid package. See our tips on completing the FAFSA for more information.

Tip: Save money for college

While family assets are a factor in financial aid eligibility, it still makes sense to save for college. In the expected family contribution calculation, only 5.6% of a family’s assets and 20% of a student’s assets are considered “available for college contribution”. In other words, your savings will reduce the amount of financial aid you can receive, but not by much. More importantly, you’ll be expected to contribute some amount of money toward college, and it’s cheaper to use savings than to take out private student loans or borrow against credit cards or home equity.

Tip: But spend money too

Students are expected to contribute 20% of their own money toward college costs. The less money you have, the lower your expected family contribution. If you’re planning any big purchases, consider using money currently held in the your own name instead of your parents’ savings or consumer credit.

Tip: Save money in your parents’ name

While there are potential tax benefits to your parents saving in your name, there are also potential financial aid implications. Parent assets are factored into the expected family contribution at a low rate of 5.6% while student assets are assessed at 20% of assets and 50% of after-tax income over $1,750.

Now’s the time for your parents to build up retirement savings. These funds are shielded from the EFC calculation, so your parents can contribute as much as they want to IRAs or other retirement accounts without affecting your financial aid eligibility.

A 529 savings plan, such as the NextStudent Scholar’s Edge^TM plan, allows your parents to contribute to a tax-deferred account established for you, but in your parents’ name.

You can also save money in accounts held in other family members’ names. Only parent and student assets are considered in the EFC calculation.

Tip: Make it a family affair

The federal government financial aid programs were designed to help families pursue their college dreams and reward those that have more than one dependent student enrolled in college at the same time. In fact, your expected family contribution may drop as much as 50% if more than one family member is attending college.

Tip: Don’t settle

If you’re not happy with the financial aid packages you’re offered, negotiate. The final student aid packages are developed by school financial aid officers, and school officials may not fully understand your financial situation. Talk to them. Ask them how they arrived at the final numbers. Help them understand your position. Each school’s financial aid package may be different, so don’t give up until you’ve tried them all.

Tip: Don’t stop

Start looking for scholarships and grants, apply for work-study as soon as possible, and don’t stop looking until graduation looms near. Your financial situation or academic record could change over the years, and these changes could have an impact on your financial aid eligibility.

Free money for money — scholarships, grants, and fellowship —is awarded for a variety of reasons, not just financial need or GPA, so you may already be eligible for more than you think. To find scholarships and grants, use the NextStudent Scholarship Search Engine powered by Scholarships 101, one of the most comprehensive online databases of scholarships available, currently listing more than 6.2 million individually awarded scholarships totaling more than $16 billion.

Tip: Don’t assume

Just about every family is eligible for at least some type of financial aid, even those families who think they earn too much to qualify or who don’t think there are financial aid options available to them.

Fill out the FAFSA, and let the Department of Education determine the amount of financial aid you’re eligible to receive. The Education Department and your school will consider a number of factors, including college costs, financial need, and non-need based criteria such as academic performance, ethnicity or nationality, and special aptitude for athletics, music, art, leadership, or other skills.

You’ll need to fill out the FAFSA in order to be eligible for any type of federal financial aid — federal grants, student loans, and parent loans. There’s no other way to get government help. Remember, some federal sources of financial aid, namely unsubsidized Stafford student loans and PLUS parent loans, are available regardless of financial need.

Tip: Start low

Focus first on the lowest-cost financial aid: scholarships, grants, and work-study. These forms of financial aid cost you nothing because they don’t have to be repaid.

If scholarships and grants aren’t enough to pay for college, look next to low-cost federal student loans. Rates for federal Perkins loans and Stafford loans are among the most favorable, and repayment is deferred until after graduation. Your next best bet is a federal PLUS loan for your parents, followed by private student loans.

Avoid high-cost financing, such as home equity loans and credit cards. Not only do these lines of credit carry a high rate of interest, they also require immediate repayment and can jeopardize your creditworthiness and financial status.

Tip: Aim high

Don’t turn your back on your dream school just because it’s expensive. Your expected family contribution (EFC) is based on your financial situation but can vary from school to school, depending on whether the school is using your federally calculated EFC or its own calculation of EFC. Your financial aid package is based on the cost of attendance minus your EFC, so a more expensive school with a lower EFC may actually award you a more substantial financial aid package than a less expensive school.

Tip: Stay on track

The financial aid process can be long, and there are so many things to remember. Make photocopies of all forms and applications, and keep them in a handy file. Use this financial aid calendar to stay on top of key financial aid dates and deadlines.

Tip: Get help when you need it

Unless you’re a financial aid officer, you probably have questions about the financial aid process and the types of student aid available. Call us. We have friendly, professionally trained Education Finance Advisors who can answer just about any question you may have about financial aid and who will be happy to guide you through your financial aid options, help you search for scholarships, and assist you in finding the best student loans for what you need. You can call us on our dime at (877) 680-9879.

Tip: Consolidate your student loans

Federal student loan consolidation is one of the smartest, most economical student loan repayment tools available. This student loan consolidation program allows you to consolidate one or more eligible federal education loans into a single new loan at fixed interest rate with no additional fees. For many student borrowers, a student consolidation loan extends your repayment period, resulting in lower monthly student loan payments, plus the convenience of making a single payment each month.

Quick Links

» Financial Aid Resources
» FAFSA
» Financial Aid Advisor: The Guided Tour
» Financial Aid Tips
» Student Loan Calculators
» Financial Aid Articles
» Financial Aid Glossary
» NextPath: The Paying for College Blog