Seven Things You Need to Know About Financial Aid

With the rising cost of college, and increasingly dire news about the student loan burden in this country, it's more important than ever to think carefully about financing college.  The following tips can help maximize your chances at getting financial aid:

1. Complete the FAFSA, and do it early!

FAFSA stands for Free Application for Federal Student Aid, and it is the first step in the process of applying for nearly all forms of financial aid, including some merit-based aid that does not depend on income.  Some types of aid are first come, first served, so the earlier you get your application in, the better.  You need to complete the FAFSA every year. The application is available at fafsa.ed.gov

2. If you are a California resident and meet eligibility requirements, the Cal Grant will pay the full tuition at a UC or CSU school.

And the income limits may be higher than you think.  To qualify for a Cal Grant, you need at least a 3.0 GPA (or 2.0 for the Cal Grant B, for lower income applicants), and a family income under $98,900 for a family of 4.  The Cal Grant will pay the full tuition at a UC or CSU school, and up to $9,000 per year at qualifying private schools in California.  Completing the FAFSA automatically submits an application for the Cal Grant. If you are a resident of another state, check to see if your state offers similar aid programs. More information about the Cal Grant is available from the California Student Aid Commission.

3. The net price of a college may be much less than its "sticker price".

Many colleges that look more expensive on paper actually have generous financial aid policies, making the net price for low and moderate income families much less than other schools that appear less expensive based solely on tuition prices.  Some expensive private schools will meet 100% of demonstrated financial need, meaning low-income students may pay nothing at all.  This financial aid may also cover living expenses like room and board and transportation.

4. Not all loans are created equal.

In general, federal student loans have better terms and better protections than private loans.  There are two types of federal loans: subsidized and unsubsidized.  Both types of loans allow students to wait until 6 months after they are no longer in school to begin making payments. The difference is that interest does not accrue on subsidized loans during the time the student is enrolled at least half time, and during the 6 month grade period after the student is no longer enrolled. Unsubsidized loans, on the other hand, DO accrue interest during this time, and if the interest is not paid, it is added to the principal amount, so the student then needs to pay interest on the interest as well as the principal. If you must take out unsubsidized loans, at least try to make the interest payments while you are in school (even though you are not required to make payments).

5. You should apply to 4 or more colleges.

Different schools have different financial aid policies, and completing a variety of applications increases the chances that one of the colleges will offer a financial aid package that works for you. Aim for a mix of in-state, out-of-state, public, and private colleges, and carefully compare financial aid offers before making your final decision.

6. It is sometimes possible to get more financial aid just by asking.

Seriously.  One student I recently worked with received an admission offer from her dream college, but the financial aid package didn't work for her.  She contacted the college to thank them for the offer but explained that she could not afford to attend.  They increased her financial aid by $10,000. This is more likely to happen at small, private liberal arts colleges than public universities. Of course, it's also more likely if you are an outstanding student or have some particular talent that makes you attractive to the college, but regardless of your circumstances, it never hurts to ask.

7. Even moderate and higher income students may qualify for some aid.

In California, the Middle Class Scholarship offers some aid to students with family income up to $120,000 per year.  Also, your eligibility for need-based aid depends on both your family income and assets AND on the cost of attendance.  So if your income is relatively high, and your Expected Family Contribution is $20,000, but you're applying to a school with a total cost of attendance (including room and board) of $30,000, you may be eligible for financial aid.