Due to the FAFSA delays, there are a lot of elements that may be out of your control. However, there are a few ways you can spend your time to prepare to make one of the biggest decisions of your life.
If you already submitted your FAFSA application, you are likely waiting to receive your financial aid award letter from the schools on your FAFSA school list.
While you may not be able to control when your school receives your FAFSA information, you can control how you spend your time waiting. Here are some tips to prepare.
Identify the Decision Deadlines for your Prospective Schools
This year is going to be a bit different. With the delays in FAFSA processing, many schools have pushed their decision deadlines. Generally, college decision day is May 1; however, some students may still be waiting for financial aid letters until after that date. Make a list to track the decision deadline dates of each school you are interested in. If there is a school that has an early decision day and you still don’t have your information from all your prospective schools, make sure to reach out to them to discuss your situation. Schools are being more flexible than ever this year.
Review your Future Education Options
You already know where you have been accepted, now it’s time to do some research into the academics offered at those institutions. Review your major options, and curriculum. Compare your options at each school to start creating the best path for your future goals. You can even take this time to look at future earnings. The U.S. Department of Education’s College Scorecard can be a great place to start. They have listed graduate earnings, by major. Now that you have a little time for a deep dive, take some time to research a bit about your academic career.
Understand Your "Costs"
Your school may list your Cost of Attendance (COA), student budget, or net price on their website or on your financial aid award letter. Typically, your COA or your student budget will be the same. These two figures represent the estimate of how much it will cost you to attend that school for one academic year. Included in your COA or student budget will be your room and board, books and supplies, personal expenses, and transportation. Each school will have its own COA based on your living situation (on- or off-campus, and if you identify that you are off-campus living with our parents). Make sure you review the estimates of each COA—since they are estimates, there could be funds in there that will not apply to you.
If your school has identified your net price, you need to understand what that means. Net price can be a bit tricky. Your net price is your school’s COA minus free money. Free money is money that does not have to be repaid or earned. What you should note is that any financial aid awards in the form of loans or work-study are not included in your net price. Your net price is how much you need to come up with to cover your estimated COA. You can use a college savings plan, your (and/or your parent’s) savings, student loans, and work-study to cover your net price.
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Student Aid Index (SAI) and Financial Need
The next number you need to understand is your student aid index, or SAI. The SAI has replaced the expected family contribution, or EFC. This number is calculated by the U.S. Department of Education based on the information you provided on your FAFSA. This number is not the amount you will pay, but rather an index number used by your school to determine your financial aid eligibility. You may owe more money to your school than your listed SAI.
Your SAI is used to determine your financial need. To determine your financial need, you will take your COA and subtract your SAI. Your school will do their best to meet your financial need, however not all schools will be able to award up to your full need.
While you may or may not have financial need, it’s important to note that not all financial aid is need-based. In the federal program, the ability to borrower Direct Unsubsidized Loans is not based your financial need.
Develop a Budget
If you are still waiting for your financial aid award, you will need to make decisions without a clear picture of your college costs. However, that doesn’t mean you can’t develop a budget. You want to think short-term and long-term. Yes, you need to find a way to cover your college costs next year, but you have several years after to consider as well.
Your short-term budget will help you set some parameters around your upcoming year. How much can you and your support system help you pay for college? If you and your family can only afford $5,000 toward your tuition costs, that’s important information to note. Once you get your financial aid award letter, you want to compare offers that you can afford. Make sure to calculate your net price for each school.
You also want to identify the costs of living while you are at school. If you are going to school out-of-state, you need to include a travel budget for breaks and at the end of the semester or year. Some schools may close to their dorms between terms, and you will need to find another option for housing during that time. Also calculate the daily or identify some of those hidden costs of life. Not only do you need to worry about food and shelter, but you also need to identify methods to pay for laundry, toiletries, or buying weather appropriate clothes for your new home. If you know you want to participate in Greek life, a sports team, or other activity, create line items in your budget to manage those extra costs.
Your long-term budget is for your college career. If you are entering your first year of a four-year program, you will have costs to consider each year. This is where you want to develop a budget to accommodate your annual costs and manage your annual borrowing if you need student loans to cover the costs of college. It can’t be stressed enough, if you are borrowing money, you need to be responsible with those funds.
Financial Aid Awards
Financial aid can come in various types of awards from several different sources. Types of financial aid can be classified as free money, earned money, or loans. Each type of award may have its own terms and conditions, which you need to understand. You should also know that each school will send their own award letters, and they will be different. Your financial need or eligibility for financial aid will be different at each school reviewing your information. If you happen to receive the same federal award at one school, it may be identified in a different way on each award letter. For example, if you are eligible for $2,500 of a Direct Subsidized Student Loan. You may see it listed different ways on each school’s award letter. Here are some ways you may see the award listed: Subsidized Student Loan, Direct Sub Loan, SDZED Ln, Federal Sub. They all may all be the same type of federal student loan, but it may take some time to decipher each award.
Free Money
Free money is typically awarded in the form of grants and scholarships. While the terms grants and scholarships may be used interchangeably, they do tend to have a specific meaning when used correctly. Grants are awarded based on financial need, and scholarships are awarded based on merit.
The federal student loan programs only offer federal grants to eligible undergraduate students. You may have head of the Federal Pell Grant or the Federal Supplemental Educational Opportunity Grant (FSEOG). If you are enrolled in an eligible school or program, you may be eligible for a federal TEACH Grant, which may sometimes be awarded to student’s who have already earned a bachelor’s degree.
Scholarships are not available under the federal student aid programs. However, scholarships may be made available by your school or private organizations.
When it comes to paying for college, you want as much ‘free money’ as possible. Typically, you do not need to repay free money if you meet the required terms and conditions. When reviewing grant and scholarship opportunities on your award letter, here are some questions you should answer:
• What are the terms of this grant/scholarship opportunity?
• What is the source of this grant/scholarship?
• Can I rely on this grant/scholarship for each year I’m enrolled?
• How can I use this grant money?
• Are there consequences, such as returning the funds, if I were to withdraw from school?
Earned Money
Earned money awards are in the form of work-study. There is a Federal Work-Study option for eligible student, and there could be other types of work-study opportunities offered at your school. Even though you may see an amount listed, you need to keep in mind that you must work to earn those funds. If you receive work-study, you won’t have access to those funds for several weeks after your classes start.
You will need to work with your school to find an eligible work-study opportunity. Once you begin working, you will earn your financial aid in the form of a paycheck. It’s important that you budget and use those funds wisely. Once you earn the total amount you were awarded, you will not be eligible to continue work as a work-study student. That doesn’t mean you can’t earn money outside of the work-study program, you will just need to secure your own part-time work.
Loans: Federal or Private
If you are eligible for federal student loans, you will see those listed on your award letter. There are a few types of loans in the federal aid programs: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loan for parents of dependent undergraduate students or Direct PLUS Loans for graduate or professional students. Each program will have its own eligibility criteria.
Direct Subsidized Loans are need-based federal student loans. They are only offered to undergraduate students with determined financial need. These loans will have an interest subsidy, which means the government is covering the accruing interest, while you are enrolled in an eligible program at least half-time, during your loan’s grace period, and anytime you place the loan in an eligible deferment when you are in a repayment status. These are the most sought out after loans because they have the most favorable terms for students and typically have low interest rates. You can only qualify if you are determined to have financial need; if you aren’t award Direct Subsidized Loans you can’t ask to have them included.
Direct Unsubsidized Loans are not need-based federal student loans. These loans are offered to eligible undergraduate and graduate students. These loans are part of federal student loan program and typically have low interest rates when compared to the current market— but they don’t have an interest subsidy. You will be responsible to repay any accruing interest on the loan.
Direct PLUS Loans are not need-based loans. They are only made available to the parents of undergraduate dependent students, or graduate or professional students. Beyond the FAFSA, the borrower of the loan would need to submit an additional Direct PLUS Loan application and authorize the U.S. Department of Education to run a credit check. The credit check for a Direct PLUS Loan is not as strict as the credit check for other types of private debt, making them easier for borrowers to qualify. If a Direct PLUS Loan applicant fails the credit check, they can: re-apply with a creditworthy cosigner, appeal based on an extenuating circumstance, or accept the denial and the undergraduate student would be eligible for Direct Subsidized and Unsubsidized limits for independent undergraduate students.
Private student loans are not part of the federal student aid programs. There are several different sources of private student loans, but the most common sources include banks and other financial institutions. However, private student loans may be offered under state education programs. Private student loans aren’t typically included in your financial aid award letter, and require you to seek your options, apply, authorize a credit check, and qualify. If you qualify for a private student loan, you are agreeing to the terms and conditions offered by your lender of choice. If you need to borrow a private student loan, you need to know a few things.
1. You need to qualify for a private student loan, and it may be challenging if you have no, limited, or bad credit history.
2. Most undergraduate students require a creditworthy cosigner.
3. Interest rates, repayment options, and terms will vary between lenders.
4. Lenders may limit the schools they work with.
5. Your school my certify your loan limit to ensure you don’t borrow more than your COA minus all other financial aid received.
6. You need to ensure you are borrowing responsibly to avoid issues repaying later.
The Future of FAFSA
The FAFSA application will continue to be the most important financial aid application. Regardless of the headaches caused this year, schools are committed to getting students through the admissions process. Even if you have limited time to decide once you begin to receive your financial aid awards, if you spend some time preparing for the decision, it may be easier than you think. The time can also be a blessing. It gives you the time to create a realistic budget and understand some of the financial terms you may see for the first time. This may help you make the most educated decision, which can balance your academic dreams and your financial constraints.