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The college admissions process is intimidating, but we’re here to try to help you avoid some common mistakes. In addition to understanding the competition and recognizing bias towards or against certain schools, you need to understand how financial aid really works. Misunderstanding financial aid – it’s availability and how to apply for it – can cause serious consequences. We believe that families should go into the college admissions process with their eyes wide open about their total debt load for each school.
Mistake #3: Misunderstanding Financial Aid
Let’s put one thing out there right away: Don’t be money-blind when it comes to choosing schools to apply for. Yes, you should apply to schools you love. But it is not worth being in crippling debt for the rest of your life to attend a great school that will give you zero aid versus another, also-great school that will give you substantially more money.
How FAFSA and EFC Work
Students fill out the Free Application for Federal Student Aid (FAFSA) around the same time they are applying to schools (the application used to be made available January 1, but they recently moved the date up to October 1. This is important to note because some aid is first-come, first-served.)
When you receive the Student Aid Report after your FAFSA has been processed, you will see an Estimated Family Contribution (EFC) amount listed. This is based on your family’s income and other factors.
If the college you want to attend costs $60,000, you might receive an EFC of $20,000. This would mean $40,000 must be made up of scholarships, loans, and grants.
But here’s the thing: just because your EFC is $20,000 doesn’t mean you are guaranteed ANY of that $40,000. Schools are not required to give any aid to meet the amount over the EFC.
Loans and Grants
If you do not receive any scholarships (see below for more information on these), you will have to rely on loans and grants to cover the costs over the EFC. Some students are able to take advantage of Pell Grants, which do not need to be repayed. However, these have limited availability and generally do not cover the full amount needed for tuition and room and board.
For most people, “financial aid” is given in the form of government-backed student loans. Need-based, subsidized student loans like Perkins and Stafford are low-interest, but since they are government-insured, they are not “bankruptable.” The only way out of these loans is to pay them off, die, or become disabled.
These subsidized loans also have limited availability. Since schools aren’t obligated to meet the full amount of demonstrated leave, you may have to fill in the gaps with unsubsidized direct loans and federal PLUS loans.
Scholarships
While there are millions upon millions of scholarships dollars out there, getting those scholarships requires a lot of hard work. People often underestimate the difficulty associated with obtaining scholarships and overestimate the amount of money they will receive from scholarships.
Most scholarships are for relatively small amounts. If you need to cover $40,000 worth of tuition and room and board, it will take a lot of $2000 scholarships to get there. Realistically, obtaining enough scholarship money to cover the cost of college expenses can mean filling out hundreds (yes, hundreds!) of applications and writing many essays. Parents and students need to have a realistic expectation of the time and energy required to procure scholarship dollars.
Be Realistic and Resilient
The financial aid process simply isn’t as friendly as many people think it is. Money isn’t necessarily handed out based on need or merit (at least to the extent you require).
Should you let all of this discourage you from applying to the school of your dreams? NO! Absolutely not. But if the school of your dreams does not end up being financially viable, we promise that there are other schools out there that will provide an excellent education and fantastic experiences without causing serious financial distress.
Need help working through your options and making an informed decision? Make an appointment with our college planners today.