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What is Financial Aid? 5 Facts That You Should Know

financialaidFinancial Aid refers to a variety of programs that families use to pay for college. Many families are aware that Financial Aid exists but they know very little about it. To get families started, here are 5 things you need to know.

Financial Aid Fact 1: There are 4 different types of financial aid

  • Need Based Aid: This consists of grants, low-cost loans which don’t accrue interest while in college and work-study programs which are awarded based on a student and families financial need. These programs are usually funded by the federal and state government.
  • Non-Need Based Aid: These are scholarships and grants from private entities awarded on a variety of factors including course of study, student activities, athletics or other affiliations like family background.
  • Merit Aid: Scholarships provided by colleges and universities based on academic performance, test scores or other attributes.
  • Self-Help Aid: Low cost student loans that accrue interest while in college from the federal government, private loans from banks and credit unions or on and off campus jobs.

Financial Aid Fact 2: More people qualify than you think

At public colleges and universities over 60% of students are on some form of student financial aid. That increases to 75% at private colleges and universities. All families should take the time to apply to see what they might qualify for.

Financial Aid Fact 3: Deadlines

You do have to apply to receive student financial aid. The main application form is the Free Application for Federal Student Aid (FAFSA) which is available in January for the upcoming year and should be completed by March 15 if you want to be considered for a broad array of programs.Your school may also require the CSS Profile form. Be sure to check with the college’s financial aid and admissions office. Scholarships have deadlines so make sure you check when you get the application and note the due date on your calendar.

Financial Aid Fact 4: Student Loans will not ruin your life

Every day you read about a student who cannot make their student loan payments. You might have read that the average student has $27,000 in debt.  As a result you may think you should completely avoid student loans. The truth is that the median student loan debt is only $13,000 and there are a variety of federal programs that will help you keep your payments low after you graduate.

Financial Aid Fact 5: Financial Aid can help make even the most expensive college affordable

Some families might think that because they haven’t saved for college they should only look at low cost college options. That is not necessarily the case. If you apply for financial aid on time, look to the multiple scholarship opportunities available and use student loans wisely you can find a way to afford the college of your child’s dreams. Apply and receive your financial aid award letter from colleges and universities you apply to, then make the best financial and academic decision for your family.

About the Author:

Today’s guest article comes from Craig P Anderson, who has been working in the Higher Education Finance Industry for over 20 years. He is a Student Loan Expert and has worked for a variety of student loan providers including Chase and Sallie Mae. He also worked in the Financial Aid Offices of the University of Florida and St. Petersburg College and has served on several industry boards. You can read more from him at or follow him on Twitter @CraigPAnderson .

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Overview of the Financial Aid Process (video)

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5 Best Practices For Completing The FAFSA

FAFSA-formStudent loan debt is now the second highest ranked consumer loan debt, next to mortgages, according to the New York Federal Reserve, with the amount of outstanding student loan debt exceeding $1 trillion in March of 2012.

Given this shocking number, it has become increasingly important to seek alternative or additional means of financing for a college education. Fortunately, financial aid is also available to students in the form of scholarships and grants. This is where the Free Application for Federal Student Aid (FAFSA) comes in. You need to complete and submit the FAFSA in order to be considered for financial aid such as the Pell Grant and various other scholarship programs. If any questions arise along the way, make sure to turn to a resource that can answer your important FAFSA questions.

While the FAFSA can be the key to receiving the financial aid you need, it is a lengthy form that requires a lot of detailed information, which makes it more likely you might fill something out incorrectly along the way. Unfortunately, one mistake could spell the difference between aid and no aid. Don’t allow your child to miss out on a valuable scholarship or grant because of a preventable error. Make sure to follow step-by-step instructions when filling out the FAFSA to avoid making a mistake.

Here are five important tips in completing the FAFSA:

  1. Plan your assets. A good type of asset to own when applying for financial aid is a retirement account such as an IRA or 401(k). These qualified retirement accounts, whether owned by you or by your child, are not counted at all in determining federal financial aid. Use caution, however, when withdrawing money from your IRA (or any retirement account) to pay for college. Though the tax law now allows penalty-free withdrawals from a traditional or Roth IRA to pay for qualified college costs, doing so could jeopardize financial aid in the following year. The entire withdrawal, principal and earnings, counts as income on the following year’s aid application.
  2. Move savings out of your child’s account. The idea here is that you really have to understand how the FAFSA formula works. The formula counts 2.6%-5.6% of a parent’s assets as being available to pay for college expenses and 20% of a student’s assets as an available financial resource. Basically, this means that assets belonging to the student result in a greater reduction in financial aid. By moving a child’s assets into an account that is not in their name, it will reduce the amount you have to report on the FAFSA.
  3. Submit your form early. Filling up the forms can be tedious but you shouldn’t put it off.  There are a lot of applicants seeking the same financial assistance as you. Therefore, it’s a good idea to submit your application as early as you can. If possible, submit before the deadline. This is not a good time to dally, because you might just lose out to the students who submitted ahead of you.
  4. Write a letter. Since the form itself is quite rigid, some families who experienced special circumstances can add a letter to talk about their situation (like the death of a parent or sudden job loss, for example). Back up the letter with proof and other documents to support it. A lot of colleges will consider what you have to say when deciding on your child’s financial aid package.
  5. Check and double check before submitting the form. It’s very easy to make a mistake when you’re filling out a complicated form. Have someone else check your form, too, in case you missed anything. It’s the easiest way to ensure that you got all the important details—and even the minor ones—correct.

Today’s guest article comes from the Student Financial Literacy team at



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Understanding a School’s Sticker Price and How to Mitigate Shock

The following guest article is provided by Dr. Joie Jager-Hyman

Students may spend an entire high school career sweating and slaving to gain admission to the college of their dreams. However, the happy ending does not necessarily come with an acceptance letter: now someone has to pay for it.

Tuition bills have grown shockingly large. The rising cost of college tuition is a hot topic and for good reason: the “sticker price” for the most expensive schools in the country can exceed a staggering $55,000 per year. Chances are that you are not blessed with a bottomless bank account, but there is hope in the form of financial aid. Between grants and scholarships, private and federal loans, it is possible to pay for college without drowning in debt.

collegemoneyCulled from advice in my new book, B+ Grades, A+ College Application, this post offers a brief explanation of the financial aid application process, reasons why you should not be scared of school’s sticker price, and how to interpret your financial aid awards, so that you can eventually enroll in a school that you love—and can afford.

  • Financial aid documents are tedious and time-consuming. Their ostensible purpose is to determine your family’s ability to contribute towards college tuition. However, their format is meant to stymie and deter, so that the schools are not simply giving money away. Financial aid, for this reason, is something earned—not merely given. It requires work from your end, so make sure to follow all instructions and keeping on top of deadlines.
  • Don’t get “Sticker Shock.” The amount of aid offered can vary from school to school. Even so, the reality remains that many families cannot afford the number calculated for them. Instead of letting colleges dictate how much you can afford, it is better to come up with a realistic budget that takes into consideration your family’s out-of-pocket contribution and your debt limit.
  • To this end, add some “safety schools” to your list. While financial aid can help you close the price gap between your private and public college options, it is still a wise decision to do your research and compare costs. This may involve adding more safety schools to your list if you are looking for a substantial amount of financial aid. It’s a tough reality, but applying for financial aid may actually hurt your chances of admission because most schools simply can’t afford to make admissions decisions without simultaneously calculating their own financial aid budgets. By adding more safety schools, you are giving yourself reasonable options in the event you are not admitted into a need-aware college.
  • Even if you have a set budget, you still have to apply for financial aid to know exactly how much and what kind of aid you’re going to receive. As I mentioned before, different schools follow different models when it comes to offering their students financial aid. Things like retirement accounts, investments, home value, credit card debt, and medical expenses can all affect the amount colleges think your family can pay and the types of aid you receive.
  • Finally—and most importantly, make the most of your application! By putting together the best possible application you can convince any admissions committee to accept you—and to want you in their school so badly that they won’t care if it costs them a little more money.

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Financial Aid for Parents: Does Claiming Financial Need Hurt College Applications?

financial-aid-awardsThere are many factors that students and parents should consider when selecting colleges and universities to apply to. Perhaps the most important factor is if the school offers a good program in the student’s academic area of interest, but the selection process should not end there. With the economy in a years-long slump, financial aid has seldom been more important to families hoping to put their children through college. It is estimated that over 10 million students applied for financial aid in 2011. Financial aid from the college or university a student attends can mean the difference between being able to go to college and needing to enter the job market right out of high school. Many parents are beginning to worry that applying for financial aid will negatively affect their students’ chances of being accepted to the school of their choice, which leads them to making some common mistakes on their applications.

Are Need-Blind Schools A Myth?
A need-blind school is one that does not review the financial status or need of the family when reviewing the student’s admissions application. The student’s application is considered solely on merits such as academic performance in the classroom, scores on standardized tests, extracurricular achievements, and volunteer activities. Students and parents should be realistic about how desirable their application to these schools will be, as these schools are most likely to be very selective about whom they admit. While there are a handful of colleges in the United States that claim to admit students based on merit alone, the vast majority of schools in the U.S. will consider a family’s ability to pay when making their admissions decisions.

Truly Need-Blind Colleges and Institutions
Some of the wealthiest schools in the country, such as Harvard, Dartmouth, and Yale, can afford to be truly need-blind. These schools selectively admit only those students who are the best candidates to their school, regardless of need. However, these schools have enormous endowments and can afford to pay for students who do not pay full tuition; many schools must at least partially consider the probable financial need of a student, even when the student’s financial aid application status is not listed on the admissions application. If a student’s admissions essay casually mentions a summer in the Seychelles, for example, that sends a message to admissions officers that the student may be able to pay full tuition. Often parents will state outright in their application that they’re able to pay full tuition, but this is probably not actually helpful.

Need-Sensitive Schools: A Middle Ground
Some schools are entirely need-blind and others openly review an applicant’s ability to pay for tuition, but others consider themselves mostly need-blind schools. These are schools that may be most concerned with the applicants’ merits, but which will take into account the student’s financial needs if they are sizeable. While some schools may be truly or mostly need blind when considering applicants, some may treat applicants on a wait list differently when it comes to financial need. In fact, the National Association for College Admission Counseling conducted a study in 2008 that showed that about six percent of private schools were need-sensitive for students on their wait list. Admissions departments will often tell you what their policy is regarding financial aid and admissions. One way to ensure a student’s application receives the most favorable review is to apply for early admission. Many schools assess applications without regard to financial need before a certain deadline, so applying within that window may give students who are concerned about their financial need affecting their application the best chance of being accepted.

Applying for the Top Schools
Parents and students alike are deterred from applying for admissions to top schools like Yale, Standard, and Harvard because they believe that they will not be able to pay the tuition and fees at these schools. However, because these wealthy schools may be truly need-blind, they may be able to offer a more attractive financial aid package to students. The cost of tuition should not deter students who want to attend these schools and who have the academic background to thrive at these schools from applying for admissions.

How to Consider Financial Aid Status When Applying
The fact is that admissions departments consider many factors when reviewing a financial aid package. While some will openly consider if a student requires financial aid, grants, and scholarships in order to attend, others may be more subtle about reviewing applicants’ financial need. Students concerned about their financial need affecting their application can apply for early admission, when many colleges maintain a need-blind attitude to application assessment. Parents and students alike can stay realistic about the desirability of their application, and should focus on applying to schools to which they feel acceptance is within reach.

With each school considering financial need in different ways, parents and students may be understandably concerned about how financial need could affect their own applications. The bottom line is that students should apply for the schools that are the best fit for their academic interests. Even schools that may place some emphasis on financial need in admissions decisions will probably not rule out an applicant who is well-qualified based on need alone. It is best to apply for the right schools that are a good fit; a financial aid package will often be provided that helps to make paying for the school more affordable.


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Making the Most of Student Financial Aid Programs

financialaidFamilies are finding it more and more difficult to keep up with the rising costs of college tuition in recent years. Fortunately, financial aid is available to students in multiple forms, including federal aid, loans, scholarships, grants, and work-study programs. However, many students do not know exactly how to make the most of the financial aid at their disposal. The following tips will help ensure that you get the most out of these student aid programs.


  • Spend time researching: Before you start applying to financial aid programs, be sure to read up on the regulations for each. You need to know what program suits you best, and which scholarships you are most likely to get. By doing your research early on, you can pick out the right programs for your financial needs, and you’ll be able to prepare for the requirements to submit. This increases your chances of getting the aid you need.
  • Talk to a professional: Most colleges and universities have student aid offices. High school counselors are also good resources to ask about financial aid. If you’re looking for student aid, it’s a good idea to visit a professional to seek guidance. Sometimes, communities or non-governmental organizations (NGOs) will provide help with applying to aid programs like the Free Application for Federal Student Aid (FAFSA).
  • Calculate your tuition costs: The adage “know your enemy” is rather applicable where tuition fees are concerned. Instead of going in blindly, use the college tuition fee calculators available online to identify the approximate amount you’ll have to pay. When you have that concrete number, it’s much easier for you to identify how much aid you’ll have to apply for and how much you could possibly pay out of pocket.
  • Make sure your forms are accurate and timely: Remember that even if you’re in a hurry, your financial aid applications should be immaculate. You cannot afford inaccuracies. Most of these programs will base their aid decisions on the details you have provided. If you enter inaccurate information, this could jeopardize your chances in getting substantial student aid. Just as important as filling out your forms accurately is filling them out on time. There are a lot of applicants seeking the same financial assistance as you. Therefore, it’s a good idea to submit your application as early as you can. If possible, submit before the deadline. This is not a good time to dally, because you might just lose out to the students who submitted ahead of you.
  • Reevaluate your financial aid package: A lot of students make the mistake of just settling into whatever financial aid they receive in their first year. In reality, circumstances can change the amount of aid you’re receiving. For example, a student whose parent was laid off recently can now apply for more aid. Continue to tweak and revisit your financial aid programs and see if new circumstances can give you a better assistance package.

Today’s guest article comes from the Student Financial Literacy team at


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The Not So Scary Truth About Student Loans…

Today’s guest article comes from Craig P. Anderson.

It is hard to avoid negative stories today about student loans. Interest rates doubling! One trillion dollars worth of debt! Students with six figure loan debts can’t make payments! While these all make great headlines, the larger truth is that, used wisely, student loans can be a valuable part of your plan for paying for college.

In this post I’d like to look deeper into three “fear factor” statistics that are the focus of many media articles: Average Student Loan Debt, Total Student Loan Debt and Delinquent Student Loan Payments.

Average Student Loan Debt

Average student loan debt is around $26,000 for students graduating with a Bachelors degree. While averages are often helpful in gaining perspective, for student loans it distorts your perspective. In this case, the average is skewed higher by the small number of students with significant levels of debt. In this case, using the median student loan debt is far more instructive.  What that shows you is that most students at traditional schools have a manageable debt load of $7,960 for 4 year public schools and $17,040 at 4 year private institutions. Those are far less scary and far more manageable numbers.  This equates to a $92 monthly payment for the 4 year public graduate and a $197 monthly payment for the 4 year private graduate. Those numbers are far less intimidating than the $300 monthly payment the average would lead you to believe.

To make this point even more clear look at the chart below from a recent New York Fed Treasury Report. This shows that almost 70% of borrowers owe less than the national average of $26,000 and most of those students owe less than $10,000. Only 12.7% of borrowers fall into the horror story category we hear so much about, representing debt levels of $50,000 or more.  So yes, there are students who have borrowed far too many student loans, but most students are making wise decisions.

Student Loan Balance Distribution Q4 2012

Total Student Loan Debt

Ever since the Consumer Financial Protection Bureau confirmed that total student loan debt exceeded $1 trillion dollars we have heard more about a student loan “bubble”. But let’s dig deeper into that number. The chart below from the College Board’s “Trends in Student Aid Report” shows a 95% increase in the number of borrowers from 5.4 million in 2001-02 to 10.4 million in 2011-2012. But during that same timeframe, the average amount borrowed has only increased 8% from $7,627 to $8,230. So students are not necessarily borrowing more, there are simply far more students borrowing for college. So while $1 trillion dollars is certainly a large number, it is the logical outcome of growing college enrollment financed by a loan with a minimum 10 year repayment period.

Average amount borrowed and total borrowers

Delinquent Student Loan Payments

Of the three items discussed, this is the one that should concern you the most. What the chart shows is that more students than ever are delinquent on their student loan payments. For borrowers in repayment, 31.1% were delinquent in 2012, up from 24.5% in 2008 and 20.1% in 2004.

Student Loan Borrowers 90 Days Delinquent


This problem is reflective of our current economic environment. Recent college graduates have experienced high rates of unemployment as a result of the recession. But, there is good news; those rates have begun to fall. According to the  National Association of Colleges and Employers: “ In September 2012, the unemployment rate for new college graduates—defined as college graduates ages 20 to 24—fell to 6.3 percent from 8.3 percent in September 2011 and 9.4 percent in September 2010.” As employment rates rise, college graduates will be in a better position to make their student loan payments. Additionally, for graduates who have problems making student loan payments, there are a variety of repayment programs that help reduce the size of a student’s federal loan payments. While the Department of Education does not provide usage statistics, it is generally assumed these programs are underutilized. You can find more information here.

Students should not be afraid to go to college simply because of a fear of student loan debt. As I have shown, most students are not overburdened by debt and the increase in total debt has been driven by more students going to college as much as anything else. The most legitimate fear is having an inability to make student loan payments. Students can manage this by being conservative in their borrowing and leveraging repayment options offered by the Department of Education. A reasonable amount of student loan debt can be part of any college financing strategy.

About the Author:

Today’s guest article comes from Craig P Anderson, who has been working in the Higher Education Finance Industry for over 20 years. He is a Student Loan Expert and has worked for a variety of student loan providers including Chase and Sallie Mae. He also worked in the Financial Aid Offices of the University of Florida and St. Petersburg College and has served on several industry boards. You can read more from him at or follow him on Twitter @CraigPAnderson .

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Types of Federal Student Aid (video)

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