They’ve waited. They’ve watched the mail for weeks. Finally, the letter arrived: Students are getting notice that they’ve been accepted to the school of their dreams! But after the moment of excitement and congratulations wears off , the realization sets in: it’s going to cost money to go to school.
Even if a family has prepared for years, saving money, investing in 529 plans and being on top of completing their student’s FAFSA, now is a crucial time to pay attention to information from schools and have a clear understanding of the financial aid award letter.
Financial aid award letters are sent to students in the weeks after receiving their acceptance letter to a school and reflects the cost of attendance as well as the financial options available to families to help pay for their student’s education. As the letters state, a student’s place in the schools incoming class cannot be reserved until a deposit is received based on the financial award letter. But families should take the time to understand their award letter before submitting any form of deposit, as these deposits are not refundable if a student decides not to attend a particular school.
Currently, there is no standard format for schools to report the financial aid being offered to a student. So families should use these tips to better understand what is being offered and make a smart comparison between what different schools will cost. The school with the lowest tuition fees might not always be the best financial choice thanks to financial aid awards. Knowing how to read the financial aid award letter can make all the difference.
- Find “free money”
Many schools offer students institutional scholarships or grants. These types of funding can be seen as “free money” because students and families don’t have to repay this money after graduation. Make sure to look for words such as “scholarship” or “grant” in the name of the financial award. These awards are often given to students based on the information in the Student Aid Report created when completing the FAFSA, based on income or family responsibility. Families may miss these awards because they do not technically apply for them separately.
- Consider loans and work study options separately
To help show families how they can meet the cost of attendance at their school, award letters will also include options that require repayable loans or other options that require further action by the student, such as work study programs. Since there is no standard format for separating these options from other “free money,” families need to recognize that any loans taken out, be they private or federal Stafford loans, will require repayment by either the student or parent (depending on the loan) after graduation. This is not funds being offered by the school, but money that will require repayment.
- Know the difference between “direct” and “indirect” costs.
Attending college features a variety of costs, but not all of them will necessarily be covered the financial aid offered in the award letter. The “cost of attendance” on a financial aid award letter applies to direct school costs, such as tuition, room and board. Indirect costs, such as books for classes or travel to and from school are not considered in an award letter. These costs are those that the student and family will have to bear personally.
- Determine if awards are for one year or more.
Many families fall into the trap of thinking that the financial award letter reflects the costs and awards for all four years of school when, in reality, the letter reflects the cost for one year of school. While many of the loans listed on an award letter will be available to students each year, many of the grants or scholarships listed may require a new application each year or, in some cases, are only available for one year. Determining which of these awards are renewable, or the length of the award, can help families avoid an unpleasant surprise.
- Make sure the award letter is final.
In some cases, an award letter might not reflect the final amount of aid being offered to a student. If any section of the letter uses words such as “estimated,” “tentative” or “pending,” the school may not have all the information from a student’s FAFSA or other document needed to make a final determination of aid. Once this information is provided, it may have an impact on the amount of aid that the student is finally offered.
Understanding the financial award letter that students receive can lead to some difficult decisions about where a student should go to school. By making the best effort to compare award letters from all schools that have accepted a student, families can make an informed choice of which school fits best with a student’s goals while creating a financial plan that will avoid any bad surprises or unexpected debt down the road.
Verification is the process by which colleges review student financial aid applications for accuracy where the U.S. Department of Education identifies some FAFSA applications for colleges to review. In addition, colleges may review additional applications based on answers provided to certain FAFSA questions.
Roughly one-third of all FAFSAs filed are selected for verification and the process must be completed before financial aid can be awarded. If you are selected for verification, you can expect the following:
- When you receive your Student Aid Report (SAR) after completing the FAFSA, you will see a comment stating “Your FAFSA has been selected for a review process called verification. Your school has the authority to collect certain financial documents from you”.
- Your college’s financial aid office will contact you and inform you of documents you need to submit and any additional forms you need to complete.
- Your college may be required to verify the following data elements:
- Adjusted gross income
- Taxes paid
- Income earned from work (for non-tax-filers)
- Untaxed portions of IRA distributions or pensions
- IRA deductions and payments
- Tax exempt interest income
- Education credits
- Household size
- Number in college
- Receipt of food stamps/SNAP benefit
- Child support paid
- High school completion status
- Any other inconsistent or conflicting information.
- To verify the elements above, the college may ask for documents which may include, but are not limited to:
- Signed copies of the prior year tax transcripts for parent and student (if the student is dependent) or Federal IRS Data Retrieval.
- W-2s showing wages, 1099s and supporting schedules.
- Statement of child support paid, documentation that child support payments were made, and/or copy of the separation agreement or divorce decree that shows the amount of child support to be provided.
- Verification of net worth.
- Documentation of food stamps/SNAP benefit.
- Copy of the applicant’s high school diploma, final official high school transcript that shows the date when the diploma was awarded, GED certificate/transcript, state certificate or transcript received after passing a state-authorized exam (HiSET, TASC or other state-authorized exam) or a copy of the “secondary school leaving certificate” (or other similar document) for students who completed high school in a foreign country.
The best action you can take to reduce the likelihood of being selected for verification is to use the IRS data retrieval tool to automatically populate your (and if you are a dependent student, your parents’) tax information directly from the IRS into your FAFSA. When you use the IRS data retrieval tool, the tax information is considered to be already verified so you will not have to submit documentation.
If you are selected for verification, ensure that you respond to all requests from your college or university. If you do not submit documentation on time your financial aid may arrive after late fees have already been accessed to your account.
Financial Aid Awareness Month is dedicated to helping families and students of all ages better understand the options available to them as they look to fund their educational goals and dreams. Iowa College Aid has dedicated a page to discussing some of the common issues facing those looking for financial aid.
Our staff of financial aid experts have also helped out this month, with advice on how to overcome financial aid issues (see last week’s post). This week they address two of the common myths that students have about applying for grants and scholarships and how to debunk them.
Myth #1: We make too much/my parents make too much – I won’t get anything
Family income is definitely a factor when it comes to handing out financial aid. The best kind of financial aid is always the “free” kind – the scholarships and grants that are given freely with no expectation of being paid back later. And often it’s this “free” money that has a “financial need” component to it. Many scholarship and grant providers want to give their awards to students who show some kind of financial need, and when a student’s/family’s income is high, usually the financial need is low.
Not all scholarships and grants are need-based, however. If your student is motivated, they can seek out scholarship and grant opportunities that are based on skills, abilities and interests, grades, musical, athletic or dramatic talent, essay-writing, or a number of other merit-based achievements. The key is looking for them. You know the saying, “you can’t win if you don’t play”? That same philosophy applies to scholarship competitions. Investing some time online searching for “scholarships for high school juniors” or “scholarships for journalism majors” or, if writing essays isn’t a strength for your student, “no essay scholarships” might provide some avenues of funding.
Myth #2: My parents aren’t helping me pay for college so I can’t get financial aid.
Students who are financially independent from their parents can often access additional student loan funds, but a parent’s unwillingness to pay for college doesn’t make you financially independent from them.
The primary circumstances that cause a student to be financially independent are:
- Orphan/ward of court/foster care/emancipated minor/legal guardianship/homeless status
- Veteran of the Armed Forces of the United States
- Graduate or professional student
- Student’s marriage
- Student provides support to dependents
Detailed information about these circumstances can be found on the federal Department of Education website https://studentaid.ed.gov/sa/fafsa/filling-out/dependency
If a student has no contact with their parents, or if the student doesn’t reside with their parents because of an abusive or neglectful situation, the student can approach the financial aid office at their college for special instructions on how to complete the parent section of the FAFSA or to determine if there’s a need for a dependency override.
Financial Aid Awareness month encourages students who are getting ready to attend (or are currently attending) college to put together a game plan that helps them achieve their college dreams in the most cost effective way possible. Completing the Free Application for Federal Student Aid (FAFSA) is the first step and a vital one. But once that’s done, where do students go to figure out how to get the money they need for college.
Iowa College Aid not only awards and administers state grants and scholarships for Iowa students, but helps students stay on top of all the resources available to help them graduate college with as little debt as possible.
The financial expert team from Iowa College Aid ranked the ways for students to fill that gap between the money awarded to students in a school’s financial aid award package and the cost of attending the school of their dreams. Here are their top picks:
You filed your FAFSA, you submitted the State’s Financial Aid Application, you met the deadlines and you’ve done the math – your financial aid is just short of covering your tuition bill. You still need a few more dollars to pay for the semester and buy books, what else can you tap into?
Savings and 529 Plans: The first resource to explore is your own savings account or 529 account. If you (or your parents) have been saving money for college, now is the time to use it! Not only has the money been set aside for this purpose, but using savings or college investment accounts could reduce or eliminate the need to borrow additional loans.
Explore private scholarships: There are many scholarship search websites that allow you to create a profile and search for scholarships that fit your skills, abilities and interests and often scholarship essays can be tweaked and customized allowing you to use the same essay multiple times. Make sure to read directions carefully and pay attention to deadlines. And don’t rule out “fun” scholarships like those found on unigo.com – who knows, maybe your creative 250 word essay on what flavor of ice cream would you be could score you a $1,500 scholarship?
Payment plans and paychecks: Since colleges bill you for the entire semester at once, it can be overwhelming to get a bill in the mail for the whole semester. But what if the amount you owe could be divided into 4 or 5 monthly payments? If you’re working part-time, maybe it becomes more manageable to think about making monthly payments to your college when you know you have a paycheck coming.
Parent PLUS and other student loan options: If borrowing more money becomes an option, talk to your Financial Aid Office about which loans are available to you (and your parents) and which loans have the best repayment terms and interest. Your student loan options will differ depending on if you have a co-signer, or if you want to start repayment after you graduate (versus starting repayment while you’re still in school), or if you want a fixed or a variable interest rate. Your Financial Aid Office can help you sort through options and pick the loan that works best for you.
President Obama will join Department of Education Secretary Arne Duncan’s cross-country bus trip stops at North High School in Des Moines today, Sept. 14, before Duncan continues on to Cedar Rapids on Tuesday. While the two Iowa stops draw national attention to the education conversation, today’s visit will also include a major announcement of a change in the FAFSA (Free Application for Federal Student Aid) allowing families to use prior-prior year tax information in order to file the application in a timelier manner. The FAFSA allows students to be considered for many state and federal grants and scholarships, as well as provide colleges with the information needed to match students with grant and aid packages.
Previous FAFSA regulations required families to file with the current year’s tax information, making it much more difficult for families to file the FAFSA before school deadlines for financial aid, many of which came before the traditional April15 tax deadline. President Obama’s Executive Order will ease that difficulty by allowing information to be taken from income information that has already been reported on tax returns the previous year.
For more information on the new change to FAFSA, the National Association of Financial Aid Administrators has created a video that details the benefits of the new FAFSA allowance. The video can be viewed at their website.
School might be out for summer, but that doesn’t mean it’s time to slack off on planning for a student’s education. Preparing a good college game plan includes taking the early steps to be ready to spring into action when it comes time to act. Equally important, though, is being sure to avoid the pitfalls that can make financial aid planning more difficult. Here are some tips to use now in hopes of saving trouble down the road.
1. Do the math.
Crunching the numbers early in planning for college will help students and families get a clear picture of what is available for family contribution to paying for college. Students who get a clear understanding of what is available and what they will have to contribute are more likely to make informed decisions about everything from college choice to financial aid options.
2. Make sure to apply.
It might seem basic, but the first tip to remember falls into the “90 percent of success is showing up” philosophy. Many families choose not apply for financial aid because they think they make too much money to qualify. Before throwing in the towel (or ignoring the towel altogether), families should take advantage of calculators used for the Free Application for Federal Student Aid (FAFSA) and determine the amount they would be expected to pay before receiving aid. Since there is also no fee to submit the FAFSA, it costs families nothing to find out their eligibility for financial aid. Plus, complete FAFSAs go to colleges to which a student is applying, making them eligible for other financial aid and scholarships that might be available through the school.
3. Complete the application (or applications).
The FAFSA might be thorough (with many advocating for a shorter, less complex application), but some schools and often states, including Iowa, have other financial aid applications that are considered separately from the FAFSA. While much of the information of these applications are also found in the FAFSA, it’s important to check the requirements and deadlines for each school and state financial aid application to make sure that forms are completed correctly and avoid delays in being processed.
4. Talk with experts.
Whether a family is putting their first or fourth student through school, it always helps to talk with those who are closest to what is going on with financial aid issues. Talk with a student’s high school counselor, or even the financial aid department at a school in which a student is interested in attending. These experts will help provide the information that can save grief down the road.
College acceptance letters are starting to arrive for students all over the country. While the reward of being chosen to attend the school students have been eyeing shows that all that preparation can really pay off, a new question quickly arises: How to pay for it.
Nothing can feel better than getting an acceptance from that dream school that a student has been eying for years. Nothing can feel worse than deciding that dream school is too expensive. But rather than set that that dream aside, consider some factors that can either help or hinder choosing the right school at the right price.
Know the scholarship and financial aid options
If students have completed the Federal Application for Financial Student Aid (FAFSA), they’ll have a better sense of what financial aid is available from the school, as well as federal and state options. More often than not, that dream school will offer a generous financial aid package. In many cases, schools at the top of a “dream school” list will offer financial aid packages to lower-income students that may ultimately be comparable to a back-up school that seems more affordable at first glance.
Don’t be afraid to look into scholarships from both the target school and around the local community. That good GPA and student resume that attracted a school to a student, will undoubtedly be equally attractive to scholarship committees.
Try to get a sense of the employment outlook
Landing a great job can be one of the draws of a “dream school,” as career placement or alumni networks can often help recent grads turn their degree into a well-paying first job. The career a student might look toward entering after graduation can have a large impact on the school they attend, as well. Take time to review outlook reports from the U.S. Department of Labor and see if those careers look to be growing, both in numbers of new employees and starting salaries.
Consider loans, but examine details closely
Filling the gap between scholarships, financial aid and the cost of attending school can mean taking out loans. Loans may seem the perfect way to meet the needs of attending that perfect school, but bear in mind they must be repaid after graduation. Paying close attention to details both in the contract and the payment schedule before signing a loan agreement may make the difference between choosing a loan or settling for a more affordable back-up school. Consider the loan’s interest rate, but also pay attention to whether the loan is subsidized or unsubsidized. With subsidized loans, you do not pay the interest that accrues during your college years, while unsubsidized loans will accrue interest before graduation. The more taken out in loans, the more a student will be paying per month after graduation.
Think about future degrees
Many occupations require post-graduate degrees, such as a master’s or doctorate degree, while other careers only need a bachelor’s degree to get started. Needing more degrees beyond a bachelor’s degree means more expense, but also allows for a chance to make some cost saving decisions as an undergrad.
If a dream school offers strong graduate programs as well as undergrad programs, consider choosing a more cost-effective school for the bachelor’s degree. Not only will it allow students to save money, but also give wiggle room in case their academic and career goals change during their undergraduate years. Those students who remain focused on their goals will be further motivated to succeed in college in order to reach their dream school when it comes time for a graduate degree.
Though it may feel like a difficult, even heartbreaking, decision at the time, taking a step back to look at where their dream school fits in the bigger picture of their life will help students in the long-term, as well as help address the immediate financial concerns of going to college.