College is expensive—in fact, the cost of college continues to climb each year. Needless to say, the tuition hikes make it harder and harder for students to get a bachelor’s degree. Those who decide to go further, such as to law school, medical school, or even to pursue a master’s degree, may find that the cost of attendance exceeds even their worst expectations, so many end up turning to student loans.
Whether you are a senior about to finish your degree and possibly look at graduate school or a college freshman just trying to figure out how to pay for your first semester, the financial aid process can be confusing. However, you’ll need to understand how it all works if you’re going to pay for school.
Learning How to Navigate Financial Aid
Financial aid is a lot more than just getting money for college. It’s a process in which you provide information that explains your financial situation. In return, you are presented with a choice to take on certain forms of aid. There’s more than just one source of financial aid, so it can get pretty confusing.
In general, there’s a certain way to approach financial aid. Usually, it starts with filing the Free Application for Federal Student Aid (FAFSA), but as mentioned, there are even more options to choose from. Here’s a breakdown on the approach.
Start With The FAFSA And Federal Aid
The first step in the financial aid process involves completing the FAFSA. It’s done online using documentation on hand that describes your financial situation (if you’re under 25, your parents’ financials as well).
Some of the documentation you’ll be asked to provide include tax returns, bank account statements, and paperwork on any investments or other cash-type assets that could be used to pay for an education. You’ll also be asked to prove your U.S. citizenship or legal presence in the country as well.
All of this might sound a bit intrusive, but the FAFSA offers access to federal financial aid, which offers thousands of dollars for school. Federal aid comes with benefits that can’t be found elsewhere including flexible repayment options, money-saving benefits, and more. The FAFSA and federal aid is the place to start.
Common types of federal financial aid include Federal Pell Grants (a grant for low-income applicants that does not require repayment), subsidized Stafford loans (a student loan that covers interest while you’re in school), unsubsidized Stafford loans (same as subsidized, but you’re on the hook for interest), and more.
Always Look for Scholarships And Grants
The federal government isn’t the only place where you can get free money (excluding federal student loans). Third party organizations, charities, and service organizations offer thousands of scholarships every year. Scholarships are the ideal form of financial aid. Realistically, you should be applying for multiple scholarships each year.
Scholarships are targeted at various different individuals. Some opportunities are based on academic performance and others run the gamut from hobbies to ethnicity and various club memberships. Regardless of who you are, where you come from, or what kinds of things you like to do, there is probably a scholarship out there for you.
Scholarships are almost always competitive. The money doesn’t need to be paid back, so it’s a highly sought-after resource that many other students will be applying for. In order to be successful, you’ll want to ensure that your applications are in early with all of the required essays, forms and other documentation completed correctly. You can find scholarships to apply for all year round, and there are entire websites dedicated to helping you find the right one for your needs.
Find Alternate Sources To Fill The Gaps
If you’ve exhausted all your federal financial aid and scholarship options, but still need funds, then it’s time to look at private student loans. These types of loans are available from lending institutions and banks and they should be a last resort.
It should be made clear that private student loans are not as desirable as scholarships, grants or even federal student loans. They come with fewer benefits, fewer repayment options, generally higher interest rates compared to federal loans (especially if you’re new to credit), and harsher penalties for missing payments.
Despite this, they can sometimes be the difference between being able to cover tuition or dropping a semester. That being said, it pays to do your research if you need to rely on a private student loan. There are plenty of lenders in the private sector and they all offer different terms. Finding the better terms is obviously ideal. However, it’s also hard for students to qualify for a private loan in general, so you may need to do your research on lender requirements and your credit standing before trying to apply at all.
While you are preparing for college or preparing to graduate, keeping track of financial aid can seem a bit overwhelming. At the end of the day, it’s there to help you pay for college, making it a necessity for many. Despite being so essential, financial aid carries risk and understanding that risk is a key component to navigating the system.
If you take the time to understand that process, prepare for it, ask for help when you need it and follow the criteria, then you’ll find that not only is it not very confusing anymore, but you’ll be maximizing the amount of aid you can receive and minimizing your risk. That means saving you money in the long run.
Author Bio: Andrew Rombach is a Content Associate from LendEDU – a consumer education website and financial product marketplace. Andrew learned plenty about financial aid from his own experiences with student loan debt in college. Now he covers a range of personal finance topics in general.
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