Top Ten Financial Aid Application Mistakes

What do parents or guardians do to contribute to the headache of applying to financial aid?  Among the errors that this blog will discuss, parents do not exercise enough caution when filling out financial aid forms as well as not weigh their college options strategically when their children receive financial aid.  What other mistakes do they commit?

What do parents or guardians do to contribute to the headache of applying to financial aid? They do not exercise enough caution when filling out financial aid forms as well as not weigh their college options strategically when their children receive financial aid, among other mistakes.Rushing through the application process

If you think that applying for financial aid is on a first come, first served basis, think again.  The faster (and less careful) you apply for financial aid, the more likely you are to commit errors.  Remember: you have a deadline for submitting the financial aid forms, and the Department of Education has a deadline for informing you of your eligibility in the form of a Student Aid Report (SAR).  You do not want to submit your forms a second time with corrections and, therefore, waste even more time.

Underestimating your financial aid eligibility

You should not base your child’s college choices just on the colleges you can afford, lest your child is fine choosing among state schools or community colleges over their dream college.  Furthermore, do not base the financial aid your child may or may not receive based on the aid your child’s friends did NOT receive.  Their financial (in)eligibility is not tied to your child’s.

Overestimating your financial aid eligibility

On the other hand, assuming that your child is eligible for 100% tuition-covering aid is unrealistic and potentially very tragic for your child.  What would you tell your child who applied to expensive colleges, only to find out that they are eligible for much less aid or, worse yet, none at all?

In order for your child to have at least one affordable college choice that requires little or no financial aid, your child should apply for a state-supported college in your home state.  However, even if their dream college is not financially possible, let them apply to it, anyway, but with the clear understanding of the financial infeasibility of attending it.

Strategy: If your child’s high school limits the number of colleges to which your child can apply, have them apply to schools that seek similar grades/GPA and SAT/ACT scores.  If your child is accepted to these colleges, you can leverage the school with the most generous financial aid package against the school your child prefers, and they may counter with a more generous aid package still.

Thinking that all state schools are inexpensive

Given the rising cost of college over the years, the tuition of out-of-state public schools is almost on par with private schools.

Counting on relatives

Never rely on your relatives paying for your tuition.  They live their own lives and deal with unexpected expenses that the promised tuition must cover instead.  Therefore, even if a relative has agreed to pay for your child’s tuition, apply for financial aid, anyway.  In the worst case scenario, financial aid will cover tuition expenses, but in the best case scenario, the windfall can help you pay off  your financial aid debt sooner.

Not applying to expensive schools

Do not apply to colleges based on the cost of the school’s tuition alone.  Why?  Because need for financial aid is based on the difference between the school’s cost and what the family is expected to pay.

College A: $40,000 per year
College B: $20,000 per year

Based on the aid formula, let’s assume the family is expected to contribute $15,000 per year
Therefore, the family would be eligible for the following:
College A: $40,000 – $15,000 = $25,000 in aid
College B: $20,000 – $15,000 = $5,000 in aid

Conclusion: Financial aid packages may help lessen the overall cost of tuition as long as you can demonstrate financial need.

Taking out a personal loan

Personal loans through a bank maybe expensive in the long run.  Go to the financial aid office of the college your child attends for better, much more attractive financing arrangements.

Being afraid of debt

Your child does not have to pay off college loans in the early parts of their careers if you apply for a Perkins Loan or subsidized Stafford Loan.  These loans do not charge interest or require repayment of the principal until a few months after the child graduates, leaves school, or drops below half-time status.  Turn to these loans instead of, for example, a home-equity loan, which charges interest immediately.

Responding to a college’s offer too soon

Do not respond to a college that sends you a financial aid package first.  Instead, wait until the financial aid packages from all the schools your child was accepted to have arrived.  Your strongest leverage is a competitive package from a similar-caliber school.  That aid package could be used as a bargaining chip to get a better deal from your child’s first choice.

Waiting too long to think about financial aid

Your child’s senior year in high school is not the best time to think about making financial aid decisions.  Instead, begin planning your child’s financial aid eligibility when they are in 10th or 11th grade, starting with the effect of your income, assets, debts, expenses and retirement provisions.  Consult a financial aid/college money guidebook or, better yet, hire an independent aid consultant.  Keep in mind: the criteria for how state schools distribute aid is very different from those for private schools.

You want to give yourself a head start of a few years so that you can understand financial aid, including how to fill out a FAFSA application.  Yes, a few years.  During your child’s sophomore and junior years in high school when they are still wondering where they’d like to go to college and what to study, you can do your own homework based on their tentative choices for college.  By the time they do apply for college in their senior year, you will have already determined ahead of time how you would finance their college education.  By getting a head start on understanding financial aid and avoiding the most common financial aid mistakes parents make, you will help your child get the best financial aid package possible.

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Francis M. Unson


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