Step 1 – What is Financial Aid? Understanding that financial aid is both free money and student loans is an important first step to understanding the financial aid process and all that is involved. Go into the process with your eyes wide open. There will be out-of-pocket costs for almost every student and your financial aid package will probably include loans. That doesn’t mean you have to take the loans, but they will be part of the package. Many families misunderstand financial aid and think it will cover all the costs and the reality is it probably won’t. It’s best to approach this with a clear view and expectation.
Step 2 – the FAFSAThe FAFSA or Free Application for Federal Student Aid (FAFSA) is by far one of the most important steps toward earning financial aid for college. The FAFSA became available Oct. 1 so if you haven’t filed yet you should make that your top priority this month.
The FAFSA is the gateway to federal and state aid, and can open doors for institutional and private scholarships and grants as well. No matter what you should ALWAYS file the FAFSA, and file it every single year you will attend college.
Step 3 – ScholarshipsScholarships are step 2 but this is where the process can continue on and on in infinity. The scholarship step actually has many mini-steps.
- Institutional Scholarships – every college you apply to should have a scholarship program. Talk to the admission and financial aid offices and ask about the process. Is it one applications are there several applications? Is there a special scholarship day or event on campus you should attend? Garnering scholarships from the college you attend is huge because most are renewable each year you attend as long as you continue to meet the requirements. Talk to the schools, understand the process and complete the application.
- Private, Local Scholarships – If you are a senior in high school your very next visit on the financial aid tour of applications should be your school counselor’s office. Check out the listing of local scholarships that are available and start filling out applications. There are many local businesses and organizations that want to help seniors get a good start on their post-high school education. Apply for every single scholarship you can!
- Private Scholarships – Use online search engines and databases and look for scholarships you qualify for. This will take a lot of time but can be very rewarding. And every scholarship you earn is money you don’t have to borrow to cover the cost of college. Start with trusted sites such as www.icansucceed.org/scholarships and then branch out from there. Never pay for help with scholarships. You want organizations to award you scholarships; you should never have to pay to earn a scholarship.
- Continue searching for scholarships every year you are in college. Scholarships aren’t just something you do senior year. Keep working throughout college. Look for department scholarships as you declare a major, or internships or special programs as you advance through your degree and edge closer to graduation.
Step 4 – Award Letters
Each college will give you an award letter outlining your financial aid eligibility at each school. Part of being aware of financial aid is making sure you are aware of the cost of college and how much of that cost is covered by financial aid. This goes back to Step 1 – there will be out of pocket costs and student loans. The question is, is the package manageable or will it be too much for you to take on? If you aren’t sure just remember a good rule of thumb – if you have to borrow for college, your responsible borrowing limit is your intended career’s first year starting salary. Don’t borrow more than you will make your first year out of college.
Example: If you will make $25,000 your first year out of college that is your borrowing limit for your entire college experience. If you are looking at a traditional four-year experience that means you have a first-year borrowing limit of $6,250.
If you need help analyzing and comparing award letters you can talk to the Iowa College Access Network (ICAN) at 877-272-4692. They offer free appointments to discuss award letters.
Step 5 – Student Loans (maybe)If you do find yourself in need of student loans just remember to go back to Step 4 and calculate your borrowing limit before making any decisions about loans. Then compare and consider your options. Look at interest rates, repayment rules, and borrowing limits. All students are eligible for Federal Direct Loans. These loans have fixed interest rates and can be deferred while you are in school.
Private loans are loans that are financed and managed by a private loan company or financial institution, not the US Department of Education. Each private loan can have a different rate or set of terms. It’s up to you to compare your options and make the best choice for you. Again, ICAN is great at explaining your options if you need help.
Understanding the different facets of financial aid will make you aware of all your options and help you make informed decisions. And remember – if you start to feel overwhelmed by this process, there are always people willing to help – just don’t pay for it.
Example: If you will make $25,000 your first year out of college that is your borrowing limit for your entire college experience. If you are looking at a traditional four-year experience that means you have a first-year borrowing limit of $6,250.
If you need help analyzing and comparing award letters you can talk to the Iowa College Access Network (ICAN) at 877-272-4692. They offer free appointments to discuss award letters.
Step 5 – Student Loans (maybe)If you do find yourself in need of student loans just remember to go back to Step 4 and calculate your borrowing limit before making any decisions about loans. Then compare and consider your options. Look at interest rates, repayment rules, and borrowing limits. All students are eligible for Federal Direct Loans. These loans have fixed interest rates and can be deferred while you are in school.
Private loans are loans that are financed and managed by a private loan company or financial institution, not the US Department of Education. Each private loan can have a different rate or set of terms. It’s up to you to compare your options and make the best choice for you. Again, ICAN is great at explaining your options if you need help.
Understanding the different facets of financial aid will make you aware of all your options and help you make informed decisions. And remember – if you start to feel overwhelmed by this process, there are always people willing to help – just don’t pay for it.
Brittania - ICAN Hiawatha Center
