One to three weeks after you submit your FAFSA you will receive a Student Aid Report (SAR) that summarizes the information you provided on your application. It is a very integral part of that financial aid documentation.

If you provide your email address when you file, you will receive your SAR via email. If you file a paper FAFSA, you will receive a SAR via postal mail. If you have an FSA ID (username and password) and your FAFSA has been processed, you can log in at the FAFSA site to view SAR information. The school(s) you list on your FAFSA will have access to your SAR data electronically a day after it is processed.

 The SAR summarizes the information the family provided on the FAFSA and indicates the family’s official Expected Family Contribution (EFC). The SAR also contains a four-digit Data Release Number (DRN). You will need the DRN if you choose to allow your college or career school to change certain information on your FAFSA. Both items will be listed in the top right corner of the SAR.

A number of applications are selected randomly each year for verification. If you were selected for verification you will find an asterisk (*) after your EFC and instructions on what you need to do. Be sure you keep copies of all documents used for your FAFSA so if you are selected for verification you will have these for reference. 

When you receive your SAR, review it carefully to make sure it’s correct and complete. The school(s) you listed on your FAFSA will use your information to determine your eligibility for federal and possibly nonfederal financial aid. A school may ask you to verify the accuracy of the data you provide on the FAFSA, so you need to be sure the information is correct. If you don’t have any changes to make to the information listed on your SAR, keep it for your records. If you review your SAR and find a mistake, you will need to correct or update your FAFSA as soon as possible.

Once colleges have information from your FAFSA, they can calculate your financial aid. Financial Aid is the Cost of Attendance (COA) minus Expected Family Contribution (EFC) financial need. This formula is the starting point for college to calculate your financial aid package. COA is an estimate of what it will cost you to go to school, in most cases for two semesters or three quarters which includes tuition & fees, room & board, books, supplies, transportation, and living expenses. The COA is only an estimate, your actual life style at college may be different. EFC is generally an estimate of what your family can pay for college as reported on your SAR.

The financial aid office at colleges will decide how much financial aid you are eligible to receive and prepare a custom financial aid package. Schools will first award need-based aid, such as grants and subsidized loans, then award non-need-based aid, such as non-subsidized loans.

When a college’s award letter does not meet the student’s financial needs, either in the total amount of aid or the type of aid, the student can appeal the award to the college. Most colleges have an appeal process that allows students to request a review of their financial aid eligibility and corresponding financial aid award offer. Each college determines its own regulations for this process, and students should be aware of a particular college’s procedures. The best time to file an appeal is soon after the award letter is received. Keep in mind that as students who are offered aid packages accept at other colleges, the declined award money may increase the funds available for other students.

• The student should contact the college’s Financial Aid Administrator, FAA, to discuss their situation and request for appeal. It is preferable that the contact is made in person, but if this is not possible, the contact should be made by a telephone call. The “personal touch” is important to a successful appeal.
• If the student does appeal an award letter, the student should be specific in requesting additional funds. The student should clearly state the reasons for the appeal, and request a specific amount of money. The student should write the request and submit any required documents with the letter of appeal (and keep a copy).
• In the appeal letter, the student should ask the FAA to exercise “Professional Judgment.” Professional Judgment is the authority given to the college’s FAA to change the family’s financial and household data in any way that would more accurately measure the family’s ability to pay for educational costs.
• Special circumstances that might warrant a change in aid include unusual medical or dental expenses, loss of employment, divorce or separation, injury or the death of a parent, significant change in income, change in the student’s status from “dependent student” to “independent student” and natural disasters.
• The appeal of an award letter has a much greater chance of success if the student has the type of talent, such as academic, athletic, musical, etc., that the college needs to fill its enrollment needs. In the appeal letter, the merit of the student should be emphasized to the FAA. This is especially true at private colleges that seek to attract students with merit.

 Example award appeal letter:

Heather wants to appeal her financial aid package from Carnegie Mellon University. She called Mrs. Smith, the FAA at CMU to discuss her appeal indicating her parents’ employment situation that was not adequately reflected in the FAFSA information as it only requires one year of financial information. She also told Mrs. Smith that CMU is her first choice and about the science awards she recently won. Mrs. Smith instructed Heather to write her a letter and provide documentation for her appeal. Heather sent Mrs. Smith the letter below.

Dear Mrs. Smith, FAA
Carnegie Mellon University

Per our recent telephone conversation, enclosed is my Student Aid Report, and a copy of the award letter that I received from Case Western University.

As we discussed, my family’s present financial situation is not good, and it would be very difficult for me to attend Carnegie Mellon unless there is a major reconsideration for financial assistance. Both my mother and father recently obtained new jobs in 2015, and are trying to catch up with the debt incurred while unemployed for over a year each. This has forced me to take a serious look at the Case Western Reserve Award as an economically viable alternative to Carnegie Mellon, which as I mentioned, is my first choice.

You stated that I should forward the attached documents to you personally and that you would review them and do everything possible to provide additional assistance for me. I would be very grateful for any additional aid Carnegie Mellon would be able to offer.

I hope I have demonstrated in my application my dedication to study of biology. I think this is further demonstrated, as I mentioned, by my recent science competition award. I believe Carnegie Mellon is the right university for me to develop my talents.  However, as the enclosed Case Western Award shows, other schools have committed substantially more money for my education. If there is any way you can meet Case Western’s award, I will absolutely commit to attending your school for the 2016-17 year.

Please contact me as soon as possible so that we can make the appropriate arrangements for my future.

Sincerely,

Mary Jones

College costs have escalated beyond the reach of many families today.  While the cost of in-state public universities hovers around $30,000 a year, private school costs have now reached the $70,000 mark. As a result, many of these private colleges now use financial aid as a recruiting tool for students that fit the school’s profile. This phenomenon is called “preferential packaging.” Preferential packaging merely means that colleges will offer the most advantageous financial aid packages to recruit students to their school. Private colleges use this procedure because they must compete with state universities on price.

This preferential packaging procedure is straightforward. The student that the school most wants to recruit will receive the maximum amount of grants and scholarships, and the minimum amount of student loans. Usually the upper 25% of the student class. The balance of the admitted students will most likely receive a package consisting of loans, including parent PLUS loans.

Furthermore, the college may not even meet the student’s need in full. This procedure is called “gapping,” meaning that the student will receive a limited financial aid package. Even worse, some students may go on a waitlist and are only offered that limited financial aid package if they replace students that decide to attend another college.

WHAT THIS MEANS TO YOUR FAMILY

If money is a factor in your student’s college search and it will impact your final choice, you should be sure to apply to colleges where you are clearly in the top 25% of the applicant pool. Otherwise, you will surely be offered that “limited financial aid package.” Colleges are increasingly reluctant to part with their money to enroll students who do not raise their academic profile. The world of preferential packaging may not seem fair, but it’s the system almost every private college uses today for admissions.

THE GOOD NEWS

As colleges work to shape their freshman classes and enroll students who represent the college’s profile, highlighting the student’s unique niche is an excellent thing to do. If you can figure out how the student fits into the college’s “community” in a unique way, let the college know it. If the student’s grades and test scores are not in the top 25% of the schools recruiting profile, then highlight extracurricular activities, unique talents, and community service.

IT’S YOUR CHOICE

If a private college goes out of its way with money to enroll a particular student, there must be a good reason. If a particular private college really wants the student, they will find a way to make it financially beneficial to attend. Sometimes to the point where the private school’s cost is less than a state university.

March 2018

A recent study by the National Association of College and University Business Officers found that over 50% of incoming freshmen received these tuition discounts that reduced their tuition by as much as 40%. In many cases, these institutional funds lowered private college tuition costs into the same price range as public universities.

Why do colleges offer tuition discounts? It allows them to:

• Increase ratings average
• Boost net revenues
• Improve the diversity of the student body
• Attract legacies (students of alumni)
• Attract students from wealthy families (increase alumni contributions)
• Attract better students
• Compete with public university prices
• Increase freshmen class size

Understanding how and where to find those colleges that offer money inducements can give students an opportunity for a quality education while reducing their overall college costs.

Here’s How It’s Done

When the college sets a sticker price for their tuition, higher income families naturally pay full tuition, while lower income families are subsidized with financial aid. This is how the system has worked for years and colleges use this method to attract a more socio-economic group of students.

In reality, though not all higher income families pay full tuition and not all lower income families will be offered enough financial aid to pay for college.

Colleges actually put incoming freshmen into pools and set a range of tuition prices based on those pools. Each family is put into a pool based on the amount of income and assets they show on the FAFSA and/or PROFILE financial aid forms. Then the college uses a mathematical process called “financial aid leveraging” within each pool to attract and enroll the best students into their college while using the minimum amount of financial aid to do it.

In other words, they will take a $40,000 scholarship that they normally give to a needy student in a lower tier pool and break it into four scholarships of $10,000 each for wealthier students in an upper tier pool. These wealthier students would probably go elsewhere without the $10,000 tuition discount.

“Financial aid leveraging”“ is a game colleges play, and they play it very well. And if you know how to play the game, you can avoid paying the full sticker price, even if you’re a millionaire.

How You Can Get Your Share of College Tuition Discounts

Institutional aid is not guaranteed. Students wishing to be considered for institutional aid must position themselves correctly to be recruited by private colleges. Proper positioning begins early in high school and involves the following seven factors:

1-Good Grades

Good grades are self-explanatory. The presumption is that good grades in high school will mean good grades in college and ultimately graduating from college and becoming an alumnus. A student should have a minimum of a 3.0 GPA in high school to be in the running for a tuition discount.

2-SAT/ACT Test Scores

The SAT/ACT college prep test scores are merely qualifiers, but colleges have no other way to compare the academic abilities of a student from Ohio with a student from California. A student should have a minimum of 24 ACT or 1250 SAT test score to be in the running for institutional aid.

3-Solid Resume of Achievement

Throughout their high school years, students should build a solid resume of achievement and list any civic groups or community service projects that they were involved in. This will demonstrate to the colleges that the student is well rounded and is active in student affairs outside of normal studies. Treat this exactly the same as preparing a resume for a job! Send a resume with the application to each school.

4-Apply Early in the Academic Year

Apply to the various colleges early in the senior year of high school (September-December). The rule of thumb here is the earlier the better! Remember, once a particular school begins to fill the upcoming year’s freshman class, the need for a private college to offer institutional aid diminishes.

5-Apply to Schools that Recruit the Same Students

Private colleges compete with each other for the same students and are more likely to give significant institutional aid if they know the student is also applying to a competitive school.

6-Apply to Schools that Have a Low Yield Factor

Number of students actually enrolled ÷ number of student admitted = YIELD

Look to apply to colleges that have a high amount of students that are admitted, but a lower number that actually enroll. Enrollment is key to a college’s survival. Many colleges select students for admission to their school only to have them enroll and attend another. Private colleges have a constant battle to fill seats every year. The second-tier private colleges are even more challenged because they must compete with the low cost of public universities and the popularity of the elite private (Ivy League) schools. As a result, the student has a high probability of receiving institutional aid from private colleges with a low enrollment yield percentage.

7-Apply to 6-8 Colleges

Students should apply to a minimum of 6-8 colleges. At least four should represent private colleges that compete with the student’s first choice college. Applying to several colleges gives the student the opportunity to receive institutional aid from one college and use that award to ask for a similar, or better, award from the college the student would prefer to attend.

The bottom lines is… there’s really two prices for college that families pay:

1. one price for families that have a financial game plan, and
2. a higher price for those who do not.

There are a lot of different forms of grants and scholarships available for students including government grants, college grants, and private scholarships. The advantage of grants and scholarships is that you do not have to repay them. Be careful especially with college-related grants. Often they are offered as 4-year scholarships but are dependent on the student maintaining a certain GPA. Many colleges offer aid based on grades so the better your grades (both in high school and in college), the more your aid package may be.

Government Grants

• The Federal Pell Grant program provides need-based grants to undergraduate and some graduate students. The grants can be used at any one of approximately 5,400 participating colleges. Grant amounts are dependent on the student’s expected family contribution (EFC), the cost of attendance (COA), the student’s enrollment status (full or part-time) and whether the student attends for a full academic year or less. The Pell Grant is capped for all students at $5,920 for the 2017/18 award year. Students must apply to FAFSA in order to qualify for a Pell Grant.
• The Federal Supplemental Educational Opportunity Grant (FSEOG) program provides need-based grants to low-income undergraduate students. This grant can be used at any one of approximately 3,800 participating colleges. When making FSEOG awards, the institution must give priority to those students with “exceptional need” and those who are also Federal Pell Grant recipients. Awards run between $100 and $4,000/year, depending on need, the amount of other aid you get, and the amount of funds available in your school. Students must apply to FAFSA in order to qualify for a FSEOG. These grants run out quickly so the sooner you complete the FAFSA application the more likely you will receive this help.
• Pennsylvania Higher Education Assistance Agency (PHEAA) administers the PA state grant program, which offers grants to qualifying students. Students must apply to FAFSA in order to qualify for a PHEAA grant. These grants have higher awards if you are attending a college in Pennsylvania. PHEAA also offers summer grants for some students who are taking at least 6 credits, are PA residents, are making satisfactory academic progress, and have the FAFSA form filed. Students will have to pay tuition to the college first as the grants may not be determined prior to the time the bills are due. You can complete the application online.

Private Scholarships

Private scholarships are more readily available than you may think, especially in your local community. These private scholarships are very competitive, and scholarship judges may spend just a few precious minutes or even seconds reviewing the scholarship application. With such a finite amount of time to make a lasting impression on these important decision makers, it’s crucial that the student makes the most of this opportunity. To increase your chances of winning a private scholarship follow these tips:

• Search in your own community first. Find out about these kinds of awards by contacting your local chamber of commerce, community chest, Rotary, etc. and by reading your community newspaper, or searching for local Foundations. There are many free internet scholarship searches available.
• Talk with your high school guidance counselor about private scholarship. They will have resources to help you with the process.
• Never pay for an online private scholarship search. You can find private scholarships on your own, and applying for these private scholarships should always be free.
• Choose quality over quantity. You’ll need to prioritize which scholarships to apply for. Instead of trying to apply to as many scholarships as possible, try to apply to the scholarships that best fit your strengths, interests, and qualifications.
• Understand the purpose and use of the scholarship. Scholarships may be designed to encourage students to enter a specific career field, to reward students who contribute to their communities or to help underserved students enter higher education. Find out what costs the scholarship can cover. Some can be applied toward the entire cost of attendance while others are restricted to tuition and fees only. Use this information to guide how you write your scholarship application.
• Write an essay that demonstrates why you should win. The scholarship application gives the scholarship judges a sense of who you are and what’s important to you. Think about what skills and qualities the scholarship judges seek and then describe how you match them.
• No matter how strong of an applicant you are, it would be difficult for a scholarship judge to overlook spelling or grammatical errors. Proofread your application and essays carefully, and have someone else do the same.
• Practice for interviews. Ask a friend or parent to do a mock interview with you to prepare for the real thing.
• Ask friends or family members to help you find scholarships, keep track of deadlines and give you feedback on your applications and essays.
• Brag a little about yourself. You need to let your best self shine through in your scholarship applications, don’t be bashful about discussing your accomplishments.
• Consider small awards. When there are scholarships worth tens of thousands of dollars, you might think you shouldn’t bother with the “small potato” awards. However, a $1,000 scholarship is $1,000 less that you will need to come up with for college.
• There are scholarships based on leadership, art, music, theatre, community service and more, not just for academics or athletics.
• Answer all the questions in your essay. There’s a reason why the scholarship organizations provide the essay questions. They want to know your answer. An essay can be very well written, but if it doesn’t answer the question asked, then it’s not going to win.
• Plan ahead. Taking time to review your work will take the pressure off, and allow you more time to complete an application.

Some forms of need-based financial aid are reduced when a student wins a scholarship because the private scholarship essentially reduces the student’s financial need. If you are notified that your financial aid package is being reduced, talk with the financial aid office immediately. You may be able to negotiate no reduction in your financial aid. If that is not an option, ask the college to reduce the student loans or work study, not the grants. Replacing student loans with a private scholarship will allow the student to graduate with less debt.

If you are planning to apply for private scholarships, research the college’s policy on private, outside scholarships. Also ask the scholarship provider if they can “forward” the scholarship to a future college year when the student’s loans automatically increase by contract.

Merit scholarships are not just for ‘A’ students

Many parents worry that their children must be stellar students to receive scholarships from schools. This widespread assumption has created tremendous pressure on students to be perfect. In reality, about two-thirds of students who attend either a public or private college or university don’t pay full price thanks to federal and state grants as well as institutional awards.  At private colleges and universities, nearly 89% of students receive scholarships and/or grants from the schools themselves.

At an historic level is the average tuition discount that freshmen are capturing at private schools. It’s now at 53%. Here’s an example of the average discount: If the tuition at a private school were $40,000, the student receiving the average discount of 53% would pay just $18,800.

The most accomplished teenagers don’t always get the top scholarships

The awards that a top student receives will depend upon the financial ability of their parents and where they are applying to college.  While the vast majority of students at private schools receive price discounts, this is not true at many of the most highly ranked and wealthy private institutions.

Elite schools like the ones above are in high demand by wealthy families and take advantage of this reality. These schools are deluged with high-income applicants, so they can create their freshmen classes with a large percentage of full-pay students. Parents of a child who gets into Harvard, Yale, or Stanford, for example, are going to be more willing to pay full price for a bachelor’s degree from these schools than they would at a school that isn’t a prestige name. Because of this strong demand, these institutions, including the ones in the list above, don’t have to award merit scholarships, or they can get by with offering a modest number.

Private schools that provide few or no merit scholarships can be excellent institutions for smart students who require a great deal of financial help to attend college. A student of modest means who gets into a school like Amherst, Johns Hopkins, or Yale should receive an excellent financial aid package.

You can’t assume, however, that all schools that provide few or no merit scholarships will automatically provide excellent need-based aid packages. Boston College, for instance, is typically not nearly as generous with its need-based aid packages as some other schools in its peer group.

High-income students who attend elite research universities and the most highly ranked liberal arts colleges will usually pay full price or close to it. This reality can pose a problem for smart teenagers aiming for elite schools, but whose parents have not saved enough to pay for a school that costs $65,000 or $70,000 a year!

Many colleges offer Work Study options as part of their financial aid package. PLEASE IGNORE THIS PART OF THE FINANCIAL AID PACKAGE when you are calculating your aid!!!  It is NOT aid and it does not count towards your overall payments.  Some students misunderstand and think it means they automatically get a job when they arrive on campus. This is generally not the case. The idea of Work Study is that there are certain jobs that are only available to students who qualify for Work Study, but students still need to apply to get one of these jobs. And there are often more students who qualify for Work Study than there are special jobs. If you want to work while in college it’s good to have these extra jobs available to you, but you still need to get out there and find the right job. The sooner you do that, the better.

Here are eight things you should know about the Federal Work-Study Program:

1. Being awarded Federal Work-Study does not guarantee you a job. Accepting the Federal Work-Study funds you’re offered is just the first step. In order to receive those funds, you need to earn them, which means you need to start by finding a work-study job. Some schools may match students to jobs, but most schools require the student to find, apply for, and interview for positions on their own, just like any other job. Either way, students who are interested in work-study or who have already been awarded work-study should contact the financial aid office at their school to find out whether positions are available, how to apply and how the process works at their school.

2. Not all work-study jobs are on campus.  The availability of work-study positions includes community service options with non-profit employers, which means some work-study jobs are available for off-campus work. (An example: reading to or tutoring children at local elementary schools.) If you are curious about securing a community service work-study position, contact the financial aid office or the career center on campus.

3. Work-study funds are not applied directly to your tuition.  Unlike other types of financial aid, work-study earnings are not applied directly to your tuition and fees. Students who are awarded work-study receive the funds in a paycheck as they earn them, based on hours worked, just like a normal job. These earnings are meant to help with the day-to-day expenses that students have and are not meant to cover large costs like tuition and housing.

4. Work-study jobs may be limited.  You may still be able to work on campus without work-study if your school does not have enough work-study funds or positions to cover all on-campus student employees. Many campuses offer jobs for students with or without work-study. Check with the student employment office on your campus to find out what is available.

5. Federal Work-Study is not guaranteed from year to year.  There are several factors that can determine whether or not you receive work-study from year to year. These include your family income or financial need, whether you used the work-study funds that were offered to you in a prior year, and/or how much work-study funding your school receives that year.

Contact your school for specific awarding criteria if you are interested in work-study. Typically, students who file the FAFSA form early and answer that they are interested in Federal Work-Study will have a better chance of being awarded funds from the program.

6. Pay may vary.  Work-study jobs vary in qualifications and responsibilities, so the pay will depend on the job that you are hired to do. Pay may also depend on your school’s policies and/or the minimum wage requirements in the state.

7. Hours worked may vary.  How many hours you work each week will depend on the type of job you get and your employer’s expectations. Most employment positions for students, however, will work around your class schedule and only require between 10 and 20 hours per week, but again—that can vary!

8. Work-study earnings are removed from your FAFSA calculation.  One of the benefits of earning income through a Federal Work-Study position is that those earnings do not count against you when you complete the FAFSA form. There’s a question on the FAFSA form that asks how much was earned through work-study during a particular tax year; make sure to answer that question accurately so the amount can be factored out. If you do not know how much you earned, you can contact the financial aid office at your school for help.

There are many different types of loans for you to consider. You may be awarded government loans or loans through your school. You may take out a private loan though a bank, credit union, or institution of your choice. Of course you may see if you can find a friend or relative who would be willing to loan you money. All loans need to be paid back. And keep in mind that if you run into financial difficulty later in life, and need to declare bankruptcy, government loans are often not forgiven. Think carefully before you take out any loans.

Parents, after you’ve tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust his or her borrowing options before you consider taking on any debt to pay for college. Putting yourself into debt to pay for your child’s college education may have disastrous effects on your financial future. There is no such thing as financial aid for your retirement.

If you are offered loans as part of your financial aid package, you do not have to accept all of the money. Refer to your award letter to determine what amount will be sufficient. For some colleges, if a need comes up later in the academic year you can go back and ask to borrow some of what you originally declined. Sometimes the Perkins Loans will run out of funding so you can’t do this, but there will always be money for the Stafford Loan. If you think this is a potential issue, discuss this with the college.

Government loans

• Subsidized Federal Student (Stafford) loans are awarded on the basis of financial need. You won’t be charged any interest before you begin repaying the loan. The 2017/2018 interest rate is 4.45%. These loans need to be repaid and interest starts to accrue starting about 6 months after graduation.
• Unsubsidized Federal Student (Stafford) loans charge interest from the time the money is first disbursed until it is paid in full. The interest is capitalized, meaning you pay interest on any interest that has already accrued. One way to minimize how much interest accrues is to pay the interest as it accumulates. The 2017/2018 interest rate is 4.45%. These loans need to be repaid starting about 6 months after graduation.
• PLUS loans are federal loans that parents of dependent undergraduate students and certain graduate students can use to help pay for college. The Department of Education is the lender. The borrower must not have an adverse credit history. The 2017/2018 interest rate is 7.0%. Once you’ve taken out a PLUS loan, you must repay it, even if your child doesn’t complete their degree. The parent is expected to begin making payments on the loan immediately after you’ve received the last disbursement, while your child is still in school. Also, a PLUS loan cannot be transferred to the student later. You, the parent, are responsible for repaying the loan.  A very specific page explains all the steps for a PLUS loan – click HERE for that information.

Note: You are charged a fee for each federal student loan you receive. The loan fee is a percentage of the principal amount of your loan. This fee is deducted before you receive any loan money, so the loan amount you actually receive will be slightly less than the amount you have to repay.

Private loans
You have the option of going to a bank, credit union or other institution and take out a private loan. You will need to qualify through whatever process the lender uses. This may require a co-signer.  It may take 30-45 days to approve; the sooner you can start this process the better. If you are approved, set a closing date for a few days before the bill is due so you don’t start the loan (and interest accrual) any sooner than necessary. For most lenders, the loan money would go directly to the parent who then pays the college bills. Some lenders make loans specifically for college bills, others would make a personal loan that could generally be used for any purpose.

Important tips on taking out loans

• Do not take out more loans than you can pay back. Loans of $3,000-$4,000 per semester sound manageable, but if you take out this size loan every semester for 4 years you are facing $24,000-$32,000 in loans upon your graduation and some kids need 5 years. Obviously the fewer years it takes, the less borrowing, fewer tuition increases and fewer potential years of lost wages from not graduating and getting a job. Students often take all the loan funds offered to them, not realizing if they take longer to graduate they may run out of loan borrowing potential not only annually but on an aggregate level. Do the long-term math before you commit to a loan.  See note below!
• Keep copies of ALL loan documents. It is very important that you keep complete records of all your financial aid documents in a secure place. Start the first time you accept a loan by putting together a file folder that includes copies of your promissory note and the award letter that indicates the amount you are agreeing to repay. Update your file with each new transaction, and regularly review these documents to help you keep track of your debt. By keeping track along the way, you will know what payment you ultimately will be facing and then you can make an informed decision whether it is wise to take on more debt. The amount of monthly payment that you will be comfortable with is a personal choice that only you can make, and having your information organized and accessible will make that decision a little easier.
• Should I apply for a private loan? Sometimes yes. This may sound opposite of what you’d think but if you were denied enough aid, then go ahead and apply. For many colleges if you apply for a loan and are denied the loan then you may be eligible for more assistance from the school. You just have to let the financial aid office know that you’ve been turned down for the loan. Sometimes the extra assistance will be scholarships, sometimes it will be loans, but the interest rate will be lower rate than private loans.
• Do I have to accept the whole amount of a federal student loan offered? You do NOT have to borrow the maximum amount of federal student loans each year, you can request a lower amount. Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying your school. After your loan is disbursed, you may cancel all or part of the loan within certain time frames. Your promissory note and additional information you receive from your school will explain the procedures and time frames for canceling your loan.
• Should I apply to more than one source for a loan? It can be good to apply to multiple sources for your loans. Then you can decide which would be the best deal for you.
• Do not let your contact information become out-of-date. Graduating and moving away from campus? Changing your cell phone number or e-mail address? The company that handles the billing and other services on your federal student loan is your loan servicer. Make sure you let them know about these changes. Their services are provided free of charge, but they can only help you if they can reach you.

Paying Back The Loans

• Do not pay for help getting a student loan. You may have seen an ad on Facebook, or gotten phone calls or letters from companies offering to help you lower your payment or apply for loan forgiveness for a fee. If someone asks you to pay for these services, walk away (or hang up).  Contact your loan servicer for free student loan help.
• Choosing the right repayment plan. Your repayment plan determines your monthly student loan payment and how long it will take you to pay your loans back. There are several repayment plans, but your choice really comes down to what your goal is: to pay off your loan quickly or to have a low monthly payment. The 10-year standard plan will allow you to pay off your loan quickly and save you money in interest. An income-driven plan will allow you to have low monthly payments, but you will be in repayment for longer and pay more interest. If you take no action, you’ll automatically be placed on the 10-year plan.  The best way to compare your options is to use a repayment calculator (you do not have to log in to get the basics here).
• Set up automatic payments so you never miss a payment. Sign up for automatic debit through your loan servicer, and monthly payments will automatically be made from your bank account. You’ll often get a 0.25% interest rate deduction when you enroll.
• Make extra payments when you can. Interest on your student loan accrues every day. An easy way to save money is to pay extra whenever you can. You can pay off your loan faster if you tell your servicer that: the extra payments should not be put toward any future payments, and to apply extra payments to the highest interest rate loan. This will reduce the interest you pay, and over time, reduce the total cost of your loan.
• Do not pay late or miss payments. Late or missed payments hurt your credit score and will affect your future ability to get loans for things like a car or a home. If you miss multiple payments and go into default, your wages could be garnished and your tax refund withheld. If you’re overwhelmed or can’t afford your next payment, contact your loan servicer as soon as possible. They can recommend options to reduce or postpone your payments and keep your loan in good standing. The worst thing you can do it to just stop paying your loan.
• Postponing payments (without considering other options first) – There are two ways you can temporarily stop (postpone) your payments: through a deferment or forbearance.  They can be helpful solutions if you’re experiencing a temporary hardship, but they aren’t good long-term solutions because they don’t actually help you pay the loan back.  In most cases, interest on your loan continues to accrue (accumulate) even while you’re not making payments.  Eventually, it may capitalize (interest accruing on interest).  When you resume payments (which you‘ll have to do) your loan balance will be higher than before.  Deferment or forbearance may set you back even further, so it makes sense to consider other options.  For example, you may want to consider an income-driven repayment plan instead. Under these plans, if you’re single and make less than $1,486 per month, your monthly “payment” could be set at $0, which is technically what it would be with a deferment or forbearance. The benefit of choosing an income-driven plan over postponing payments is two-fold:

(1) Interest subsidies*, meaning if your payment doesn’t cover the interest that’s accruing on your loans, the government will cover some or all of that interest for you, and|
(2) Loan forgiveness is built into the plans, so even if you aren’t paying your loan back as quickly, there is light at the end of the tunnel.

* The government may pay the interest on certain types of loans if you choose a deferment.

• Can I postpone repayment of my past Federal Perkins Loan?  Yes but it’s not easy. Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, you are allowed to temporarily postpone payments on you loan, and no interest accrues. You may receive a deferment under certain conditions, such as unemployment.  Deferments are not automatic. You must apply for one through your school by using a deferment request form your school can give you. You must file your deferment request on time or you’ll pay a late charge.  For more details on deferments, contact your Perkins Loan repayment office.
• What if I’m not eligible for a deferment?  If you are temporarily unable to meet your repayment schedule but are not eligible for a deferment, you can receive forbearance for a limited and specific period. During forbearance, your payments are postponed or reduced. Interest continues to accrue; you are responsible for it.  Forbearance isn’t automatic either.  You may be granted forbearance in 6 to 12 month intervals for up to three years. You must apply in writing for forbearance through the school that made your loan or the agency the school employs to service your loan. You’ll have to provide documentation to support your request for forbearance. You must continue making scheduled payments until you are notified that deferment or forbearance has been granted.

• Loan 20,000 5% – for a 10 year payout you’ll be paying $212/month, with a total of $5455 in interest on top of the loan.
• Loan 25,000 5% – for a 10 year payout you’ll be paying $265/month, with a total of $6819 in interest on top of the loan.
• Loan 30,000 6% – for a 10 year payout you’ll be paying $333/month, with a total of $9967 in interest on top of the loan.
• Loan 40,000 5% – for a 10 year payout you’ll be paying $424/month, with a total of $10,911 in interest on top of the loan.
• Loan 60,000 6% – for a 10 year payout you’ll be paying $666/month, with a total of $19,934 in interest on top of the loan.
• Loan 80,000 10% – for a 15 year payout you’ll be paying $859/month, with a total of $74,743 in interest on top of the loan.
• Loan 100,000 6% – for a 15 year payout you’ll be paying $844/month, with a total of $51,894 in interest on top of the loan.
• Loan 100,000 10% – for a 15 year payout you’ll be paying $1074/month, with a total of $93,428 in interest on top of the loan!

US News and World Report, Sept 2014

• Choose the right major. College is expensive, the average Class of 2016 graduate has over $37,000 in debt. Think about what major you are choosing when you calculate the amount of debt you might be required to pay. If you work for a government or non-profit, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Plan. There are many jobs that won’t make enough money in a year to allow you the funds to start to repay such a debt. Look at a debt calculator in thinking about your future expenses, such as Crown. Check out our budgeting assistance page for other options for thinking about how to repay the debt. Contact us at cap@tecare.org for assistance thinking this through.  Here is a link to a great article about choosing the right major – from July 2013.
• Graduate in 4 years. Try not to take 5 years to graduate from college. Many colleges now encourage the students to take an extra year to finish school, but of course that means a full extra year of tuition, room, and board. You miss a class here, you retake a class there, you change your major and before you know it you have to take 5 or more extra classes, and need to attend an extra semester or more. If this happens, one much cheaper way to make up the credits is to go to a local community college during the summer. Confirm first that the classes you want to take will transfer back to your main school.
• Get good grades!  Many colleges offer academic scholarships to students based on their grades.  This can be true for students going into college as freshman (grades are based on high school results) as well as throughout your time in college.  Doing well in school can save you thousands of dollars as you head to college!
• Choose the right meal plan. All colleges offer a variety of meal plans. They tend to be a combination of a set number of meals and flexible spending that basically acts as cash at the dining facilities. Make sure you understand the details of the meal plan: do you lose unused meals and flexible spending at the end of the semester or can they roll over, what are the options for changing a meal plan mid semester, can you buy a smaller plan and add to it during the year, etc. Know your eating habits too. If you don’t eat breakfast or only grab an energy bar and coffee, do you need a meal for your breakfasts, or will flexible spending work.   While you might decide to choose the lesser meal plan to save money, be sure to first think about your eating habits.  It might actually cost you MORE to chose the smaller plan!   Remember, you can always change your meal plan each semester!
  • If you ate 3 meals a day at home – chances are you’ll do that in college as well.
  • If you pay for the 2-meal option, and then you go out to eat for that 3rd meal – it will likely cost you lots more money!  Assume $6/meal x 100 days (a little over 3 months) – that’s $600 IN ADDITION to your meal plan!!
  • If the dining hall is far from your dorm and/or classes, then it’s likely you will not eat all your meals there, so that’s a good reason to pay for less meals.  Conversely, if the dining hall is close by, and the town and the various Subways and McDonalds, and other places are pretty far – then it’s much more likely that you’ll want to eat at the dining hall.  Find these things out before you decide on your meal-plan!

When it’s time to start to pay your college loans, it is important to understand the best process.  There are a number of things you can do to keep yourself on track and out of default.

1. Enroll in an income-driven repayment plan.  If you haven’t already, you should consider enrolling in an income-driven repayment plan. Learn more about income-driven plans.

2. Consider setting up automatic payments.  Sign up for automatic debit through your loan servicer, and monthly payments will automatically be made from your bank account. You may also get a 0.25% interest rate deduction just for enrolling.

3. Track your loans online.  Log in to “My Federal Student Aid” to find information about all of your federal student loans.

4. Keep good records.  It’s VERY helpful to keep important documents such as records of monthly payments, payment schedules, and notes about phone calls to your loan servicer in an organized file.

5. Stay in touch with your loan servicer.  As soon as you think that you’ll have trouble making your monthly payment, contact your loan servicer to discuss your situation—they are there to help you. Additionally, if you enrolled in an income-driven repayment plan, your loan servicer will let you know when it’s time to re-certify your income and family size.

If you’re having difficulty repaying your federal student loans, contact your loan servicer regarding the options to change your payment due date or your repayment plan, or to consolidate your loans. If these options don’t work for you, under certain circumstances you can receive a deferment or forbearance. These two temporary solutions allow you to stop making or lower your monthly loan payment. While both can help if you’re experiencing temporary hardship, they aren’t great long-term solutions because interest still accrues on certain types of loans and your loan balance could be higher when your deferment or forbearance period ends.

The two main differences between deferment and forbearance are the situations under which you may qualify, and whether or not you’ll be charged interest when you’re not making payments. Most borrowers first apply for a deferment because it’s usually the best option and then if they aren’t eligible for it, their loan servicer may grant a forbearance.

If you work for a government or non-profit, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Plan.

Should I postpone my payments with a deferment or forbearance?

Just because you qualify to postpone your payments with a deferment or forbearance, doesn’t mean you should. Why? Because any unpaid interest (discussed in the previous question) that accrues during deferment or forbearance periods may be capitalized. So when you start making your payments again—which you eventually must do—your loan balance may be higher than it was before you got a deferment or forbearance, which may cause your monthly payment amount to increase. For this reason, a deferment or forbearance may not be the best option for you. There are often better options available to help you make your monthly payment.

What are my other options?

Other options include changing your payment due date, switching repayment plans, or consolidating your loans. For example, just changing your repayment plan to an income-driven repayment plan could reduce your monthly payment to $0. Consolidating your loans could also lower your monthly payments by giving you up to 30 years to repay your loans. If you haven’t considered these options, you’ll want to review the options before you apply for a deferment or forbearance.

Ultimately, the decision to postpone or reduce your monthly student loan payment is yours, but for many borrowers it is absolutely necessary to keep a loan from going into default. Just proceed with caution and take some time to find out the best option for you and your financial situation. You can always contact your loan servicer to discuss the options. Your servicer will help you—free of charge!

You can find more information about deferment and forbearance, including the situations that may make you eligible at StudentAid.gov/deferment-forbearance.

What if you are not a US Citizen and/or you don’t have a green card?  Obviously if you or your family can PAY the college costs, or can get private loans or private scholarships – then anyone can attend a college in the USA.  But if you expect to need some government assistance, it’s harder.  There are still some ways to receive assistance, even if you are not a citizen or you do not have a green card.  Check this link for details on these options:  http://studentaid.ed.gov/eligibility/non-us-citizens.