TRANSCRIPT: Navigating The Financial Aid Process

Introduction - Navigating The Financial Aid Process

Today, we're going to talk to you about the 10 key steps in applying for and financing your post-secondary education. We're calling it Your Checklist to Applying for Financial Aid.

Step 1 – File FAFSA

Step one is to complete the free application for Federal Student Aid, also known as the FAFSA, which is done at studentaid.gov. This is where you'll begin completing your application for financial aid. Remember, it's a free application. It's the application that you'll use to apply for all types of financial aid opportunities that you may be eligible for, including federal loans and grants.

You must fill out the application every year to be considered for aid, even if it's only loans. The form is normally available on October 1st of the year prior to the academic year you are applying for aid for. Since you'll be using your tax information from the prior year, you won't have to wait to file the current year's taxes to complete your financial aid application. Completing the FAFSA is even easier now with the direct data exchange process, which will automatically input the appropriate information from your tax return.

However, you and your parents, if you're a dependent student, must give consent and approval for the Direct Data Exchange, even if you aren't required to file taxes, or your FAFSA will not be processed. Let's just take a moment to review a tip. If you happen to run across a place online where you're going to be charged for filling out the FAFSA, you're not in the right place, you need to stick to the free Department of Education portal at studentaid.gov. The FAFSA starts with the word free for good reason.

With that said, there are other resources online to find non-federal grants, scholarships, and non-federal loans. We'll provide you resources for those later on in this module.

Funding Options

There are four funding options that may be available to you. One thing to remember is that the overarching premise in the federal financial aid policies is that it's considered the family and student's obligation to fund their higher education. This is why the first funding option that should be considered and planned for is the student and the student's family. The vast majority of students do not receive full funding for their tuition, living expenses, housing and food and other educational expenses, making it very important to consider how the unfunded portion of the total cost of attending your college of choice will be managed.

With the exception of some extreme situations, the unwillingness of the family to contribute to these costs or the level of financial independence the student has will not increase the amount of aid offered to the student. The next funding options are grants and scholarships. That's where the free money is, grants and scholarships. Then there's the student employment, such as Federal Work-Study or getting employment outside of the financial aid programs.

Student employment is basically for every hour's worth of work, there's an hour's worth of pay. The money doesn't go to the school, but into the student's pocket with the intention of helping pay for living expenses, housing and food, books and other expenses. And then finally, there are educational loans, whether they're private or federal. That's borrowing money you would pay back later to finance your education now.

The FAFSA is the application for these federal aid programs. There are grants and loans on this particular slide here. I recommend that you check the resource listing because you will be able to get detailed descriptions of each one of these programs. Now, let's just talk a moment about a tip or a myth.

Scholarships will pay our student's college cost. As we mentioned earlier, very few students find all of their educational expenses covered by free money, such as scholarships and grants. The other common myth that we see all the time is that the family makes too much money and I won't qualify for any type of aid. That's simply not true because for federal student loan programs, you may be able to borrow, even if you're not qualifying for other types of aid based on your income.

Remember, unless you have an outstanding defaulted federal loan, you may qualify for at least some federal student loans, so it always makes sense to fill out the FAFSA every year. Also, some schools utilize FAFSA information to offer their own school-based aid, making it even more worthwhile, regardless of your financial situation.

Step 2 - Review Your FAFSA Submission Summary

Review your FAFSA submission summary.

The FAFSA Submission Summary has been specifically designed to highlight your eligibility for federal student aid. It will include the answers that you submitted on your FAFSA form except for any federal tax information that was transferred directly from the IRS, your Student Aid Index, SAI, and an estimation of the amount of federal student aid that you may be eligible for. You should expect to receive it anywhere between three days and three weeks from the time you complete the FAFSA, depending on the time of year of your submission.

The SAI is calculated using the information that you and your contributors provide on the FAFSA. The SAI is used by colleges to determine eligibility for financial aid. It is not necessarily the amount a student will pay for college, this is the amount that the government considers the family can contribute towards the student's educational costs. The SAI stays the same, no matter what type of college or university you select.

Now, it's very important that you look at the FAFSA Submission Summary when you get it, to see if there are any errors on it. If there are, you need to make the corrections and resubmit it, and you can do that also at studentaid.gov. Let's look at the next tip, special circumstances. When you get your FAFSA Submission Summary, you need to let the school's financial aid office know if there's any type of changes in your family circumstances.

What could those be? It could be a loss of or a reduction of income, it could be a change of family circumstances, or even unusual medical expenses, anything that changes the financial circumstances of your family, let your financial administrator know about those. While they aren't allowed to outright change your SAI, they can make changes if allowed under federal aid policy to the components that are utilized in the SAI calculation. Remember, the tax and income information you used when you filed the FAFSA was based on income from two years ago, so such changes in circumstances are not uncommon and you should not be afraid to let your financial aid office know about them.

Step 3 - Respond To Information Requests On Time

Respond to information requests from your school on time. You could be selected for a process called verification, but that doesn't mean you've done something wrong. The Department of Education chooses approximately 30% of all FAFSA submissions for verification annually, and some institutions choose to do verification on all their students. If you were chosen for verification, you'll need to submit a tax return transcript or other relevant IRS documents in order to validate the information and verify that you've submitted it accurately on your FAFSA.

Failure to complete this process will result in you not being considered for financial aid. Now, some schools will ask for even more additional information. This is the place where you need to make your financial aid administrator the most important person. Respond quickly, efficiently, and on time to ensure that you don't miss out on any aid you might be eligible for.

Here's another tip. If you consent to the Direct Data Exchange to complete your tax information in your FAFSA, the chances of being chosen for verification are reduced significantly.

Step 4 - Understanding Your Financial Aid Offer

Understanding your financial aid offer. There are three main components here. They could be grants and scholarships, work study, and loans. You need to study carefully each type of aid that you've been provided.

Grants and scholarships are considered free money since you typically don't have to repay it. Employment is work. And student loans, that's money you're borrowing now that you'll end up paying back at a later date. Let's talk about evaluating your aid package.

You're going to be looking at different types of offers and different types of packages from the colleges and universities that you've applied to. The first question you need to ask is whether the cost estimates are realistic. You're also going to need to look at what types of grants, what types of loans, and how much of each that you're going to be receiving. Also note that grants and scholarships, while they're the best type of financial aid since you don't have to repay it, can come with requirements or obligations such as achieving a certain grade, attending mandatory meetings, or pursuing a specific career field.

You're also going to have to look at the terms and conditions of the grants, the scholarships, and the loans. Some scholarships and grants are based on a minimum grade point average, or that you attend school full-time. Student loans have to be repaid after you graduate or drop below at least halftime attendance. It's important to understand these conditions upfront, not only so you aren't caught off guard down the line, but so you can decide upfront if these terms and conditions are ones you think you can meet.

Let's look at a sample financial aid offer. There are usually four sections on your financial aid offer. One is the cost of attendance, the student aid index, your gross financial need, and then there will be a list of types and amounts of financial aid offered. In this particular example, you can see that the total aid actually adds up exactly to the total amount of financial aid that this student is eligible for.

This is the type of comparison that you'll need to be doing for each college and each university that you submit an application to for financial aid. Unfortunately, not all financial aid offers are set up the same way, so it can be challenging to compare them between schools. Some financial aid offers also don't make it completely clear what is free money and what is loan money, so be sure to know which is which in each offer letter you receive. Let's just take a moment to review another tip: financial stretch.

Each family, as they look at the financial aid offers that they receive, needs to look at how far they're going to stretch themselves with their own resources, and they often have to be deeply involved in making that decision about their monthly and their semester budget. Families should evaluate very carefully how much to borrow and when to borrow. Only borrow what you need and when you need it, so you need to compare cost, value, and the type of financial aid that you're receiving. Another tip is to look at the potential student loan borrowing for the first year and multiply by the number of years it will take to complete your degree plus one year.

This takes into account cost increases, as well as the data that shows that many students end up taking three years to complete a two-year degree and up to five years to complete a four-year degree due to changes in major in schools or other life factors. You may not need the extra time to graduate, but many do. So this is one way to look at student loan borrowing and repayment amounts. Next, for every 10,000 borrowed, assume a payment of $125 a month every month for 10 years.

So if you are planning to complete a two-year degree and have to borrow 10,000 in your first year, you should assume a total loan debt of 30,000 and a student loan payment of $375 per month every month for 10 years. And if you are planning to complete a four-year degree and have to borrow 18,000 in your first year, you should assume a total loan debt of 90,000 and a student loan payment of $1,125 per month every month for 10 years. Is this something that you and your family will be comfortable with?

Step 5 - Promissory Note & Loan Counseling

Completing the loan promissory note and loan counseling. The most important obligation of a student loan is you must understand the promise to pay in the future. You'll be asked to sign a master promissory note, MPN, and this is done online at StudentAid.gov, the same site where you completed the FAFSA.

And you'll be able to sign it electronically if you choose. You will also be required to do entrance and exit loan counseling. Entrance counseling is to ensure you understand the terms and conditions of your loan, you understand your payment obligation, and most importantly, you understand the interest that you'll be charged before you borrow your first loan. Exit counseling is required of all graduates and all students who cease to be at least a half-time student.

Keep that in mind. And if at any point you decide to leave school, you're going to be required to complete exit counseling. Also, keep in mind you need to be following the instructions of your school about when to complete this process and what additional information they require. I know it's long, but please read the Rights and Responsibilities page of your promissory note, as well as the rest of the terms and conditions.

So many borrowers express regret once the payments are due, wishing they were aware of certain things before they chose to borrow. For example, these terms and conditions spell out that you'll be required to repay the loan in full, regardless of whether you complete your education or get a job in your career field or realize the salary you expected. The counseling and these terms will also educate you on the repayment plan options, how and when interest accrues on your loans and what happens should you default on your loans.

Step 6 - Determine Annual Payment Strategy

Determine annual payment strategy. You've gotten your financial aid offer. You have completed your promissory note, if you're borrowing any type of student loan money, but now you have an obligation to pay the college or university that you're attending. In this process, you're going to get a bill from the school that you're attending.

That bill will indicate the amount that you're paying towards the educational costs not otherwise covered by financial aid. You need to keep in mind that when you get that bill, it's like any other bill that you might get. There's a due date on when those payments are due. Payment options and payment plans may be available at your school.

Payment deadlines are critical, so be sure to know your payment deadline, which can usually be found in the course catalog or on the academic calendar. Not knowing the payment deadline is not an excuse for non-payment. You can also research to see if your school offers payment plans where you pay your cost to the school over the length of the semester or term. You should note there may be fees associated with a payment plan.

Look for these options. Design your payment strategy, and make sure you stay on time with those payments. Here is another tip that you'll want to consider. When you're looking at your financial aid disbursements, remember your financial aid will normally be applied to your student account at the college or university that you're attending.

You're not going to get a check directly and have to pay the school. They're going to receive the aid directly and credit your financial aid to your student account first. If you have a credit balance, that means that you have funds come back to you for living expenses or purchasing books. Each school is different, but they're going to issue the extra funds to you in some capacity.

It could be a check, it could be credited to your bank account, or they might issue you a debit card. It's important to know how and when your school issues extra funds so that you can choose the best method for you. The way you receive your funds should not substantially increase the time it takes them to be issued to you. If they're actually transferring your money to your bank account, you must give authorization to do that before they'll actually be able to complete that transaction.

Keep that in mind.

Step 7 - Establish Good Spending Habits

Establish some good spending habits. That's going to be a very important thing. You've gotten your financial aid. Some of it has been applied to your account, and you may have additional funds that you've gotten from the college that you're going to have to manage yourself.

You're going to be required to pay for your own books. You're going to have transportation costs if you're commuting back and forth to a school. Therefore, you have gas, or a bus, or a subway pass to pay each week. You may be living off campus, and you're going to be managing your own rent payment for that housing.

Your living expenses will include food. You may choose to buy a meal plan at the school or to buy and prepare your own food. And then there are all types of personal expenses. All of these things have to be budgeted, and you have to establish good discipline in order to manage the funds that you're going to be receiving for your financial aid.

There are lots of interactive tools that we could use and you could use in estimating how you're going to budget all of those funds that you're going to be receiving. Please review the resources for ideas.

Step 8 - Stay Enrolled Half Time

You need to stay enrolled as at least a half-time student in order to continue to receive your financial aid. In many cases, your financial aid will be prorated and reduced if you are going to school less than a full-time student. It doesn't mean that you won't qualify for that aid, but you're going to get a reduced amount. In addition, in order to qualify for your student loan, not have your prior loans enter repayment and to have the government pay the interest on some of those loans, you're going to have to be enrolled at least as a half-time student.

There are some exceptions in the Pell Grant Program, in your state aid and your institutional scholarship. I recommend before you ever adjust your enrollment, that you consult with your financial aid administrator to see how it will impact your financial aid. It's also important to know that if you do drop below half-time, or withdraw altogether, you may end up owing your school, even if the bill was previously covered by financial aid. Federal refund policies are often very different from school refund policies, meaning that students who leave in the beginning or middle of a semester, can find themselves with their aid canceled and owing the school a large bill, that must be satisfied before they can re-enroll.

Step 9 - Finish Your Degree

Finish your degree. You've commenced on a plan to secure a higher education. What you need to do is to always recognize that as you're progressing along your educational journey, if you have to interrupt your plan, there are ways to do that. Again, I recommend that you consult with your financial aid administrator and academic advisor.

Anytime you're interrupting your educational plan, you've got to worry about your loans and your grants. And then when you do return, you're going to have to apply for financial aid all over again. So that extra few minutes of talking with a financial aid counselor can make the difference of a smooth transition and for you returning to your educational goals.

Step 10 - Finish Your Degree

Keep your contact information on student loan repayment up to date and current all the time. As you're receiving a student loan, you'll need to keep the student loan servicer always informed about a change of address, a change on an email, and you may have to submit a deferment form, if you're returning to school after being out for a while, Always keep your information current, they need to know where you're living, and you want to keep your student loan in good standing. Not receiving a bill is not a defense to non-payment. You'll also be able to access your student loan information online and be able to update whether it's your email or your mailing address, as well as you'll be able to get the current information about the type of loan that you're paying.

Conclusion

We've provided a lot of resources for you today to look at, to study, and remember. They're all there for you to follow up later. I hope that you have enjoyed the presentation today where we've talked about the 10 steps, critical steps to applying for financial aid, keeping your information up to date, and remember to stay in contact with your financial aid office while in school and your student loan servicer if you borrowed federal student loans.