Common Student Mistakes in Financial Aid - And How to Avoid Them
Most students get some form of financial aid to go to school—usually a combination of private and federal loans. If you’ve earned some scholarships and grants, you’re lucky—but for most students, paying back those loans is eventually going to be a reality. And it’s not uncommon for students to make mistakes early on in their college career that they regret later with regard to financial aid. Here are a few to avoid.
Not completely understanding your student loan contract
It’s not unusual for interest rates on private loans to go up dramatically—or for students to be hit with high fees for paying late. Be sure you understand exactly what you’re getting into before signing any student loan contract. Ask how much you’ll be expected to pay per month, whether or not the interest is variable (hint: it nearly always is with private loans, rarely with federal loans); what happens when you pay late; and whether there are convenient online bill pay options that will prevent the firm from sending your bill late to encourage late payments.
Paying for college isn’t easy—and many students are hit with unpleasant financial surprises after graduating.
The financial aid letter your college gives you is, in effect, a marketing tool. It’s often used to paint a rosy picture of your financial aid prospects, not give you the whole truth—for example, it might refer to both private loans and federal loans as “financial aid,” making you think that you’re qualifying for that much in scholarships, not expensive loans. Be sure to get the real story on your financial aid before choosing one of the many distance education universities that are out there.
Not being realistic about your post-graduation salary
It can be difficult to assess whether or not you’ll actually be able to afford your student loan payments when you graduate—because you have no idea what your salary will be or how long it will take to find a job. However, it’s valuable to do some research into entry-level salaries in the career or careers that appeal to you—and do some realistic assessment of market demand (the Occupational Outlook Handbook* is a great resource for this). Assume a salary and time to employment that seems realistic given today’s market conditions.
Overspending your loans for living expenses
Some financial aid goes immediately back to the school. Other aid goes to your bank account—and is meant to cover living expenses, books and school supplies, and other costs. It’s not unusual for students to spend this money too quickly—and be stuck for funds by the end of the year. Be sure to budget carefully, and don’t use student aid money on non-school-related things.
Taking out private loans before you’ve exhausted other options
Private loans are often necessary to cover the gap between what your tuition actually costs and what you’ve qualified for in terms of scholarships, grants, work-study opportunities, and federal aid. But private loans should be a last resort. And you shouldn’t count on your financial aid office to help you with this—there have been cases where colleges have offered less federal aid to students than they actually qualify for. Be sure you’re getting the most you can possibly qualify for in terms of scholarships and other forms of aid before taking out a federal loan.
Paying for college isn’t easy—and many students are hit with unpleasant financial surprises after graduating. Don’t let that happen to you. Be sure you understand exactly what you’re getting into with student loans—and decide based on a realistic assessment of what you’re likely to make in an entry-level job once you graduate with your distance education programs.
*Occupational Outlook Handbook
Distance-Education.org: Five Common Mistakes to Avoid When Filling Out the FAFSA
Distance-Education.org: Top Five Financial Mistakes New College Graduates Make
Distance-Education.org: Top Seven Mistakes to Avoid in Paying for Your College Education
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