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10/20/2014

Financing a Higher Education, Part III

After writing my last blog, I realized that I still hadn't covered all of my suggestions for financial management DURING college (or graduate school):

1.  Live within your means.  It can be difficult to transition from high school (where much of your money is disposable income) to college (where you need to live within a budget).  As I mentioned last week, financial aid shouldn't be seen as "free money."  When it is considered such, students can fall into the same pattern that people with credit card debt do: it's easy to spend money if it seems "free" or "not real."  Therefore, it's easy to get into bad money habits- making daily Starbucks stops, renting a more expensive apartment than you need, buying new clothes more often than necessary to stay in style, etc.  College is a time to start good financial habits as an adult, so do it!

2.  Know the realities of loans.  Last week, I talked about interest and how it accrues and gets added to the principle.  The other reality is that loans must be paid back.  Perhaps this sounds obvious, buy many students don't realize that if they do not graduate or decide to "take a break" from school, they get a six month grace period but then have to start paying back the loans.  This can come as a big surprise; many believe that they don't need to pay them back if they don't get their degree.  NOT TRUE!  If you bought a new car with a car loan and then crashed it a year later, you'd still be responsible for paying back the car, right?  The same goes for school- you still owe for the money you borrowed!

 

3.  Know the realities of your EFC (Estimated Family Contribution).  If you are receiving grants, it's important to think about how your income will affect your eligibility for grant aid.  Sometimes, students think that it's best to work a lot during college to raise their income after high school.  While I support working, I caution students to not work too much.  First, I want you to be able to focus on school and do well.  Second, if you make too much, you can bump yourself out of grant eligibility because your income is calculated into your next FAFSA and can raise your EFC.  A student was recently told by a family friend that he should stop going to school after he receives his associate degree (before going on for his bachelor's degree) and work a lot for a year or two and save up money for his bachelor's degree.  What the person didn't realize was a) this student was eligible grant aid and if he saved up enough money to pay for his entire bachelor's degree, he would not qualify for grant aid and b) that he would need to begin paying back his loan aid (which was subsidized) after his six month grace period.  In this student's financial situation, it would be best for him to continue straight through his bachelor's degree and not take his friend's advice.

4.  If you're experiencing financial difficulty, ask questions.  You may be surprised to learn there are "un-advertised loopholes."  For instance, you may be able to ask for a book deferment, which allows for early disbursement of financial aid funds to buy your books.  If you're commuting a certain amount of miles, you can request a mileage adjustment to be added to the estimated cost of your school expenses (which affects how much financial aid you receive).  If your family experiences a job loss or medical expenses, there are forms you can fill out to show how these changes affect your EFC (even if last year's taxes don't reflect the same information on your FAFSA). 

5.  YOU are responsible for your financial aid. As an academic advisor, I hear students say all the time, when referencing financial aid, FAFSA, or tuition payments, "oh, I don't know anything about that.  My parent's take care of it."  While, yes, parental information is usually needed to process the FAFSA, financial aid and tuition information normally falls under FERPA (Family Education Rights and Privacy Act) law and therefore, parents do not have access to that information.  Many students get fines for not paying their tuition on time or do not get their financial aid processed because all the information is sent to them (the student) in their email or is housed in their student online account (neither of which parents have access to).  It's important for students and parents to establish good communication regarding college finances and for students to recognize that all things related to financial aid is actually THEIR responsibility, not their parent's. 

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