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10 financial aid pitfalls

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2. Applying early
Though knocking the college application process out of the way before your peers seems like a good strategy, it may not be for your wallet. To avoid the rush of college applications, many schools offer two windows when students may submit them -- the regular December/January admissions season or an earlier application window typically in October or November. Students who opt for this earlier window hear back from their schools faster, usually around the same time regular admissions students are submitting their applications. However, there's one big catch: While some schools with early action programs allow early applicants to apply to as many other schools as they'd like, others with early decision programs require students to sign a legally binding promise to attend that particular school if admitted. These early decision programs only allow students to apply for one school, denying them the opportunity to compare financial aid offers from other institutions.

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"It's risky," says Kalman Chany, author of "Paying for College Without Going Broke" and founder and president of Campus Consultants. "Institutions realize that you really want to go to the school and they figure they can offer less aid because they know that there's no competition."

To avoid getting caught in the early application trap, read the fine print before sending off your application.

3. Planning too late
"The No. 1 mistake students make is not financially planning at all," says Jeffrey Wallin, associate director for financial analysis at the University of Vermont. "In their freshman year in high school, students should start thinking comprehensively about where they're thinking of attending school and how their family finances can be organized to do that."

To maximize aid eligibility, students and parents should begin organizing family finances long before they ever touch a FAFSA form. That means spending the students' first three years in high school paying off lingering family debt, which unlike income and assets, is not assessed on the FAFSA form, maximizing contributions to accounts such as IRAs and 401(k)s that don't count on the FAFSA form and investing some leftover savings in such things as a computer, clothes or dorm supplies that the student will need for college. The goal is to invest as much of your income and assets as possible in FAFSA-exempt places before the federal government counts your stashed cash against you. Liquidate stocks, bonds or mutual funds to pay off a credit card or the car loan by no later than your student's junior year in high school.

4. Overlooking private scholarships and grants
Federal and campus-based programs are your two best shots at receiving a financial aid check, but they're not the only places you can find college dough. There are literally thousands of private scholarship and grant programs available to students savvy enough to find them. The problem, Barnett says, is that while there are millions of dollars in private aid available, many students use the shotgun approach and wind up wasting their time applying for programs they have a slim chance of winning.

 
 
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