In spring, college students look forward to one thing — receiving their financial aid packages. Outlining how much the school and federal government are willing to give, the financial aid award letter helps a family determine the affordability of a particular school. Before cheering or crying about your aid award, be aware that these letters don’t tell you everything.
Not everything is shown
An award notification will explain what federal and school-sponsored grants, scholarships, student loans and work-study jobs you’re eligible for, but some aid is left off, says Nicole Ferguson, director of financial aid for Sierra Nevada College in Incline Village, Nev.
“Students who get private scholarships on their own are required to let us know, but sometimes they don’t,” she says. “Once we find out, we usually adjust their aid package by reducing the least attractive loan offer.”
Aside from scholarships and grants, Ferguson says that other forms of financial aid, such as private loans, loan forgiveness programs and educational tax credits, won’t be included on the award notification either.
Your end of the bargain
Students who see free college cash on their award letter shouldn’t start doing cartwheels yet. While schools are happy to show what grants and scholarships they’re willing to give, they rarely list any grade point average, credit hour or income requirements necessary to keep the money, says Dan Davenport, director of student financial aid for the University of Idaho in Moscow, Idaho.
“When we give financial aid, we give it one year at a time and they need to reapply for it every year,” says Davenport. “Award letters don’t give multiyear information on Pell grants, federal or private loans, so you’re not really seeing a full financial picture.”
When it comes to scholarships and grants, Davenport advises students to ask whether the funds are renewable for all four years, what’s required to keep the award and whether the award will increase with tuition hikes. While students are entitled to such need-based federal aid as the Pell grant, Supplemental Educational Opportunity & Grant, or SEOG, and Stafford loans as long as their family’s financial circumstances remain about the same, school-sponsored and merit-based awards may not be renewable.
PLUS loan not a big plus
If you see a generous PLUS loan offer from one institution, but not from any others, don’t be fooled, says Chris Vaughn, director of new student financial planning at Mansfield University in Mansfield, Pa. You’re not getting a better deal.
“The PLUS loan is a federal loan all parents can take out if they pass a credit check,” says Vaughn. “Some schools list it as financial aid and some don’t. So if one school is offering a $20,000 PLUS loan and another isn’t, it doesn’t really mean you’re getting more aid.”
Unlike the federal Stafford loan, families aren’t automatically qualified to receive the parent PLUS loan. Capped at the student’s total cost of attendance minus any other financial aid the student has received, PLUS loans are only given to parents who pass a modest credit check and who haven’t had a bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or debt write-off in the past five years, says the Department of Education.
“When schools list a PLUS loan on the award letter, they’re assuming that parents meet those requirements,” says Vaughn. “That’s not always the case.”
Students whose parents who don’t qualify for parent PLUS loan funds will be eligible to receive an additional $26,000 in unsubsidized Stafford loans over their college tenure, according to financial aid Web site Finaid.org.
Preferred lender list not always preferable
To help families pay the expenses the aid package won’t cover, schools frequently issue a list of preferred lenders or loans.
“These products might be the best option for your family, but they might not be,” says Kendra Feigert, director of financial aid at Lebanon Valley College in Annville, Pa. “Families need to do their own research beyond what the aid office is saying.”
Students can comparison shop interest rates, repayment terms and borrower benefits of various loan products by checking out what’s offered through their local community banks and credit unions as well as through loan search engines such as the one at Bankrate.com.
Plans for the present, future
Besides financing an education with grants and loans, families can pay as they go by enrolling in a payment plan. “Schools usually don’t list financing options they have available,” says Feigert. “If a school has different kinds of tuition payment plans, that’s usually not on the award letter.”
Once families know how much they owe, it’s up to them to ask questions about how to improve their financial aid package in years to come, says financial aid director Nicole Ferguson.
“We inform students on what grants and scholarships they could be eligible for next year, but most schools don’t,” she says. “The future is really up to the student.”