13 financial aid traps

7. Don't negotiate. 
If you have two colleges' offers in hand, one with a better aid package than the other, check with the financial aid office of the school with the lesser offer to see if they can match or beat the better terms. It never hurts to ask, and if they want you, they may find a way to help you attend their school.
8. Take out a home equity loan instead of a line of credit. 
Kantrowitz cautions: "If you get a loan and haven't used the full amount, the remainder will be counted against you in aid determination in subsequent years. Interest payments on your line, as with a home equity loan, are tax-deductible and borrowing on your home reduces your assets."

However, despite tax benefits, federal education loans will usually save you more money with better interest rates.

9. Get married to achieve independent status. 
While it's true that the only thing reasonably under a student's control to achieve independent status is getting married, don't rush off to Vegas before fall semester starts. Wedlock now would only affect eligibility in subsequent years -- according to Kantrowitz, you need to say "I do" before filing the FAFSA.

10. Don't file FAFSA if you're not eligible for aid. 
Are you really so sure you're not eligible? The formulas are complicated enough that you can't tell if you will qualify for aid until you submit the form, according to Kantrowitz. "Congress tinkers with the higher education benefits each year. Last year they raised loan limits for freshman and sophomore students, for example. You can use the calculators on the Finaid Web site to play a guessing game, but the key is to apply," he says.

Applying for FAFSA will also help you avoid a related pitfall: going straight to private loans. Even if you don't end up qualifying for Perkins and subsidized Stafford loans -- which have the lowest interest rates around and the added benefit of government-paid interest while you're in school -- you might find you're eligible for an unsubsidized Stafford loan or your parents might be able to get a PLUS loan. These options could very well be a cheaper route than private loans, Kantrowitz says. Never take out a loan without shopping first.

11. Take out a loan from a 'recommended lender.' 
While you may be tempted to snap up loans from your school's "recommended lender" because, hey, the school checked them out first, Nancy Ziering, CCPS (Certified College Planning Specialist) and president of College and Retirement Solutions in Chatham, N.J., says: "Shop it -- though the school gives the lender its stamp of approval, you might get better rates elsewhere." The cost over the years could become quite substantial. Do your homework -- it's worth it.


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