Top 5 Financial Aid Mistakes

Money may be tight for you and your family this year. And chances are your school's costs have gone up since last year. Many families are really digging deep and making sacrifices to cover college costs. As you're making decisions on how to pay for college, we just want to make sure that you aren't making any mistakes that might hurt your financial future. If any of these sound familiar, there is still time for you to reevaluate your financial aid decisions and work with your financial aid office.

Potential Financial Aid Mistakes

1. You walked by the financial aid office, but didn't check for new scholarship applications

It's true that your chances of winning the world's most popular scholarship essay contest are one in a million. But once you are accepted into a school, the universe becomes smaller and your chances of winning increase. Suddenly you are competing against just freshman, just female engineers or just chess club members. There are all kinds of scholarships, provided by corporations, alumni or special interest groups. Don't believe it? When you find a scholarship at your school with only 3 other applicants, you will!

2. You didn't accept your work study money

Are you kidding? You turned down a good hourly wage, working on or near campus, with work hours scheduled around your classes – in a recession? Most students love their work study job because they generally get to pick from a list of activities like tutoring kids, working in the library or helping out with intramural sports. In this financial environment, even part-time work is difficult to find. Unless you already have a good gig lined up or you are just loaded with cash from rich relatives every month, work study is highly recommended by other students. Even if you weren't awarded work study on your financial aid award letter, ask your financial aid office if there are any types of work study programs available to you.

3. You didn't talk to your financial aid office

If you are having difficulties paying for school, or your family's situation has changed, check with your financial aid office. Your financial aid package for this year is based on the FAFSA you completed last January, which takes into account your families income from the previous tax year. For example, if one of your parent's has become unemployed, you may be eligible for more financial aid. Don't put off going just because there is a long line; everyone else probably just got their paperwork too. If you can wait in line for a $10 movie, you can wait in line for a $10,000 tuition bill.

4. You didn't maximize your federal loans

When you graduate and have a job, you will realize that the Federal Stafford Loan was a great decision. It's cheaper than other options like private loans or credit cards. There are flexible repayment plans and deferment protections in case you can't find a job right away, or run into financial hardship.

One student I know is working two jobs until 1 a.m. in the morning and making poor grades because someone told her that "student loans are bad." Well, so is flunking out of school. It's a personal choice nearly every student must face: "Am I going to incur debt to complete my college education?" Examine your situation with your family and your financial aid officer. If you find that you need to borrow money, the Federal Stafford Loan (or Federal Perkins loan if you qualify) is a great first choice.

5. You took out private loans without maximizing your other financial aid

Private loans are necessary for many students to fill the gap once they have exhausted free money (scholarship, grants) and federal loan limits. Unless you're an independent student, you can only borrow between $5500 and $7500 in Federal Stafford Loans as an undergraduate, depending on your year in school. It's true that private loans don't require a FAFSA and so some students are tempted to just use the private loan to cover the full amount they owe. Don't do it. Take the extra time to complete the FAFSA. Who knows, you may qualify for grants or federal work study money. In addition, you should always maximize federal loans first before taking out private loans because they will cost you less over time. You'll thank us when you are paying them back.

Graduate students, Mistake #5 especially applies to you. You are eligible for increased federal loan limits ($20,500 in Federal Stafford Loans, $40,500 for medical professionals). If the Stafford Loan doesn't cover everything, the Grad PLUS Loan is also an option you may want to check out.

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