Soon after applying to colleges, you'll start receiving financial aid packages. For many, the amount of financial aid a college will give is the ultimate decision-maker. Therefore, it is important to understand exactly what the financial aid package is saying. At first glance, these packets look like a confusing mess of numbers and words. However, after slowly reviewing your packet a few times, you'll be able to make sense of it. You just need to understand the terminology and what numbers can be changed.
What Types of Aid are There?
Most students will be able to receive scholarships, grants, and work study jobs. You might see these terms on your financial aid packet, so understanding them will help you make sense of your packet. There are two types of scholarships: merit-based scholarships, which are scholarships awarded for outstanding academic performance, and need-based scholarships, which are scholarships given to those who are in need of money to attend college. Grants are similar to scholarships as they are given by organizations to students who need money for college. While work study is available for most students, it is not guaranteed that there will be enough working hours for everyone. Therefore, when calculating your total financial aid, it's better to avoid including work study payments as they're unreliable.
What are the Different Kinds of Loans?
Loans are sums of money that students take out from banks but then have to pay back with interest. Scholarships and grants should always be taken if offered, but loans should be thought about carefully and should only be taken if absolutely necessary. On the financial aid packet, you might see direct subsidized loans or direct unsubsidized loans. In general, direct subsidized loans only start accumulating interest once you're no longer in college, while direct unsubsidized loans will accumulate interest from the beginning of your college career. You might also see Parent Plus Loans, which are loans taken out by your parents on your behalf. I suggest avoiding this type of loan at all costs because this loan depends entirely on your parents and puts their finances and retirement at risk.
What Can Change?
Your financial aid packet will also tell you the estimated cost of the school. It will include Tuition, Housing and Meals, Books and Supplies, Transportation, and a section for other miscellaneous costs. While you are not able to change the cost of Tuition and Fees, you are able to reduce almost everything else. For instance, to reduce the price of Books and Supplies, you can buy used textbooks instead of new ones. Also, you can reduce your transportation costs by limiting the number of times you travel between home and your college. Therefore, your real cost of attendance might not be as high as what's indicated in your packet.
Calculate Your Yearly Costs
Make sure you know whether the financial aid you receive will stay the same every year or if the amount can change each year. If you are taking out loans, use a loan calculator online to see how long it will take you to pay it off. Also, take into account that the tuition is most likely going to increase a little per year. Each year, your finances will be different from the year before. Thus, make sure that you are well-organized so that you can be as flexible as possible when your costs and aid change.