10 Lies you are Believing about Financial Aid, FAFSA, & Student Loans
Let me start with a confession:
I have seen the ugly side of the enrollment process. As an enrollment counselor, I have been right in the middle of it. I have seen ignorant college students waste thousands of dollars because they bought into common lies and myths about financial aid. I have even seen bad counselors lead unsuspecting college students into poor decisions just so they can get another body in class… Thankfully those counselors didn’t last long. But I don’t want another student to buy into the lies. So let me start with this…
Dear New High School Graduates,
Please understand this reality… College is more than just an opportunity to learn and prepare for the future… education is a business. That means the more loans you take out the more the school makes. Educate yourself about student loans because it may not be in the best interest of your school to do so…
I was an enrollment counselor for 2 ½ years and I have seen student after student come in completely ignorant about finances and how student loans work. Each lie is something I have personally heard out of student’s mouths… over and over again.
Lie # 1 “Grants and loans are the same thing.” FALSE!
What is the difference between grants and loans?
you do NOT have to pay back assuming you meet all terms of the grant. For example, many students qualify for a grant from the federal government called the Pell Grant. However, the Pell Grant does NOT cover failed or dropped courses. So if you can’t handle your geometry course and fail it. Guess what? You pay for that geometry course out of your pocket! Often times this looks like your financial aid officer either adjusting your Pell Grant amount or using remaining loans to cover the cost of the failed course. Either way you pay for it, not the government.
Ugly side of enrollment: As an enrollment counselor I have witnessed students call in and proceed to yell at a financial aid counselor because they failed a course and don’t understand why they now owe a thousand dollars “for a course they never went to anyways”. The reality is they messed up, they failed, and no one else will pay for their mistake except for them no matter how much they yell.
These are loans that are given to students to pay for tuition and living expenses. You HAVE TO pay these back. They will never go away. If you don’t pay them you will continue to be charged a daily fee for borrowing the loan in the first place. This is called interest! I have plenty of friends who borrowed only $2,000 but now owe $3,500 because they did not pay down their loan for several years! Imagine what would happen if you had $50,000 in loans and didn’t pay anything towards it for years!
Lie #2 “Grants are free money” – PARTIALLY TRUE
Grants are only free IF you meet ALL of the requirements of the grants. The most common grant is the Pell Grant but there are several other grants that students can apply for to cut the costs of tuition. For example, the Teach Grant is a grant specifically for students going into “HIGH NEEDS” educational careers. This grant in particular has a lot of hoops to jump through. It is only available for specific educational majors and also has a GPA requirement. Those that receive this grant also have to agree to work for 5 years in a title I school. That means, if you decide education is not your thing and do not meet any of these requirements, your grant will turn into a loan… with interest!
Lesson learned: Pay attention to the fine print!
Lie #3 “I didn’t take out loans I just used financial aid” – PARTIALLY TRUE
I heard this ALL the time! Most students think financial aid is just free scholarships and grants, which is completely false! The government provides financial aid when you fill out FAFSA. Once you complete the application you will receive an email with two award amounts: 1) Pell Grant amount and 2) student loan amount. These amounts matter!
Unless you are attending a community college your Pell Grant will most likely NOT cover the cost of tuition. I can’t tell you how many students transferred schools and said that they never took out loans just FAFSA. When we completed the entrance counseling we discovered that they actually already have $8,000 in loans! How did this happen? They either thought all financial aid was free or they thought their pell grant covered tuition and it didn’t come close. Or they failed several courses and their loans covered the cost of the course.
Lesson learned: Pay attention to your award lesson and ASK QUESTIONS!
Lie: #4 “My parents make too much money, so I won’t qualify for aid.” DEPENDS on what you mean by “AID”
There is no income cut-off for qualifying for financial aid. So, even if your parents are millionaires you can still apply. However, the Pell Grant (read: loans that do not need to be paid back) is saved for students that are in the greatest need.
You might be thinking “My parents make a lot should I still apply?” Yes! Why? Well, first of all it is free. Second, you are automatically applying for funds from your state as well. Third, some schools consider it a requirement to be considered for academic scholarships.
Lie #5 “I can use ALL of my Pell Grant first before using loans” FALSE
I wish this was true, but people, financial aid comes from the government and they have to recoup their costs somehow! Nothing is ever free!
When you receive your award amount from FAFSA, the amount listed is the total amount you receive for an entire academic year. This amount is then split in half for each semester. For example, if you receive $5,000 in Pell Grant, you will receive $2,500 for the first semester and $2,500 for the second semester. This means if your tuition is $5,000 a semester your student loans will cover the rest of the cost.
Lie #6 “The financial aid I received my freshman year is the same amount I will receive each year!” FALSE!
Each year financial aid is determined by the amount earned (by you or your parents if you’re under 24) in your previous years taxes. If your parents suddenly increased their income expect only student loans and little to no grants.
Hard cold truth: you will pay far less out of pocket your freshman year than your senior year.
Why? Universities have a business side
Universities make their money by attracting new high school grads to join each year. Their very existence as a university depends on it. For this reason they give extra scholarships and incentives to get you in the doors. Once you have made memories and friends and earned some credits that can’t transfer anywhere else, the prices rise. Universities offer scholarships and grants to incoming freshman that may not be renewed or only a one-time event. When junior or senior year rolls around, not only has the cost of tuition been raised, you will also be receiving less from the university in scholarship and/or grant money.
If you are taking out $5,000 in loans your first year expect that amount to increase each year! If you can’t afford it, pick another school! I only had to take out $2,500 in student loans my freshman year but by senior year tuition raised and scholarships decreased to where I have to take out $9,000!
Lie #7: “I don’t live with my parents so my FAFSA does not need to be completed by them.” I wish this wasn’t FALSE, but it is…
This is the most annoying truth about financial aid: regardless of your personal relationship with your parents, financial aid is based on their income recorded on their taxes until you are 24 (unless you get married or have children). Student’s under the age of 24 are considered “dependent” this means two things: 1) your parents have to fill out a portion of the FAFSA application and 2) your aid is determined by how much your parents made on the previous years taxes.
“But I filed my taxes independently from my parents and I haven’t talked to them in years. Am I still tied to them?”
Sadly… if you are under the age of 24 and not emancipated, serving in the armed forces, not married, or have any children then yes you are tied to how much your parents make. This is annoying. Especially, for students that have parents that refuse to fill out financial aid each year.
“But, my parents don’t pay for my college at all, do they still have to fill FAFSA out?” Yes… sorry but if you are still under 24 not emancipated, serving in the armed forces, not married, or have any children…. The answer is still yes. It sucks…
If your parents reuse to fill out the FAFSA application there are refusal forms that you can speak to your enrollment counselor about but the best option is to get your parents to complete the form.
For more detailed information check out this page: https://studentaid.ed.gov/sa/fafsa/filling-out/dependency
Lie #8: “The Pell Grant will never run out” or “I can use the Pell Grant for my Masters program” FALSE
You can only receive the Pell Grant for a total of 12 semesters, or 6 years of full time schooling. The lifetime maximum of the Pell Grant is based on the years you enrolled. It is not based on the amount you have actually received. This means it is more important how often you received and used the Pell Grant than the amount.
The Pell Grant is only eligible for undergraduate programs. As of today there are very few federal grants for masters programs and those grants are limited to select fields.
You will eventually run out so use it wisely!
Lie #9: “I just got a refund check in the mail from my school.” Or “When do I get my refund check each semester?” FALSE
No, you didn’t get a refund check. The school does not pay you for going to school you pay the school.
PLEASE PAY ATTENTION: I have seen more students rack up ridiculous amounts of debt by this one action.
When you fill out financial aid you have access to the full amount of loans whether you need it or not. For example, let’s say after scholarships and grants I only need $3,000 in loans for the year but according to my FAFSA award letter I have been awarded $6,000. Depending on the school you may be automatically sent a check 30-45 days after the new semester begins with remaining portion of your STUDENT LOANS to be used for ACADEMIC PURPOSES. Most students see a big check, say a “praise Jesus” and start spending. Please don’t…
Did you read that carefully?
1) the check is your remaining loans 2) it is for academic purposes not a big screen TV. The correct term for this is called a “stipend.” It is not a refund because a refund is free money. This is certainly not free. By cashing this check you are taking out the total amount of your loans.
You may have met with a counselor and they told you that you would only have to take out $3,000 in student loans to attend but if you cash this check guesses what you just took out $6,000. Worse off some of these loans start occurring interest right away, which means you’ll have to pay back way more than the $6,000 you borrowed in the first place. I have enrolled plenty of students that if they did not take out the stipend as I recommended, they would have graduated with under $15,000 in debt, but instead they ignored my advice and graduated with $40,000 in debt.
Many students say, oh I’ll put it in my savings just in case… DON’T FALL INTO THIS TRAP. Other’s are just plan awful and waste their “stipend” on college parties, big screen tvs, and clothes. Trust me you will have to pay this back and with interest! I had one student who wanted to enroll before Christmas so she could buy Christmas presents with her “stipend”. I had another student that was going to use their “stipend” for their wedding… face palm.
Lie #10: “I can find a way to not pay back student loans” – Mostly FALSE
The government distributes student loans. Meaning the government will want their money back and trust me THEY WILL GET THEIR MONEY BACK. You may not remember but, when you applied for financial aid you completed a Master Promissory Note. This is a legal document saying that you agreed to pay back your student loans. Universities will not let you start attending classes with out this document signed.
HARD TRUTHS ABOUT LOANS:
You have to pay them back
They don’t go away
They will only grow larger… interest is a jerk.
You can not file for bankruptcy on student loans. (in rare circumstances this can happen but it is incredibly rare and requires a lot of legal gymnastics)
LOANS WILL BE FORGIVEN OR CANCELLED WHEN:
You die… yup loans are with you till you pay them off or die which ever comes first
You attended a school that closed (your degree is invalid) or got a false certificate
Public service loan forgiveness, teacher loan forgiveness. (but these programs might be cut as they were enacted by Congress and they can eliminate them)
Check out the governments website for more details. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation
What to do now?
There is so much to learn about financial aid and it can be so overwhelming! But you can do it! It begins with educating yourself and asking questions when you are unsure. Please know that not every person who gives you advice has your best interest at heart. Do your research first!
Most students graduate college having little knowledge of how much they actually owe in financial aid. But you can graduate way above the curve.
Download my free student loans organizer! It will help you organize your student loans and pay them off as quick as possible!
Free Budget Form Here!
Download the same budget I used to pay off $30,000 in just 11 months!!!