Financial Aid

When your student receives their admissions letter to college (Yay!) they’ll also hear about their merit award. This is part of their overall financial aid package for that school. Finances are a critical factor in choosing a college, but how can you tell a good financial aid package from a bad one?

The Basics

There are three basic types of financial aid for colleges, and for this, the federal government website is particularly helpful. Their primary advice is simple, which is that you accept your financial aid from any institution in this order:

“Accept Financial Aid in this Order

1. Free money first (e.g., scholarships, grants)
2. Earned money second (e.g., work-study)
3. Borrowed money last (e.g., federal student loans)”

The reasons for this is that free money doesn’t cost your student anything. And the money they earn through an on-campus job doesn’t burden you either. In fact, many studies confirm that working on campus often improves student retention and graduation rates.

Which Funds Can Be Renewed?

But even in the case of merit awards—one type of free money—make a deliberate decision. You want to be sure that the merit award your student receives in their financial aid package isn’t just for the first year. The last thing you want to do is to scramble to replace that money in years two, three and four. In addition, many students receive merit-based aid as part of their initial financial aid packages that may be renewed, but only if they receive a 3.0 grade point average (GPA) every year. For many students, that’s not an issue. But others may hit a wall during their first year, and their grades fall below their high school standard. This leads to significant stress for students who worry about their ability to return to school because of their GPA. Students and parents should know that most schools will allow students to request a waiver of the GPA requirement for a semester or two, but at some point, they need to make the required GPA.

Loans Are Not The Enemy

Accepting loan money is often the rub for students and their families. How much of a loan burden do you want your student to graduate with? That’s a question that only you and your student can answer. In our case, we thought a student loan debt between $20,000-25,000 would be okay if we could swing it. Any more than that made us nervous. But I would caution you that expecting your student to graduate with no student loan debt at all may be unrealistic. Managing student loan debt properly, rather than not wanting any at all, is probably a more realistic strategy.

Another thing to think about it out of-pocket cost. One thing to consider is the impact college tuition and fees will have on your regular finances. The other factor is you need to add the out-of-pockets costs to the regular loan payments. This may become a deal breaker for the student, even if they judge the overall debt burden to be okay. Going to college shouldn’t bankrupt your family; that’s why taking the time to consider finances carefully is so crucial.

The First Offer May Not Be The Last

What if your student’s financial aid package still isn’t doable for you and your family, yet your student is set on this as their college? Well, you can appeal the decision of your student’s school financial aid office, by telling them that with their aid offer, it will be impossible for your student to attend.

That’s not a bad idea and you may find advocates in the admissions office who will support you. Cappex also suggests using the College Board website and comparing the statistics on financial aid awarded by a host of universities. This may give you more ammunition, since you can find their school’s average merit (non need-based) award there. If your student’s offer is far below that, that’s your wiggle room for negotiating.

Yes, looking through financial aid packages isn’t easy, but facing this challenge head-on with and armed with critical information is your student’s best way of attending the college of their choice.