The Financial Aid Timeline

Probably the most important piece of advice I tell to both students and parents is that there is a proper chronological order that they should abide by when applying for financial aid. By following this timeline student and parents can maximize their ability to benefit from financial aid by lowering their costs, and conserving the time that they will have to spend searching for aid.

The order in which students and parents should approach applying for financial aid is heavily contingent on the different types of aid that may be offered during any particular school year.

To review, these are the major types of financial aid that may be available during an academic term:

• Federal Student Loans
• Private Student Loans
• Education Grants
• Scholarships
• PLUS Loans
• Work-study Programs
• Gift Aid
• Other Loans and Credit Instruments

Step One: Complete the FAFSA

The first and most important in getting financial aid involves completing the FAFSA. The FAFSA, or Free Application for Federal Student Aid, is the official application that the Department of Education makes available each year for college students and parents who wish to become eligible for federal student aid.

The earliest the FAFSA can be completed and sent in is January 1 for the following academic year beginning in the Fall semester. The latest the FAFSA can be sent in is June 30, and it is highly advisable that both students complete the form and send it in as early as possible in order to improve their likelihood of receiving the maximum amount of federal student aid that may be available to them.

By completing and sending in the FAFSA, students and parents will make themselves eligible for all types of federal student aid, including all federal student loans, federal education grants, state-based aid, and even some aid that is provided exclusively through various postsecondary institutions.

So in conclusion, by completing the FAFSA students and parents will put themselves in the running for the following types of financial aid:

• Subsidized Stafford Loans
• Unsubsidized Stafford Loans
• The Federal Perkins Loan
• The Pell Grant
• Other Federal Grants—including the TEACH Grant, SMART Grant, ACG Grant, and FSEOG award
• Federal Work-study Programs
• State-based Aid
• Certain Types of Scholarships

Step Two: Accepting Various Merit-Based Awards and Scholarships

The next step after completing and sending in the FAFSA that both students and parents should do when seeking aid is to either apply for, or accept whatever awards and scholarships may be available to them.

This type of aid is usually categorized as scholarship aid, although sometimes there can be other sorts of awards that are available that could be considered as a grant, or loan. Regardless, these typically are exceptional kinds of aid to receive in that they don’t have to be paid back, and because they are based most often on merit.

Students who have excelled in a particular area while in high school should not hesitate to search for such aid, as there is usually an abundance of scholarships available to those students who may qualify. Prime examples would be students who have achieved academically or on the field, and for those students who may exhibit a special talent, skill, or ability.

Many times these types of awards are simply given out to those students who qualify, while other times students will be required to apply independently on their own. The bottom line is that scholarships, and other types of merit-based awards should always be welcomed by incoming college students, as they can provide aid that doesn’t have to be paid back, and that should mean that there will be less of a reliance on student loan debt when all is said and done.

Step Three: Reviewing Gift Aid and Considering Private Student Loans

Once the FAFSA has been sent in an award letter should be sent to the student at some point during the Spring, and perhaps early Summer. Within this award letter will be a detailing of all the federal student aid the student qualified for, and perhaps any scholarship, and merit-based aid that was approved.

After reviewing this award letter, the student and their parents should then have a clear idea of how much additional financial aid they will need to pay for the particular postsecondary institution at hand they plan on going to. By subtracting the current level of aid that was included in the award letter from the cost of attendance, the student and parents can be left with the total amount of aid they need to come up for the following school year.

• Cost of Attendance (CoA) — Aid Present in Award Letter = Total Amount of Funding Needed

The total amount of funding that is needed once this equation is completed leaves the student and parent with a figure that they must come up with so that matriculation is possible.

This total amount is typically paid for via either one, or a combination of the following mechanisms:

• PLUS Loans
• Gift Aid
• Out of Pocket
• Private Student Loans
• Other Loans and Credit Instruments

PLUS Loans

While technically speaking PLUS Loans are considered to be federal student loans, they really are more like private student loans with some of the benefits of federal student loans, as they are not based exclusively on financial need, and are rather based mostly on credit.

Because they can provide aid up to the full cost of attendance, and because they do in-fact have a variety of benefits that are similar to most federal student loans, I advise students and parents to consider this type of aid before they attempt to apply for private student loans. If they are approved, they can typically get a lower interest rate, and an overall better loan than they would from an independent private lender.

Remember that the student cannot apply for a PLUS loan while they are still considered to be an undergraduate student, as the parent must apply and use their credit during the application process. The student can apply independently if they are considered to be a graduate student, or are participating in certain types of professional degree programs.

Gift Aid

The availability of gift aid may be a possibility, although when all is said and done this kind of aid isn’t typically able to pay for a significant portion of the leftover total of education-related expenses. Regardless, it is still a smart move to try and ask friends and family for money if they are willing to work with you, as you should be able to justify such a donation for a worthy cause.

Paying Out of Pocket

Paying out of pocket is a common option that is utilized when the student’s family has a significant level of cash reserves or assets. This however is becoming more and more of a rare occurrence, and while it is prudent to at least examine what funds the family may have access to, not paying bills in order to pay for school is never a smart idea.

Private Student Loans

The consideration of private student loans is probably the most viable option out of the aforementioned items, as they are readily available, and can easily provide the student with enough aid to bridge the gap between what they received from scholarships and federal aid, and what they need to pay for their entire cost of attendance.

Getting a private student loan isn’t easy however, as they aren’t based on financial need, and are rather based on credit. This means that to get an approval either the student, or the parent is going to have to have both a good credit score, and a significant and regular income that they are willing to demonstrate to a lender. The only exception to this is if the student borrower can provide a credit-worthy cosigner to the private lender that has the necessary credentials the lender is looking for.

Other Loans and Credit Instruments

When all else fails it might not be a bad idea to consider applying for other loans and credit instruments that have nothing to do with obtaining a college education. Credit cards, personal loans, and payday loans are common instruments that are often thought when all other types of conventional financial aid have been exhausted, and while I don’t typically endorse the utilization of such financial instruments, they can be useful if the student and parents have no other option.

In reality these types of credit and loan products don’t go very far when attempting to pay for a high-priced college education, and should only be used as a last resort. The most appropriate use would involve the taking out of a student credit card to be used only during emergency situations, or perhaps for books, food items, and other living expenses.

Otherwise, I would advise both students and parents to avoid applying for such credit and loan instruments, as they typically carry high finance charges, low disbursement amounts, and poor repayment terms. Especially avoid payday loans, as they are ultimately fraudulent loan products that will end up costing you more than you will ever receive from their proceeds.

Step Four: Putting It All Together

In the end applying for aid in this way should maximize your eligibility for the best kinds of aid that are available, and should lower your overall costs over time. Students who have little to pay out of pocket, and are in need of a high amount of aid should make sure that they get their FAFSA in as early as possible, explore all scholarship opportunities, consider work-study programs, and take into consideration alternative methods that can help pay for their education-related expenses.

The following is a brief summary of the major steps that should be taken in chronological order when seeking and applying for financial aid:

• Step One: Complete FAFSA
• Step Two: Accept Scholarships and Merit-based Aid
• Step Three: Apply for PLUS Loans
• Step Four: Gift Aid and Out of Pocket Funding
• Step Five: Apply for Private Student Loans
• Step Six: Apply for Alternative Loan and Credit Products

These are the steps that I recommend to students and parents who require financial aid to pay for college, and I highly suggest that you follow these steps in chronological order if you want to maximize your ability to get the most amount of aid you can, at the lowest possible cost.