Is it better to wait for my college financial aid award letter before I start looking for student loans?

I am just wondering if it is better to wait for my college financial aid award letter before I start looking for external student loans. I just know I am not going to get enough from FASFA — is that generally true that I shouldn't rely totally on FAFSA to pay for college?

Answers

Vielka Cecilia Hoy, Founder/Director at Vielka Hoy Consulting, Teacher, and Parent

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Hi there! FAFSA is going to give your college a summary of what you need. Next, your college decides how to distribute that money including how to distribute state grants (e.g. school scholarships, loans, grants, work study). If you find that FAFSA has calculated your contribution to be more than you can actually do, or if something happened between the time that you completed your FAFSA and when you are starting college, you should contact your college's financial aid office or bursar to make those changes (and FAFSA at some point to do the same).

Most of your loan financial aid is coming in the form of a federal loan. This means that the cap is set by them rather than your college. The federal government will say as a freshman, you can have X amount of Stafford unsubsidized, Y amount of Stafford subsidized, and so forth. So you may not be able to get more Stafford loan, let's say, but may be eligible for a parent PLUS loan or a private education loan from a bank.

Lastly, I would be super careful about taking more of any loan. Federal student loans stay with you forever and can not be discharged in a bankruptcy. So what may seem like only a few thousand dollars could turn into something really ugly ten years from now. Look at your budget for school and determine what you can manage in work study, a super part-time job (about ten hours per week max), or searching for scholarships that are still open now. Consider book rentals rather than purchasing, and other ways to manage budget items such as those.

So the short answer is yes, you should wait to see what your college is giving you because that will determine what external loans you can get. BUT you should definitely look for and apply to scholarships in the interim.

M. Erez Kats, Seattle Language Arts Teacher

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One thing students often overlook or forget to inquire about is grants. Student loans you obviously have to pay back, but grants are dollars that the University or College is giving you to go to school there. I would always explore the amount of grant money a school is willing to give. When I was going through the process of choosing a college, this was probably the single biggest factor that I considered financially when choosing a school. Private schools often offer more grant money, mainly because they actually have the money to give, whereas larger state schools often do not. This is partly because of the donations made by wealthy alumni, and also because of higher tuition costs, but again, when you subtract the money that is granted to you, it is often cheaper to go to a private school over a public school that is out of state, sometimes even in-state. On average, I was granted roughly $20,000 out of the $30,000 dollars in tuition I was required to pay at Tulane University and Boston University (both private schools), and therefore only needed to take out about $10,000 per year in student loans that I had to pay back. Most Perkins loans and Stafford loans have a limit on the amount you can borrow anyway as you have already mentioned in your question, so grants, and of course scholarships are the way to go. As far as scholarships go, there are many to choose from that cater to just about every niche or group of people you might belong to, whether it is a cultural group, business or sports scholarship, academic, or even specialty scholarships are available, you simply have to google them and look them up, and then apply. So grants first, then scholarships are something I would always look into very carefully. Good luck!

Nicole Hosemann, Founder and Consultant, On My Way Consulting

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You can certainly start looking for loans before you receive award letters, but definitely don't commit to anything until you see what the colleges are offering. The process of shopping for and comparing loans can be time-consuming, and you many only have about a month between receiving all your offers and May 1 (the date by which all colleges require a decision from admitted students). So learning about some options ahead of time may prove to be helpful!

I recommend starting with the Federal Direct Student Loan. All undergraduates who file the FAFSA are eligible for this loan, and it's an excellent option to start with. The Direct Loan has a fixed low interest rate and is guaranteed by the Federal Government. Students in a lower income bracket will qualify for the subsidized version, and pay no interest while attending school full time. There are numerous repayment plans to choose from, including income-dependent plans where your payments change depending on how much you make. The amount you can borrow is capped: $5,500 your first year, $6,500 your second year, and $7,500 your third and fourth years.

Beyond this, it is best to proceed with caution. There are a lot of private student loans available, but the interest rates are higher and the repayment plans many not be so flexible. Many students end up over-borrow and graduating with debt that takes 10-20 years to pay off. Try not to borrow more than you absolutely need to!

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