The Eight Worst College Financial Aid Mistakes - Avoid Them

Contributing Author: Keith Maderer

With college costs rising faster than inflation and financial aid shrinking, you can't afford to make mistakes when it comes to sending your child(ren) to college. If you do... it will definitely cost thousands, even then of thousands of dollars per child. Now if you have an extra $5,000, $10,000 or $20,000 sitting around and don't mind giving it to a college... then this article isn't for you. For all others... Please read carefully!
Going to college can be a very complex and stressful time for many families. Especially with your first child that begins the process. While it may get easier with each child, if you make any of the following mistakes, it will cost you money.
If you are fortunate enough to be reading this while your oldest child is still in middle school or just entering high school, then you should have plenty of time to methodically make the most out of the college financial aid process. If your child is about ready to graduate or already in college, then you better get started right now and plan to spend some quality time making the adjustments necessary.
Eight Mistakes That will Cost You Plenty
Mistake 1: Not Starting Early Enough: The main reason families make costly mistakes during the financial aid process is that they wait until the last-minute and are rushed. If you start early and plan your steps on a timeline, you will be ready and prepared to take full advantage of the process.
Mistake 2: Not Paying Attention To Deadlines: Another big mistake is missing a financial aid deadline. If you don't file the right forms with the right departments before the required deadline, you lose the opportunity to get the financial aid for that semester and generally cannot reapply until the following semester.
Mistake 3: Not Filing The FAFSA: The dreaded first-time FAFSA (Free Application for Federal Student Aid) isn't as bad as most families believe it is, but if you never file it, you are guaranteed to be overlooked by the financial aid system. Most colleges require the FAFSA to be filed, even if you will not qualify for Federal aid, just so they can offer you any private scholarships, grants or endowment opportunities. So always file the FAFSA.
Mistake 4: Not Utilizing EFC Reduction Strategies: Every applicant that applies to college and requests financial aid will have an Estimated Family Contribution or EFC calculated based on the financial information that is provided. If you know how to use these EFC reduction strategies before you are required to file, you can lower your EFC and increase your financial aid dramatically.
Mistake 5: Student Loans: Many students and their families use the wrong types of students loans, don't use them at all or fail to look into which student loans are custom-made for their situation. A vast amount of information on student loans is available and all you need to do is read it. It will compare the different types and then you should be able to decide which is best if loans are required.
Mistake 6: Paying For College With Retirement Money: Every year I hear and read about parents that are tapping their 401K or other retirement plans to help pay for their children's college expenses. They either withdraw or borrow funds for education and neither method is a good idea for most families. Don't sacrifice your retirement for your child's education, because they probably will not be able to take care of you in retirement if you do.
Mistake 7: Not Appealing Your Offer: Appealing a financial aid offer from a college can be a great way to get additional aid, especially if you believe some mistakes or omissions were made when you initially filed. This is the time to clarify and correct any issues that you discover and request an adjustment if possible. It generally cannot hurt to ask for more and it gives your student the opportunity to make some great contacts inside the financial aid system.
Mistake 8: Not Asking For More... In Years 2 to 4: As a student continues through college, most never visit the financial aid office again after their freshman year. If you make regular visits each semester and inquire about additional aid, scholarships or grants, you may be pleasantly surprised by how much aid is available (and sometimes unclaimed), specifically for 2nd, 3rd and 4th year students.
Summary: This is a just a summary of the major mistakes that I hear about each and every year. Each of them is avoidable if you just take the time to do your research, get organized and plan your strategy. Obviously, the earlier you start, the better prepared you should be... so get started today and save a bundle.
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Keith Maderer is a financial expert, author, speaker and father of five. He has been a financial adviser in the Western New York for over 30 years. He is the owner of SENIOR Financial and Tax Associates and founder of the Maderer Foundation, a private scholarship program for area youth.  He is the author of the book, "How To Get Your College Education For Less.",

How to Get A College Tuition Loan

Getting a college tuition loan seems hard at first, but it gets easier as you learn how to do it and what to look for in a loan.

Here you'll find several places to look for a loan, and what kind of loans work best. These pointers are guidelines, of course, but can help you get better loans.

First, places to look for a college tuition loan:

1. Your bank or credit union

2. Your school

3. Federal financial aid (using the FAFSA form)

4. State financial aid

5. Independent lenders like Sallie Mae, Citibank, Chase, and so on.

What Makes The Difference in a College Tuition Loan

Borrowing money for school hinges on just a few points. Your credit is important typically in the case of a private loan. Your school mainly becomes a factor because it needs to participate in the government financial aid system if you use government aid. Qualifying for government aid, whether grants or loans, depends on your income or the income of your parents.

Beyond those, you may have to be careful of hitting the ceiling on your government loans, or limiting yourself to less private loans.

The above comprise the top sources for a student loan. I'll give you a few more below, less common.

Get The Best Student Loan You Can

First, look at these things to remember when you look for a college tuition loan. Remember, I list these as guidelines. If you can get all of them, great. If not, get the best you can, and understand how the loan characteristics affect you.

1. Low, fixed interest rate

The benefits here should be obvious - stable and hopefully less interest, lower payment, faster payback. A variable interest rate opens your loan up to a higher rate. Of course, during recent events, many variable rates have dropped, but that is not the rule. With a fixed rate, you can set your payment and not have to worry that it will rise over time.

2. Forbearance and deferment available

These can be very helpful. Deferment and forbearance allow you to miss payments at certain times. You will have to apply for these, but the application is easy.

In many cases, when you do not have a government subsidized student loan, you will your interest capitalized, which is bad and increases the balance of your loan.

However, having the safety valve of deferment and forbearance available is a good idea in any college tuition loan. Just don't use it much. If you have to use it, often you can still pay the interest payment on your loan to avoid capitalization.

3. No capitalized interest

When you use forbearance or deferment, many unsubsidized loans will capitalize your interest. This means that the bank adds it onto the loan, and you then pay interest on the capitalized interest.

Your small loan can become much larger very fast - bad idea. If you can, get a loan that doesn't capitalize interest. This one can cost tens of thousands in your future.

4. Consolidation

When you finish school, you might have more than one loan. If so, consolidation may help you get a lower payment or a longer payoff. This can really help you.

Those are the most important options to look for in a college tuition loan.

Emergency Sources

When you can't find a loan from the tuition sources listed above, consider some less common places. IF you have a 401K, you might want to borrow from it. Understand that this may mean you will not have it to grow for your retirement, but you might finish your degree.

Another place to look, your home equity loan. Many people have used a HELOC to go to school. And finally, if you expect a sizable tax refund, use it for tuition instead of a cruise.

Now get to it!

Need more info? Come to Beat-Tuition.com and download my free ebook on grants and scholarships all over the US. Thousands of students every year get free money for tuition. I can show you several places - I've done it. You'll find tons of sources in my free grants ebook at Beat-Tuition.com

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