How To Lose Your College Financial Aid

http://www.forbes.com/sites/nataliesportelli/2015/06/08/how-to-lose-your-college-financial-aid/3/

When deciding which college to attend, students consider factors such as academics, prestige, location, and size. Even though these features are all important when making a final decision, for money-conscious families, a financial aid package is often the deciding factor.

Although seeing the right number on paper can be exciting for students and parents alike, there are almost always strings attached to the award. Financial aid can help students afford college, but it is not free money and families may find that keeping those dollars from freshman to senior year is more difficult than they anticipated.

Financial Aid Fails

In the frenzy of reading acceptances and financial aid letters, families may not consider the conditions under which the money is being offered. “The requirement for maintaining eligibility, so you can continue receiving a financial aid award, is something people don’t pay attention to,” says Mark Kantrowitz, publisher of Edvisors.com and author of Filing the FAFSA.“Families don’t usually look at the award letter in too much detail and often the letters are really confusing.”

Once they get to college, students on financial aid can’t slack off or they could be out thousands of tuition dollars. “The number one way students lose aid is their grades,” says Kantrowitz. To remain eligible for federal and college financial aid, students typically have to maintain at least a C average and be making Satisfactory Academic Progress (SAP), which means that they are on track to receive their degree within a set time frame (3 years for an Associate’s degree and 6 years for a Bachelor’s degree).

Fall below a 2.0 GPA, and the aid can disappear. If students get their grades up, they may regain their aid, however this task may prove challenging. “It can be difficult to improve your grades when you’ve had some other reason to fail courses like illness, injury, and death of a relative,” says Kantrowitz.

Outside of the classroom, students must maintain a good record to keep their aid. “You cannot be convicted for sale or possession of illegal substances if you’re on federal aid because you can lose your eligibility.” Upon release, most eligibility limitations are removed, but if the charges were for a drug or sexual offense, access to aid could be limited.

When accepting a financial aid award, students and their parents may not consider the possibility of a worst case scenario and fail to look into the strings attached to their package. “Families may not pay attention to disclosures because they may not be in the financial aid packet, but they are always in the college course catalogue,” says Kantrowitz.

What’s Not In The Letter

Students and their families should be aware that the initial number they in their award letter is not guaranteed for all four years. Financial aid is awarded on a yearly basis so if circumstances change, financial aid will change. That means that aid can fluctuate based on what families report on the FAFSA. If parents make more money one year, they may see a decrease in their package. If they make less another, they may see more.

Financial need is determined by subtracting Expected Family Contribution (EFC) from Cost of Attendance (COA). But EFC is not actually a number. “It’s not a dollar amount, it’s an index of eligibility,” says Paul Wrubel, cofounder of TuitionCoach.com. “Colleges aren’t under a moral obligation to give you a specific amount of money.” That’s why, he says, financial aid offered at one college can be drastically different than at another, even though the FAFSA is identical. So, EFC can be very expensive speculation.

When first receiving notification of an award, families may not understand what kind of monetary support the school is actually offering. Colleges are free to adjust financial aid packages during matriculation, frontloading the grant money and then later reducing it and replacing it with loans. “When you accept an award and there is grant money involved, you should do whatever it takes get a letter saying that if a student progresses normally you should get that grant money every year,” says Wrubel. “If you don’t secure grant money then you’re just eligible for more student loans.” Students can be in danger of graduating with loans they didn’t know had if they do not clearly understand what kind of support the school is offering them.

Financial aid letters can also offer work study compensation as part of the package. However, that money has to be earned. Students get paid for hours logged during their work study and that is considered part of their EFC. If they do not work the set amount of time, they will not earn the total amount of work study compensation offered. Often, too, they may find these paychecks go towards personal expenses that arise, rather than their tuition bill.

When Financial Aid Doesn’t Work

Often, financial aid packages aren’t enough to cover all the costs of going to college. “Typically financial aid covers tuition and room and board, but sometimes miscellaneous expenses aren’t covered,” says Felicia Gopaul, a certified financial planner who started the College Funding Resource. “Things like transportation or a new computer are costs students and parents don’t necessary know about upfront.” These fees as well as extra charges for certain classes or printing are other add-ons that may arise.

Students should also be aware that they can amass interest on loans in their financial aid packages. If they don’t pay interest on their loans during school, it will go on their loan balance and they will have to pay the extra charges after graduation. “Most of the time students just ignore the interest on their loans because they can defer making payments on them while in school,” says Gopaul. “They don’t understand the impact it will have on their finances if they let interest accrue.”

On top of everything else, students may not be prepared for the personal and fiscal responsibility that comes with taking on loans associated with financial aid. “There is an inclination with some students to live beyond the student lifestyle because oftentimes they think of student loans as free money and sometimes take out more loans than they need,” says Gopaul. “They continue to live like mom and dad are supporting them and not necessarily understand that those are costs that they’re going to pay back.”

Although financial aid can support a student’s dream of attending college, it can also present a number of hurdles and make false promises of college’s true affordability. If they don’t do their research, students and their parents could be paying the price of their financial aid long after they receive a diploma.