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Traversing the world of collegiate financial aid can feel like you are navigating a maze. If you go into the process blindly, that is exactly what it will be: a confusing tangle of dead ends, backtracking, and worst of all, traps.

Today we’ll take a look at some of the worst traps and tell you how to avoid them.

The 6 Financial Aid “Traps” To Avoid

1. The Confusing Financial Aid Award

If you are confused by your financial aid letter, do not feel bad—-a very common mistake in the financial aid process is misunderstanding where the money for your package is coming from.

Colleges use various sources to fund financial aid packages, and they do not all necessarily save you money.

Unfortunately, the financial aid letter is rarely clear about what type of aid you will be given (loan or grant) or how much you will owe in the long run.

The only way to effectively understand exactly where your aid is coming from and how much money you will owe is to ask questions.

Look at each item listed in your package and ask the college’s financial aid office whether it is a loan or a grant.

For loans, find out the interest rates, details about the maturation of the loan, and piece together what it will cost you in the long-term.

For grants, find out how and when the money will be dispersed. Some schools will provide the entire grant at the beginning, while others will spread it out over four years.

Be sure you understand every detail of your financial aid package, no matter how confusing it may seem.

2. The Fear of High Prices

Many families are quickly scared away from applying to private schools when they see a yearly price tag in the range of forty to sixty thousand dollars.

However, the sticker price is far less important than the net price.

This is the total amount you will pay out of pocket to attend a college after aid and other variables like travel or room and board are factored in.

The more expensive schools often offer far more financial aid, meaning your cost to attend could drop drastically to the range of a state school.

Calculate your net cost to attend a university before you cross it off your list for being too overpriced.

3. Withdrawing from Retirement to Help Defray Expenses

If at all possible, you should avoid pulling money from your retirement accounts to help fund your child’s college education.

When you withdraw from your IRA, money that was previously not counted as assets in financial aid calculations can suddenly negatively affect the amount of aid you receive because it is now counted as income.

Then you face sharp penalties and fees for drawing from your retirement too early as well as owing taxes on previously taxed deferred funds.

The damage you do to yourself by tapping into retirement is far worse than taking out federal loans to pay for college.

4. The Dangers of Procrastination

When it comes to filing for financial aid, DO NOT WAIT!

Start early and fill out the FAFSA as soon as possible.

There are many different deadlines for federal, state, and college financial aid programs, and some of them are quite early.

The longer you wait to fill out these forms, the more you risk missing out on the maximum financial aid package for which you are eligible.

5. Just Because You Need It Doesn’t Mean They Give It

Not all colleges fulfill 100% of financial need.

Don’t assume that your FAFSA EFC (Expected Family Contribution) is all a college will expect you to pay.

Ask each college whether they fulfill 100% of financial need, and if not, what percentage of need do they cover.

A cheaper school that only covers 70% of need could be more expensive than a higher-priced school that covers 100%.

6. Fixed Financial Aid Packages

Many people assume that if their financial need increases in the future, then their aid package will be accordingly adjusted.

Unfortunately, this is not always the case.

Some schools will not adjust your package for any reason after your first year of college.

This is something you need to find out ahead of time, especially if you expect your need to increase in the future.

You don’t want to discover in your child’s third year of college that you can no longer afford to pay for it.

A Unique Opportunity

You may not find this opportunity anywhere else in the college planning space.

It’s an “inside look” at your college funding situation with an authorized college funding advisor – absolutely free.

We’ll help you figure out where you stand, including whether or not you can lower your expected family contribution (EFC) – and maximize your eligibility for financial aid. What’s more – you set the date and time for the call.

Sign up for your free, no obligation consultation by following this link.

(It’s important to recognize that individual circumstances and efforts can significantly impact outcomes. Engagement and commitment from both the family and student are indeed crucial factors in achieving positive results. The advice and direction provided by CPN (College Planning Network) and CPF (College Planning Fresno) can serve as valuable guidance, but ultimately, it’s up to the individuals involved to actively participate and implement the recommendations effectively.)


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