Earning a college degree can be an important investment in yourself and your future.
Data from the U.S. Census Bureau shows that full-time workers age 25 and older had median weekly earnings of $595 in 2006 if they were high school graduates. By comparison, earnings were $721 for those with associate’s degrees, $962 for those with bachelor’s degrees, $1,140 for those with master’s degrees and $1,441 for those with doctoral degrees.1
1Bureau of Labor Statistics, “Education pays…” Retrieved October 29, 2007, from http://stats.bls.gov/emp/emptab7.htm
Most college students cannot pay for college out of pocket. Therefore, they must apply for loans or financial aid. Because financial aid is basically free money, all students should apply for it before considering loans. Today I will discuss six common mistakes that people make when applying for financial aid.
- Not applying – As obvious as it may seem, many college students never even apply for financial aid. They simply assume that they could not get it. However, nearly everyone can get at least some financial aid. For example, even families who make more that $100,000 can get financial assistance. The American Council on Education estimated in 2006 that 1.8 million low- to middle-income families did not even file the FAFSA (Free Application for Federal Student Aid). They also estimated that 1.5 million of those same families could have qualified for a Pell Grant. Always apply for financial aid, chances are you will get some aid.
- Missing deadlines – Because if can be worth thousands of dollars, you would think that all students would file the FAFSA as soon as possible. Surprisingly, many families wait until the last minute. That is a big mistake! If you miss the FAFSA deadline, you will not qualify for financial aid! This is a big deal. File your FAFSA as early as possible. Make it your goal to be the first person in the whole nation to submit your FAFSA. Even after you’ve met the FAFSA deadline, you will still have more deadlines to meet. Every school, for example, will have a their own deadlines and requirements. Make sure you meet them. Set yourself a deadline two weeks before the real deadline. That way, if you miss your first deadline, you still have some time before the final cutoff point.
- Paying for something that is free – For what does “FAFSA” stand? It means the Free Application for Federal Student Aid. Therefore, if any website wants you to pay them for help you with the financial aid process, they are most likely trying to rip you off. The basic rule of thumb for financial aid is “If you have to pay money to get money, it’s probably a scam.” Avoid paying anyone for help with the FAFSA. Instead, get free online support or call your local college – they are normally more than happy to help.
- Forgetting scholarships – While you are busy filing your FAFSA, do not forget about regular scholarships. Hundreds of thousands of dollars are available in scholarships. Find a good free scholarship search like Fast Web and start applying for scholarships. Just like the FAFSA, make sure you meet all the deadlines and be very wary of paying money for “scholarship help”.
- Living like you have a rich uncle – Even if you get lots of scholarships and other financial aid, you are most likely still going to be short of cash. Do not live like you have tons of spare cash. If, like most students, you must take out a student loan, you want it to be as small as possible. College is the time for frugality. If you live cheaply in college, you might be able to live more expensively after college. Every time that you want to buy something extra ask yourself, “Do I have to get this now, or can it wait until after college?” Obviously, some extra spending is understandable, but try to be frugal.
- Ignoring federal loans – If you do have to get a student loan, apply for federal loans before you consider private loans. Normally, federal loans have much lower interest rates than private loans. Unfortunately, federal loans have lower borrowing limits that private loans. Federal loans amount to an average limit of $4,000/year. The first year you can only borrow about $2,000, but by the last year you can borrow about $8,000. For a good comparison of federal loans vs. private loans, read this article by Business Week.
Obviously, these are only a few of the mistakes that can be made.
What mistakes do you think are the most dangerous?