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Key basics to help students throughout the financial aid process

With all the news about student loan forgiveness these days, it’s important to start with the facts. According to, the average federal student loan debt as of 2022 is $37,574 — an amount that has tripled since 2007. More than 45 million borrowers have student loan debt. And 20 years after they entered school, half of all student borrowers still owe $20,000 each on outstanding student loan balances.

In the most recent study on collegiate financial wellness from The Ohio State University, 74% of respondents agreed or strongly agreed that they were stressed out about their personal finances. 33% said they had considered dropping out of college due to financial concerns. 54% said they may not be able to pay back the student loans they’ve taken out. And 49% said they didn’t have a good idea of what their monthly student loan payment would be once they graduated.

It's clear that while some students know what they’re getting into with student loans and have a good handle on how financial aid works, the majority — incoming freshmen, first-generation students and adult learners alike — find themselves lost and easily derailed in the complexities of the financial aid process. To help, we’ve compiled a list of 10 things students should know about financial aid: simple, basic, no-nonsense information you can share with the students you support when the subject of financial aid comes up. The hope is that taking time to educate them upfront will pay off tenfold down the road.

Financial Aid 101 — Understanding the different aid available

Ask 10 would-be higher education students to describe “financial aid” and you’re likely to get 10 different answers. Here’s a simple cheat sheet to help students understand the different types of financial aid:

Student Loans are funds a student borrows in order to attend college. The key word here is “borrow,” as the money has to be paid back, with interest. The amount a student can borrow is based on income — either their income or their parent’s income (if they are a dependent). Eligibility for nearly all financial aid begins with completing and submitting the FAFSA.
Grants are a type of financial aid that does not have to be repaid. Grants can come from a variety of sources, including the federal government, state government or college, as well as from a private or nonprofit organization. The most common type of grant is the Pell Grant — a need-based grant which is awarded to students who demonstrate exceptional financial need.
Work Study is a type of federal and state financial aid for low- and middle-income students. Like the name implies, it allows qualifying students to get an approved part-time job (usually on campus), with the earnings meant to help with day-to-day expenses — rather than the big-ticket items, such as tuition or housing. Eligibility is typically based on financial need and the availability of funding.
Scholarships are “free money” based on academic merit, talent, or a particular area of study and provide education-related funding that doesn’t need to be paid back. Scholarships can be awarded by the school, as well as nonprofit and private organizations. Some scholarships are awarded for a single year, while others are awarded for each of four years, if the student is attending a four-year school.

1. Start by getting students to set their assumptions about eligibility aside

Every year, thousands of students decide ahead of time that they won’t qualify for financial aid, so they don’t apply. That’s a mistake — and one that’s easy to fix. Explain to them that there’s a good chance that they’ll be eligible for some kind of financial aid. But the only way they’ll find out is by applying. Students often tell anecdotal stories of a friend or neighbor who applied for aid and wasn’t eligible — so they think they won’t be eligible either. But every household/situation is different. So applying should be thought of as a must, not a maybe.

2. Help students become familiar with the FAFSA

The Free Application for Federal Student Aid, or FAFSA, is the gateway to all federal student aid — including Pell Grants, work study and student loans. Most students have heard of the FAFSA, but aren’t truly sure what it is or how it works. Despite what many students think, it’s not a bank. And it’s not an agency, organization or department that hands out money. Students need to know that it’s a form — a long and complicated form — that they have to fill out in order to see if they qualify for federal student aid and, if so, how much. And make it clear to them that it’s OK to ask for help. The form is not intuitive, and when students (and their parents) feel like they’re lost when going through the FAFSA, they tend to set it aside for later and, in doing so, can miss important deadlines.

Helpful Tip: To start the FAFSA, direct your students to to set up an account. And if they are a dependent, they will need information from their parents in order to complete and submit the form.

3. Explain the importance of deadlines

Deadlines are an integral (and inescapable) part of the college application process. Nowhere is the adherence to those deadlines more important than financial aid. The FAFSA opens every October 1. Beyond that, every school, every scholarship and every grant have their own financial aid deadlines. But unlike professors who may provide a few extra days of grace for a late assignment, financial aid deadlines are a firm cutoff, and students need to understand that missing a set-in-stone date can cause them to miss out on money to pay for school.

4. Encourage students to apply as early as possible

We’ve all heard the saying “the early bird catches the worm.” The same could be said for financial aid. Some types of financial aid are awarded on a first-come, first-served basis — including financial aid for state schools and universities in more than a dozen states. Understanding that funds for financial aid come from a finite pool, encouraging students to submit their applications as quickly as possible can increase their chances of receiving an award.

Helpful Tip: Many colleges publish a FAFSA due date with a priority deadline. Students need to submit their FAFSA form by that date in order to potentially receive the most money from the school. States often have priority deadlines too. If a student sees “priority deadline” next to any type of financial aid information, they need to jump on it.

5. Review the need to stay on top of all financial aid emails

Once a student submits the FAFSA — or paperwork for any financial aid — it’s crucial for them to check their emails and respond accordingly. So let students know that they should regularly check whatever email account they used for any financial aid applications. Whenever they receive an email asking for additional information or records of some kind (like tax returns, for example), it’s incumbent on them to follow through and supply any requested information as quickly as possible. If an email isn’t returned, the financial aid process comes to a halt. Any holdup in replying to emails could mean missing critical deadlines, or worse – a loss of funds.

Helpful Tip: Every year, a percentage of students who submit a FAFSA (17.11% during the 2021-22 cycle) are randomly selected to have their FAFSA information verified. This just means they’re checking to make sure the information originally provided is correct. Verification is typically related to finances, identity or statement of educational purposes. As with all financial aid issues, students need to respond with the appropriate paperwork as soon as possible. And they should know that they can reach out to the school if they have any questions.

6. Spell out the fact that a student loan is a debt

When a student accepts and taps into a student loan, they need to understand that those funds have to be repaid — no matter what. Even if the student stops or drops out of school, for any reason, they still owe the full amount of the loan — plus interest. And student loans are one of the only types of debt that cannot be discharged if someone declares bankruptcy. It sounds harsh, but student loan servicers don’t care if a student loses their job, has to care for a loved one or needs to drop out of school. The bottom line is that a student loan must be repaid.

7. Make sure students know what they’re signing up for

An ACT survey shows that most high school students don’t understand the basic working of financial aid. This is especially true for first-generation students, students of color, and adult students whose last time in school was years ago. So when explaining financial aid to the students you work with, keep in mind that what seems crystal clear to you may be clear as mud to them. One financial aid staff member shared an example of a first-generation student who didn’t understand that the “refund” check they got from financial aid was money that had to be paid back — not money to spend, like a tax refund. Stories like this highlight the need for clarity and transparency when students put their signature on financial aid documents.

Helpful Tip: When speaking with students about financial aid, ask open-ended questions. Asking yes or no questions tends to elicit yes or no answers. Students could be confused or overwhelmed, but they won’t volunteer that. When you ask open-ended questions and dig a little deeper, you get the answers below the surface that help you learn about the real issues they’re experiencing and challenges they’re facing.

8. Encourage students to ask questions

Students are often afraid to ask “stupid questions” and think they must be the only ones who don’t understand how the FAFSA works or what a Pell Grant is. That’s why it’s important to normalize the simple act of asking questions — making it clear, upfront, that it’s not only OK to ask questions, it’s encouraged. The challenge is that since most financial aid departments are overloaded, it can be tough to have conversations that go much beyond cursory loan paperwork and housing bills. Whenever possible, students should have a direct contact they can speak with for help.

Helpful Tip: For many students, financial aid is a family affair. Parents and other family members are often part of the process and decision making. Providing contact information to the family and letting them know you value them as part of their student’s “team” can help alleviate worry on their end and make them more likely to keep their student on track.

9. Discuss the importance of follow-through

Getting the loan, grant or scholarship is great and something to be celebrated. But it’s not the end of the process. Once a student has been approved for their various forms of financial aid, they need to understand that it’s up to them to follow-through and close the loop. They need to sign any final documents for deposit of the funds. They need to pay tuition using those funds. They need to take care of room and board (and books and fees) using those funds. So make it clear to students that making sure their college expenses are paid is their responsibility — but let them know you’re there to support them if they get stuck or need help.

10. Next school year, do it all again

The good news? By this point, the student has a firm grasp on how the financial aid process works. They are familiar with the FAFSA, know to quickly reply to any emails, and understand how to follow-through from initial application through final disbursement. The not-so-good news? They have to repeat the process for every school year — including completing and submitting a new FAFSA. Rules change. Eligibility requirements change. And household incomes change. But thanks to your patience, dedication and expertise, coupled with the information and tips included here, your students should be in good shape to repeat the process.

Student loan forgiveness is a hot topic these days — and one of our 10 Higher Ed Trends to Watch In 2023. Get the latest on this and other issues facing higher ed right now.

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