Getting accepted to an academic program can be one of the most exciting events in a student’s academic career. However, this excitement is often followed by panic. Many students and their families become overwhelmed by applying for financial aid, taking out loans, and cutting costs to afford a college education. Student debt is something that can plague individuals and their families long after graduation, but doing extensive research before borrowing can help. Here are a few things that borrowers should know about student debt before they sign on the dotted line.
Calculating Financial Aid Packages
For students navigating a bursar’s office for the first time, the vocabulary used in discussions of payments and financial aid can be unfamiliar. In most situations, a school’s financial aid office will determine the cost of attendance (COA) for each student. This includes tuition, room and board, and other miscellaneous fees and expenses. Next, they will subtract the estimated family contribution (EFC), which is based on a student’s FAFSA. The amount of money left (COA – EFC) is a student’s financial need. This is the amount of money that the expected family contribution will not cover, and this amount is what a university’s financial aid package will address.
Components of Financial Aid Packages and How They Impact Student Debt
Some states offer aid in addition to a university’s financial aid department. Most financial aid packages are made up of a combination of grants, loans, and scholarships. Things like work-study programs may also be included. Scholarships are monetary awards that are available from a variety of sources. Many private companies, universities, and non-profit organizations offer scholarships that students can apply for, and scholarship selection criteria can be based on numerous factors. Grants are typically given based on financial need, and they are often awarded by universities, non-profit organizations, and federal and state governments. Both scholarships and grants, assuming the funds are used appropriately, do not impact student debt as there is usually nothing to pay back after graduation.
Student Loans: Significant Contributors to Student Debt
The last type of aid typically used to pay for higher education costs is a student loan. Student loans can be issued by the federal government or private banks and credit unions. The term “student debt” typically refers to the debt that individuals owe, either to the government or private banks, to repay their loans. Unfortunately, many American students struggle to repay their loans after graduation. These loans often come with significant interest rates, and some lenders include fine print and fees that can wreak havoc on borrowers’ finances. It is always good practice to read loan documents thoroughly and shop around for the best terms.
Take Control of Your Finances with EveryIncome
EveryIncome is dedicated to providing our clients with career and finance management tools to help them create a stable financial future. Regardless of where you are in life, our system of tools and guided learning is tailored to fit your specific needs. Take control of your financial health today. Contact the team at EveryIncome online or give us a call at (571)370-5400. For more tips and tricks to foster financial wellness, follow EveryIncome on Facebook, Twitter, and LinkedIn.