Navigating the College Loan Process

By Suzan French

It’s September and for most students, school is once again in session. The hustle and bustle of preparing for back-to-school has subsided; parents and students alike can take a breather and start settling into a routine. But not for long. The college financial aid process begins in just a few, short months. Hence, there is no better time than the present (while everyone else is taking their collective breaths) to begin exploring one’s options. It’s never too early — or too late — to begin thinking about financial aid for college.

“From September to October the focus is on admissions. So students and parents can use this time as an opportunity to connect with the financial office when it is not so busy,” says Lori Williams, Director of Financial Aid, Cedar Crest College, Allentown.

The majority of students are eligible for some form of financial aid. Grants, scholarships, and work-study are most desirable, as they do not have to be repaid, but rarely do these types of financial aid cover a student’s full tuition bill. Loans are commonly offered to supplement the financial aid package.

Learn the Basics

Though navigating the student loan process is not always smooth, arming one’s self with basic knowledge and plenty of time for preparation can minimize glitches and ease the process.

Parents and students should start by visiting the financial aid website of their chosen college(s). Eligibility for loans is determined by completing and submitting financial aid forms mandated by colleges and universities, including the Free Application for Federal Student Aid (FAFSA), which is required to apply for federal loans. Additionally, each school may have its own requirements regarding supplementary forms (such as tax returns and other supporting documents) to be completed. Take note of the college’s individual filing deadlines and mark them on a calendar to ensure they are not missed. Funds are limited and those who do not meet the deadlines could be denied financial assistance.

Next, borrowers should educate themselves about the different types of loans available. The most sought-after are backed by the U.S. Government and generally charge the lowest interest rates to borrowers.

Federal loans can be subsidized or unsubsidized. Subsidized loans are need-based, awarded to families that demonstrate the greatest financial need. The government pays the interest on the loan while the student is in school. Students are responsible for the interest on unsubsidized loans, which can be paid while the student is still in school, or added to the principle balance and repaid after the student leaves school.

Perkins and Stafford loans are designed for student borrowers. Subsidized Perkins loans are granted to students with the greatest financial need and carry the lowest interest rates. Stafford loans can be subsidized or unsubsidized. Loan repayment begins up to six months after the student leaves college. Borrowing limits vary, depending on other loans the student may or may not have received.

Parents may be eligible for the PLUS loan, a government-sponsored loan that may allow parents to borrow the remaining cost of the student’s education after all other aid has been applied.

Private and state education loans may be available to students or parents to supplement the financial aid package. Borrowers should check with the student’s school, their own state’s higher education agencies, their personal bank or credit union, and other sources of funding to compare rates and terms of available loans.

Apply Early

As mentioned, students will need to complete the Free Application for Federal Student Aid (FAFSA) to apply for financial aid and federal loans. Many students believe they will not qualify for assistance, so they don’t bother filling out the form. This can be a costly mistake, as the FAFSA is required for even non-need based, unsubsidized loans.

“Financial aid is available for anyone who wishes to pursue a career or make a career change,” says Marian L. Snyder, Director of Financial Aid, Lehigh Carbon Community College, Schnecksville.  “School web pages provide a wealth of information about particular financial aid opportunities and any eligibility requirements. Plan a visit or contact the financial aid office, which will be happy to answer your questions.”

The FAFSA is a detailed account of a family’s financial standing and can take several hours to complete. It requires completed or estimated tax returns from both students and parents. However, since the FAFSA can be submitted online anytime after January 1, it is recommended that families start the process early: gathering financial records and documents, and beginning to fill out the form, adding information as it becomes available. Getting a jump on filing ensures the forms will be submitted as early as possible and before the deadline and should families have difficulty, they will be able to contact the college’s financial aid office for assistance before the mad rush. (Financial aid deadlines at schools vary, so check with the college for their dates.)

Understanding the Award Letter

Once all applications and supporting documents have been submitted, students will receive an award letter outlining the financial aid package for which they are eligible. There is no standard format for award letters, so comparing them can be challenging. Some will list the total cost for attending that particular college, the ‘cost of attendance’ (COA), and the suggested means for paying that cost dollar for dollar, including any financial aid awarded plus expected family contribution (EFA). Others may omit room and board from the calculations, or additional expenses such as books and supplies.

Judy Novak is navigating the financial aid process for the first time. Her daughter Kyrsten, a local high school senior, is headed to an out-of-state college in the fall.

“I’d never seen a college financial aid award letter before, so to me it was very confusing. It wasn’t clear how much aid she received, how much she had to pay back or how much I had to pay,” says Novak. “And getting in contact with the financial aid office was even more frustrating. The deadlines for accepting the aid were approaching and we couldn’t reach anyone in financial aid because they were so backed up.”

Novak’s experience underscores the importance of starting the process early, particularly for parents whose children plan to attend college far from home.

“When visiting colleges in which they are interested, parents and students should schedule a preliminary visit with financial aid. The earlier we can start having conversations with prospective students, the better,” notes Williams.

Beyond the Basics

After the award letter has been received, parents and students need to decide if they want to accept all or only some of the components in the financial aid package. Borrowers who opt to accept the loans offered should, again, reach out to the financial aid office for assistance. Those who assemble a student’s financial aid package — financial aid officers or counselors at the college — are in the best position to help students and parents navigate the process and advise them on how to manage their options.

“Some schools provide a preferred lender list,” adds Williams. “At the very least we can give tips on how to evaluate loan options: what to look for, fees, repayment information, and more.”

Get an early start on the financial aid process by researching the options available, talking with family and friends who have been through it, contacting the financial aid office at the schools of choice, and allowing plenty of time to meet the deadlines.

“Follow these steps and you will be on your way to a worry free start,” Snyder concludes.

Suzan French is a freelance writer and publicist, and a mom who has been navigating the financial aid process for years.

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