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Financial Aid Pitfalls to Avoid

Stressed girl trying to get financial aid

Next to applying for admission, applying for financial aid is perhaps the biggest challenge on the road to college. Here's help for a smooth ride.

It's easy to avoid these eight common missteps when applying for financial aid—once you know about them, that is.

1. Reporting Assets Incorrectly

Many families believe that retirement funds and home equity must be reported on the Free Application for Federal Student Aid (FAFSA). But the FAFSA does not require this information.

Tip: The PROFILE aid application used by some colleges may ask about these assets.

2. Not Understanding How Student Income and Assets are Counted

Colleges expect about 50 percent of a student's income and 20-25 percent of a student's assets to be spent on college. They expect parents to contribute much smaller percentages of their income and assets.

Tip: Student income includes any money given to the student or spent on his or her behalf by anyone other than parents.

3. Expecting to Apply for Aid as An Independent Student

The rules for applying for financial aid as an independent student (not financially dependent on parents) are very specific and difficult to meet.

Tip: Enlist your counselor's help if parents are reluctant to file for aid.

4. Not Knowing How to Report the Finances of Divorced Parents

The FAFSA asks for financial data from only the parent (and stepparent) with whom the student lived the most during the one-year period prior to filing the FAFSA.

Tip: The PROFILE aid application may ask about the finances of both divorced parents and any stepparents.

5. Expecting Colleges to Cover Your Entire Financial Need

Don't assume financial aid will cover all college costs beyond your Expected Family Contribution. Many colleges do not meet the family's full financial need.

Tip: Look up any college using College Match and see the percentage of "need fully met."

6. Assuming Your Freshman Aid Offer is What You'll Get Each Year

Your need for aid will be recalculated every year. Even if your need remains the same, you may still get less aid—or less gift aid and more loans.

Tip: Look up any college using College Match and see data comparing freshman aid with aid offered to all undergraduates.

7. Not Analyzing and Comparing Aid Offers

Look at each aid amount listed in your aid offers and determine whether it is "gift aid" (grant or scholarship) or "self-help aid" (loan or work-study). Compare aid offers by subtracting the gift aid from the cost of attendance to see your actual cost for each college.

Tip: Use the Compare Awards tool to see which college is offering you the best financial aid package.

8. Not Comparing Loan Terms and Not Estimating Total College Debt

Federal college loans are almost always the best deal, but there are many private lenders. Before accepting any loans, compare interest rates and fees, and estimate your total amount of debt upon graduation.

Tip: Have a family discussion to determine how much debt at graduation is acceptable.

What's Next?

Use the Net Price Calculator to estimate your net price to attend any college.

For an introduction to financial aid, take a look at What Is Financial Aid?

For help negotiating aid awards, see I'd Like More Financial Aid, Please.

See Improve Your Financial Aid Eligibility for ways to increase the amount of aid you are eligible for.

Financial information contained on the CollegeData website is for general informational purposes only and may not apply to you or your situation. You should not act or refrain from acting on the basis of any financial content contained on the CollegeData website without consulting with a financial or tax advisor, or your parents, high school counselors, admissions representatives or other college counseling professionals. We disclaim all liability for actions you take or fail to take based on any content on the CollegeData website.