Picking A College: Evaluating Financial Aid - Questions To Ask

Of course, one of the biggest decisions that anyone who is getting ready to graduate and go away to college can make is the what college they want to go to. Of course, there are many many factors to consider when making this decision, but one that certainly shouldn’t be missed or forgotten about is cost.

As college costs are on the rise, it certainly makes sense to figure out as much as you can about what the real costs of college are going to be. Dissecting your financial aid package is a major part of this process. Similar to tricks that can be played on someone who is working on getting buying a car or home, there are also tricks that are done in some manner in order to lure students into picking a school that might actually cost them more than they would like to pay.

Cost is a major factor, of course. Since your financial aid package is the first lifeline when it comes to meeting the financial obligations of going to college, it makes sense to understand the various components that might be included as part of your package:

Student Loans

I’ve written about student loans before and much of this advice doesn’t change here. Regardless of what kind of student loan you are going to be taking out in order to finance your education, you are eventually going to have to pay that money back. And that is not the kind of burden that you want to be abnormally large when you are trying to start out.

Understand the type of student loan that you are talking about. Some student loans are provided by the state, some are provided by the federal government, and still more are offered by individual financial institutions. Each of these types of loans has different features and before you sign on the dotted line, here are some questions you might want to ask:

1. Is this loan a subsidized loan? What does that mean?
2. Can this loan be consolidated once I get out of college?
3. If I leave school, how soon will this loan have to be repaid? Are there deferment or forbearance (ability to stop payments due to financial hardship for a period of time, or while getting additional education) options available?
4. Does my program offer any options to have this money forgiven if I am a teacher, doctor, etc based on certain requirements?

Parent Loans

All of the same considerations for student loans should be considered when it comes to parent loans. This is important because of the fact that the person looking to give you the loan is not always considering all of the possibilities; they are simply looking to get you the money to go to school. Your parent’s financial situation might be complex and therefore this type of loan may not be something that your parents can handle.

For all types of loans, I would offer some basic advice: Don’t co-sign. If your parents take out loans for you, you will want to know and understand up-front what the process will be when it comes to paying these loans off. It may not be possible, for example, for your parent to transfer the loan into your name or remove themselves as a co-signer when you graduate. Transferring loans is not an easy process and changes like this can have credit implications or be impacted by credit scores.

Grants and Scholarships

Often there are grants and scholarships in adition to student loans. Typically, this money is better than loans because it doesn’t usually need to be repaid. Find out about any of the grants that you might have been given.

Ask: are there conditions as a result of these grants? If there are conditions, consider whether or not these are conditions that you think that you can meet. And if there are some of these conditions, find out what happens if you fail to meet them. Some scholarships are based on athletic participation or grade point averages. If there are restrictions on this money, you will want to plan your time accordingly for the extra commitment that it will take to meet this obligation or simply to not count on this money.

In addition to questions, the big question about all forms of financial aid is whether or not it renews. Often times, a great package is presented to freshmen but as it changes over time, it becomes worse and worse as the available options for financing change.

Simply discuss how your package might change over time and be aware that this can happen. Planning for the possibility makes it much easier to make a fair decision up front.