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5 Mistakes That Kill Your Financial Aid Award

With the cost of college [3] on the rise, many parents and students are looking for ways to help defray the costs with financial aid. From loans with low interest rates, to scholarships and grants [4], student aid can be a big deal. However, many schools are giving out less aid; your options are becoming scarce.

Unfortunately, what you do now can make a big difference later. If you have a student getting ready to go to college in the next few years, watch out for these surprising mistakes that can harm the chances of financial aid.

1. Failure to Adjust Your Income

This matters more than you might think. Realize that financial aid awards based on need look at the previous year’s tax return. So, for the 2013-2014 school year, your 2012 tax return will establish your income. There are things you can do to adjust your income in order to bring it down a little bit. Sell some stocks at a loss [5], or, if you own a business, adjust your compensation downward. Look for tax deductions that lower your income as well. If you had planned to take steps to earn more, or sell an asset at a profit, do yourself (and your child) a favor and wait until after January 1 of the next year.

2. Focus Too Much on Grades

Anymore, merit scholarships aren’t just about straight As. Indeed, if your student has straight As, but no extracurricular activities, it could mean losing out on some forms of aid. Many universities look for well-rounded students, including those that have leadership experiences, and can show that they manage time well, or that they have participated in other activities. A B grade here and there, as long as your student has also done something worthwhile, can be more valuable than straight As.

3. Letting Your Child Hang on to Assets

Realize that your child’s income matters as well as yours. If your student makes more than $6,130 in a year, that reduces his or her reward. Additionally, the assets held in checking and savings accounts can count against your student. If you want to improve the situation, consider moving all those assets into a 529 plan [6]. The financial aid award can be reduced, but it’s reduced by much less.

4. Assuming You Can’t Negotiate Financial Aid

When my husband wasn’t happy with his financial aid offer, he and his dad called the school to negotiate. Your financial aid offer isn’t the be all and end all of your help at college. You can negotiate. Call the school, and see what you can do. You might get a little more aid, or you might end up with better terms than you expected. If you don’t ask, the answer is always no.

5. Failure to Look at Other Options

There are more options than ever with financial aid. Don’t assume that you can’t take advantage of them. Make sure to fill out the FAFSA. Even if you aren’t eligible for grants, you might be eligible for work study, or for loans. Additionally, the P2P lending trend has spread to college education, and it’s possible to find alternative methods of aid. Look at your financial aid as a whole, and realize that you might have to pull from a variety of sources to make it work.

(Photo: CollegeDegrees360 [7])