When getting financial aid for school it is best to have a smart, well thought out strategy. Millions of people are struggling with a heavy student loan debt after graduation, and you don’t want to be one of them. But what can you do to reduce the odds of financial hardship after you get your diploma? Here are some tips.

The planning really starts after you have filed your FAFSA, received the Student Aid Report from the Department of Education, and the Financial Aid Offer from the school of your choice. But how do you respond? How do you choose among the offers presented?

Order of Offer Acceptance

The U.S. Department of Education recommends that you accept financial aid in the following order, following the rule of “free money first”:

  • Scholarships and Grants. However, you should be sure to understand all the conditions that may be attached. TEACH grants have all sorts of requirements, while some others might involve maintaining a certain grade point average.
  • Work-Study. It’s free money to the extent that it isn’t a loan, but you do have to work for it. This requires a certain time commitment that you should be comfortable taking on. Every hour spent working is one less hour available to study.
  • Federal Student Loans. Consider these loans before all others!! They have the best, and most flexible, repayment plans for after graduation. Of these, you should accept subsidized ones before unsubsidized ones. This is because with a subsidized loan, interest that accrues during your in-school deferment won’t be added to your loan balance when you graduate!
  • Loans from Your State or School. NJ CLASS loans do not have the favorable terms of federal ones. If you have maximized your federal loans and still need more, and your parents are willing to help, then look into federal Parent PLUS loans to close the gap. Otherwise, be sure to read all of the loan terms carefully and know what you are getting yourself into.
  • Private Loans. These are the loans of last resort. Hopefully, by the time you have gotten to this point, there is not much money left that you will need. These loans are no different than a car loan or a mortgage. If you later cannot afford the monthly payment, there is usually not much you can do.

If you get to the state and private loans, and you still need quite a bit more money to cover the cost of attendance, you should seriously consider whether you can afford to go to that school.

I know that means not attending the school of your dreams, or having to transfer, but you will thank yourself later after you graduate, and the bills come due.

More Information

If you are looking for more information about federal financial aid for college, then download my free book, Applying for Federal Financial Aid: The Definitive Guide for Students and Parents.

For more information about what happens after you graduate, get my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

You can also access the latest news on student loans, get answers to Frequently Asked Questions, and read articles in my Library. Continue to educate yourself as you go through the process of making smart decisions about college financing!

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.