February is Financial Aid Awareness Month and also a time when many college-bound students will be receiving award letters outlining financial aid packages from prospective colleges. Educational Credit Management Corporation (ECMC) is dispelling myths for students and families who may need assistance navigating this process.
“Selecting a college is one of the largest financial commitments a person will make in their lifetime,” said Paula Craw, vice president of student success and outreach at ECMC. “We want to do all we can to ensure students and families understand the information they receive and make informed decisions.”
ECMC, which provides free training and resources focused on financial literacy and college preparedness, is providing insight for students and families to ensure they understand the various types of financial aid available.
Myth #1: My financial aid award letter will show me a clear picture of college costs.
Fact: The total costs of college aren’t always clear from the outset. In financial aid award letters, not all colleges include both direct and indirect expenses in the total “Cost of Attendance” (COA). While most schools outline baseline tuition and fees, some might not include “indirect expenses” like room and board, textbooks, meals, and transportation. Not knowing how much a full year of college will cost you makes it difficult to put an aid letter in context.
Myth #2: Loans and grants are easily discernible.
Fact: In most award letters, schools outline financial aid options such as grants, scholarships, work-study opportunities and student loans. If student loans are listed, they will appear to reduce the total cost of attendance. But the reality is that loans always need to be repaid—with interest. If you’re having trouble telling the difference between gift aid and loans that will need to be repaid, look for terms like “grant,” “scholarship” and “fellowship.” Anything else is most likely a loan.
Myth #3: Interest on student loans will be included in my financial aid award letter.
Fact: Reports show more than half of millennials take on student loans without understanding what their monthly payments will be—and without understanding interest. However, award letters rarely provide information about interest rates and loan repayment options. If you’ll need loans to pay for college, make sure you understand the full costs of your options and borrow only what is absolutely necessary.
Myth #4: I need to take out the full amount of money I’m offered in my financial aid letter.
Fact: Only take the amount of financial aid necessary to get through college. Many people make the mistake of borrowing too much and using student loans to pay for all their expenses, and they struggle to repay what they owe.
In addition to these tips, ECMC offers a free downloadable workbook that features a variety of worksheets and information to help students throughout the college planning process. Opportunities books are available in English and Spanish.
For more information, visit this link.