You know the phrase “too much of a good thing?” It can mean regretting that second piece of cake, wearing out your favorite song, or putting up one too many holiday decorations.
For college-bound students with successful parents, it can also mean they make too much money for you to qualify for financial aid. In these cases, the gap between tuition and the means to pay it can be deep, but even students who fall into it may have options to help them climb out.
If you’re in the market for a federal student loan, the first thing the federal government considers is the cost of attendance (COA). But right after that comes your expected family contribution (EFC). It’s calculated based on factors like untaxed income, assets, and benefits like unemployment or Social Security.
While it also takes into account the size of your family and number of other siblings who are also pursuing higher education, families with a higher income level might find themselves eligible for less financial aid than they were expecting.
So what happens to your plans if your parents make too much money to qualify? Good news—you may have to shift course a little bit, but there are plenty of other ways to get help paying for school.
Knowing Your Federal Loans
All things student loan-related start with the Free Application for Federal Student Aid (FAFSA®) . It’s required not only for federal aid, but sometimes for other types of loans, grants, and maybe even some scholarships.
The EFC calculation has the biggest effect on need-based federal aid , including Pell Grants, Direct Subsidized Loans, and Work-Study, among others.
But even if you think you won’t qualify for this type of loan, the collective cry from the U.S. Department of Education is to fill out the FAFSA anyway . In fact, just filling out the form, regardless of income, may make you eligible for some type of financial aid. You can get an estimate of how much you may qualify for by using the government’s FAFSA4caster .
The government also offers non-need-based student loans, meaning your EFC doesn’t factor into the decision. These loans are awarded based on the cost of attendance (COA) minus any aid you’ve already received in the form of grants or scholarships. These types of loans include Direct Unsubsidized Loans , Federal PLUS loans , and others.
These two loan types are similar in that they both need to be paid back upon graduation. There’s one big difference between subsidized and unsubsidized loans, however, and that’s when interest accrual starts.
Because subsidized loans are need-based, the government covers any interest that accrues until loan repayment starts. With unsubsidized loans, however, the interest starts to accrue from day one. You don’t have to begin paying the loan back immediately, but in the long run you could end up paying more.
But the government isn’t the only path to money for school.
The best thing about scholarships? You don’t need to pay scholarships back. And with the average student loan debt hovering around $30,000 , not having to repay part of that balance could be life-changing for some students.
The second best thing is that they’re most often based on merit, not need. So even if your parents make a “richest” list, you may still be eligible. While many are awarded solely on academics and GPA, there are many more that consider other factors, like specific areas of study, athletics, or even your neighborhood. Finally, there’s a lot of scholarship money out there—possibly as much as $6 billion .
Declare Your Independence
While we’re mainly focusing on how to get financial aid when parents make too much, there are also situations when parents won’t or can’t help pay for college, regardless of how much they make.
In these cases, another way to potentially qualify for need-based aid is to claim independence.
It’s not as simple as just being a legal adult, though—not being claimed on your parents’ taxes or not living with them doesn’t necessarily count .
In order to be considered independent for financial aid, a student must meet one of a number of eligibility requirements, including being 24 or older, a veteran, a graduate student, married, or having legal dependents other than a spouse.
Tricks and Tips
Navigating the financial aid universe can be daunting, so here is a list of some potential financial aid and FAFSA tips, tricks, and good-to-knows that may help you not only avoid mistakes, but help make your journey a little bit easier.
Appealing Your EFC
If your financial aid offer is less than you can afford, you are within your rights to appeal—although it’s a bit more complicated than simply saying, “Hey, can I have some more money?”
You would appeal directly to the school’s financial aid director, but you might want to be prepared to back up your request with detailed information such as your expected EFC, the amount you’ll need to successfully attend school, or circumstances that affect your family’s actual ability to pay, such as a parent’s job loss.
Applying for the PLUS Loan
The Parent PLUS Loan is another alternative, offered to parents, that can help out when you don’t qualify for enough traditional aid for undergraduate studies. It’s a fixed-rate loan offered by the federal government, but it’s based on parents’ creditworthiness rather than income.
For qualified applicants, it can be used to cover any gaps left over after scholarships, grants, and other financial aid have been applied, up to the full cost of attendance.
PLUS loans could also be a good option for graduate and professional students , who aren’t eligible for Pell grants or Subsidized Direct Loans.
Finally, private student loans are available for helping to cover the costs of higher education, and they could be a good Plan B for getting student aid if your parents make too much to qualify for federal need-based aid.
Choosing this route takes you out of the benefits that come with government-funded loans, including income-driven repayment, grace periods, and interest rates set by law, and takes you into the world of banks and lending, where each institution can set its own terms. Interest rates can be higher (although that’s not true in every case), and the process is based on creditworthiness rather than need.
If you have a gap between your federal aid and your cost of attendance, SoFi Private Student Loans may be able to bridge that gap. We offer low rates, no fees for the loan origination, late payments or insufficient funds, and flexible repayment plans to fit your budget. And, as a member of the SoFi Community, you’ll have access to a group of scholars like you who are working hard to get the most out of their education.
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SoFi Private Student Loans
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.