Financial Aid 101
This past weekend, Alejandro and I had a blast working with the Latino Student Fund at D.C. Public Schools’ 2018 English Learners Back to School Fair. We worked with the wonderful Beth McSweeney from PNC Bank to give presentations on the financial aid process. Applying for financial aid is often a scary process for families. There are so many acronyms, so many forms, and so much information to sift through. The whole ordeal can seem daunting and overwhelmingly difficult—I know it felt that way for me. This week, we thought we’d share some of the points we found to be the most asked about and important.
This is nowhere near a comprehensive overview, but simply some important things to keep in mind—even if you’re no longer in college. If you’re working to pay off loans, out of college, or just want to be more mindful about your finances, check out our list below—it’s never too early or late to start!
Budgets, budgets, and more budgets. It’s important to know where your money goes. How much is that daily morning coffee really costing you? Well, if you were curious, let’s say a cup of coffee costs you $3.00 per day. In a year, that’s costing you $1,095. Meanwhile, your homebrewed coffee would cost you under $200 dollars. Not saying you can’t enjoy that Starbucks or Mickey D’s coffee (it’s actually delicious) once in a while, just be mindful of what that daily coffee can add up to! There are apps out there like Wally Next or Mint that can help you keep track of your daily, weekly, and monthly expenses, giving you breakdowns of what your money gets spent on. Just make sure you’re checking in with your budget regularly so there are no surprises at the end of the month!
Good credit is everything. While there is a certain amount of risk that accompanies credit cards and taking out loans, we live in a society where having credit is important. Make sure you are talking to your loan servicers, making timely payments, and checking your credit score annually. You can get your free credit score here. Moreover, it is never too early to begin building your personal credit history. Once you turn 18, you can apply for specific credit cards geared towards college students seeking to begin their financial wellness journey. Credit cards aren’t inherently bad, it’s how you use them that counts! P.S. If you’re under 18 you shouldn’t have anything on your credit score because you’re still a minor!
Understanding how interest works matters!Everyone has some sort of understanding of what interest is and how it can lead to a precarious financial situation if it isn’t monitored carefully. In this past weekend’s financial aid presentation we asked the audience to guess how many years it would take to pay off a $5,000 credit card balance with 18.9% interest while only paying the $200 minimum amount every month. The answer was staggering. It would take 11 years and 5 months and a total of $3,109 in interest to pay off the loan—a sobering reminder to pay close attention to the rates attached to all student loans you consider.
Direct Subsidized vs direct unsubsidized loans. This is something that will often come up in the financial aid process or will invariably appear in a student’s financial aid award. It’s important to know the difference between the two. The federal government pays the interest on direct subsidized loans while the student is still in school while unsubsidized loans, although still a federal loan, don’t get their interest paid for by the federal government. Knowing the difference between the two is critical as it allows you to better gauge how you want to approach repayment.
The financial world can seem like a scary place. The jargon creates confusion that leads to the money aspect of the college process to feel like a full time job. It doesn’t have to be that away. Knowledge is power, information is power. The more you know, the better set up you are for making decisions that will benefit you and your family. It’s never too early to start. Whether you’re a parent and your child is still in elementary school, or you’re a high school student trying to figure out your loan options for next year, now is the time! Read, scour the internet, meet with financial aid counselors at prospective colleges, and attend wonderful events in your community like DCPS' English Learners Back to School Fair. You are not alone in this journey!