When preparing to head off to college, one thing you may not be ready for is a financial aid gap. A financial aid gap occurs when the amount of aid offered by the school, paired with your expected family contribution (EFC) as determined by the FAFSA, isn't enough to cover the full cost of attendance.
"With many schools, they're limited on what they have available for all students," said Jocelyn Pearson, founder of The Scholarship System.
With the coronavirus pandemic affecting employment and earnings for millions of households, it's possible that you could be facing a larger than expected financial aid gap this fall. That doesn't necessarily mean your college plans have to be canceled or changed, however.
These tips can help with filling a financial aid gap.
Appeal your financial aid award letter
Financial aid award letters spell out the amount of aid you're eligible for and what you're expected to chip in for the EFC. If you receive your financial aid award letter and the aid provided isn't enough, appealing is the first step.
This involves writing a letter to your school's financial aid office making a case for why your aid should be increased. Specifically, you should be prepared to provide details about your financial situation that demonstrate why more aid is necessary.
"Appealing a financial aid package is always an option as long as a family can clearly show their financial situation is different from what FAFSA depicts," Pearson said. For instance, if your family is facing steep medical debt or a sharp drop in income due to COVID-19, that could help persuade your school to offer more aid.
It's a good idea to include any documentation showing financial need, such as bank statements or copies of bills, if you have it. And of course, it helps to be polite and courteous. If you think you'll need to file an appeal, it's important to do it as soon as possible after receiving your financial aid award letter to get the ball rolling.
Take out student loans
Student loans can help with closing a financial aid gap and federal student loans are the first option. These student loans come with fixed interest rates, and they can be used to pay for undergraduate and graduate education. Parent PLUS loans are also an option if your parents are willing to borrow to help you pay for school.
Private student loans are issued by private student loan lenders. These loans can have fixed interest rates or you may choose a variable interest rate loan instead. Use Credible to see what kind of rates you currently qualify for.
Unlike federal student loans, your ability to qualify is based in part on your credit history, credit score and income. If you have thin credit or poor credit, it may be necessary to get a cosigner to qualify for private student loans.
You can apply for federal student loans through the Department of Education. If you'd like to get quotes for private student loans, you can visit Credible to compare multiple lenders without affecting your credit score.
Regardless of whether you choose federal student loans, private student loans or a mix of both, take time to compare costs using an online student loan calculator. This can help you better plan your student debt repayment budget.
Apply for scholarships and grants
Scholarships and grants are other options when there's a financial aid gap. The advantage of scholarships and grants is that, unlike loans, they typically don't have to be repaid. The exceptions are programs that require some type of work or service commitment after graduation.
Your school's financial aid office can help with finding scholarships and grants to apply for. You can also search online for opportunities. Be sure to pay attention to deadlines to make sure you'll have enough time to apply before the fall term begins.
Enroll in a payment plan
If you've exhausted all other options for filling a financial aid gap, you could always try working out a payment plan with your school. Again, you'd want to talk to your school's financial aid office to determine whether payment plans are available, how they work and what you need to do to enroll.
"Payment plans make sense when this helps a family avoid student loans," Pearson said. "They often come with fees but these are much less than the interest paid if borrowed."
In situations where the financial aid gap is just too wide, it may be necessary to reconsider your college plans. Switching to a more affordable school or attending a two-year community college and transferring later are options, for example. Or you could delay your college plans for a bit and take a gap year. Those may not be ideal if you have your heart set on heading to school in the fall, but they're worth thinking about if you've exhausted all other options.
Before you take any drastic measures, make sure you utilize Credible's free online tools to see what your student loan options are — and find a payment plan that works for you.