Financial aid horror stories: if you don't pay close attention to the financial aid process, you can lose out on college dollars—and that can make anyone scream

Careers and Colleges, Nov-Dec, 2003 by Nancy Fitzgerald

When Nigel was a high senior, he knew one thing for sure: He was going to be a pediatric social worker and spend his life helping disadvantaged kids. After his first semester, though, he realized that his true calling was to be a computer and soon after that he sought nirvana in the fast-growing field of music recording technology. In all he switched majors four times and transferred to two different schools, and the path co his bachelor's degree was taking way longer than the traditional four years.

Finally, at 23, he was happily settled in as an elementary ed major, with just one semester to go, when the word came down from the financial aid office at his college: He'd run out of eligibility for any more loans and grants. So Nigel decided to drop out for a couple of semesters to earn enough money to complete his degree.

Sounds like a good idea, right? Wrong. For Nigel, it was just the beginning of a financial aid nightmare. Without a degree, the only job he could land paid minimum wage--and that left nothing for college savings after his rent and car payment. To make matters worse, his college loans came due six months after he had left school.

Strapped for cash, his loans went into default and his credit rating tanked. Just one semester shy of graduation, Nigel was stuck in the twilight zone--not enough money co pay for his last term of college, and a credit rating that was so bad he couldn't even get a loan to finish up.

As Nigel learned, even the best financial aid packages come with strings attached. Most require you to maintain a certain GPA; some expect you to complete your degree in four years; others obligate you to keep playing field hockey or work on the student newspaper even when you don't feel like it anymore. Nigel didn't know any of this, and that's what got him into trouble. "Students and parents don't understand how the aid process works.," says Kal Chany, author of Paying for College Without Going Broke (Random Home, 2002). "Students may feel they're too busy to pay attention to all the details, but ignoring them can cost a lot of money."

Some two-thirds of all full-time college students receive financial aid, according to the National Center for Education Statistics. That's no surprise, considering college costs much more money than most families can afford. The College Board reports that the average cost to attend a private four-year institution for one year, including room and board, was just about $25,000 in 2002-2003. State schools averaged about $9,600. The good news is that $90 billion in financial aid was available last year, and scholarship growth is outpacing loan growth. But to get the money you've got to know how to play the game or--like Nigel--you could be stuck in a financial nightmare. Here are some real-life horror stories. Don't let them happen to you!

THE NIGHT OF THE LIVING DEADLINE

Louisa was about to begin her sophomore year at a private university, in Texas when she got her financial aid award letter. To her shock, the amount she would receive was about $10,000 less than she'd been awarded as a freshman. Why? Her father didn't have the necessary information in January, so he waited until March to fill out the financial aid paperwork and send it in. By the time the school received it, their supply of grant money hall already dried up.

"It was awful," says Louisa. "I still received my government loans, but the grants were the only reason I was able to come to this school in the first place." Louisa considered transferring to a less expensive school, but her parents were able to scrape together the money she needed through bank loans. The following year, Louisa's family mailed off all their forms by the second week of January. "I'm in a lot of debt," says Louisa, "and I almost missed out on finishing my education because of that slip-up."

AVOID THE NIGHTMARE

TAKE DEADLINES SERIOUSLY.

"Deadlines are a very big deal," says Paul Marthers, vice president for enrollment at Reed College in Portland, Oregon. "I've seen so many eligible students miss out on financial aid because their papers weren't submitted on time. Colleges have to draw the line on when they can stop making awards."

BE AN EARLY BIRD. Send in your Free Application for Federal Student Aid (FAFSA) as soon after January 1 as possible. Make sure all the other forms your college requires are in well before the school's deadline also. Institutions have grant money to help students, but there's only so much to go around, and if you wait too long, the money could be gone.

ESTIMATE YOUR TAX RETURN. If your parents haven't received all their tax documents yet, they can prepare an estimated FAFSA, based on the last paycheck of the year. Later on, when their tax returns are finalized, they will need to inform the financial aid offices of any changes--but for most families, any changes are minor.

HAUNTED BY THE GHOST OF PAYCHECKS PAST

When Samantha was a high school senior in Los Angeles, she thought she had the solved the mystery of how to pay for college. An outgoing girl who was active in her school's drama club, she auditioned for television commercials and hit the jackpot. She got a part in a breakfast cereal ad that earned her more than $8,000. But that windfall will end up costing her more than $3,200 in grant money for her freshman year.