1. Apply for your first-choice institutions—no matter what.
Many applicants get hung up on tuition costs, using the "sticker price" as a reason not to even apply. But how many new cars would ever get sold if customers just looked at the sticker price and gave up without haggling? The truth is, each empty seat generates zero dollars for that university. And universities only get away with charging high prices because of reputation—which is generated by applicant quality and graduate success, not by per capita income statistics. Only a fraction of graduates pay full price for their education—why should you be one of them?
2. Always, always, always fill out a FAFSA.
The FAFSA, or Free Application for Federal Student Aid, is the subject of much ongoing mystery. Some applicants think it’s just need-based. Yet many colleges and institutions use FAFSA scores to dole out not just federal need-based aid, but merit-based scholarships, work-study opportunities, grants, and more. Fill out the FAFSA, and fill it out as early as you possibly can to get in the door quickly on the best aid opportunities.
3. Check to see if the institution has a "no loan" policy.
Many private institutions are beginning to adopt what is called a "no loan" policy. This means that if you meet the entrance requirements but your income is below a certain level, you won’t be asked to take on any student debt to pay for your education. Rather, the college will pay for you in a combination of grants, work study opportunities, private scholarships, etc. These programs are sometimes called "free tuition programs."
4. Refrain from applying "early decision."
When you apply to a school under an "early decision" status, this means that if that institution accepts you, you have to attend. Because "early decision" status is binding, you have no legroom to negotiate on tuition or funding sources. Here, a car buying scenario can again be helpful—many customers will gather a few competing offers from different dealerships and use those offers to get the best price on the car they want. You can use the same strategy with any college that offers you a place—as long as you have other offers to haggle with.
5. Follow Sallie Mae's 1-2-3 college funding plan.
Sallie Mae has been funding students for 40+ years. The company offers a very sound, sensible, and simple plan for funding your college education.
- First, research education funding that you don't have to pay back: This funding may include scholarships, grants, work-study programs, FAFSA aid, and other aid types.
- Next, research federal education funding: Many types of federal student aid come with no or lower interest payments, more flexible repayment terms, better grace period terms, and loan forgiveness for certain types of volunteer or career choices (including military service, government or teaching work, AmeriCorps or Peace Corps service, and other similar options).
- Finally, fill in any remaining funding gaps with private loans: Bank education loans, which are based on credit ratings, should be the very last funding source you consider. While private loans are still preferable to dipping into the family's retirement or emergency savings, you should still be careful to borrow only what you need and not a penny more!
6. Use resources like SimpleTuition.com to think through all possible negotiation angles.
In addition to following Sallie Mae's 3-step funding process, there are other ways you can nab the most funding for the least financial outlay. Here are some other options you can discuss with your lenders to avoid common early repayment traps and find ways to buy down the overall cost of your loan package.
- Does the package offer any repayment options, such as cash back for early repayment or interest rate reductions for on-time payment?
- Will signing up for automatic debit or draft programs lower monthly payments?
- Are there any penalties for early repayment or more frequent payments?
- What is the minimum/maximum number of credit hours I must take in order to be regarded as a "student" with this loan package?
- What type of loan repayment grace period is offered post-graduation?
- What are the options for deferment or forgiveness should paying become an issue?
- Is there an option to consolidate with other loans or refinance for a lower interest rate?
- Is it allowed to make interest-only payments while enrolled in college?
- Are there any conditions—such as a certain career choice or a term of volunteer service—under which part or all of the loan amount could be deferred, reduced, or forgiven?
- What is the total cost of the loan package—both with and without interest and fees added in?