Originally published by Management Leadership for Tomorrow.
A tried-and-true method to quickening your learning curve — whether you're going to college, pursuing an MBA, or moving into the professional world is bugging those who came before you.
How did you choose what to study? What did you wish you knew on day one of classes? Why did you finance your education the way you did?
Every student and aspiring business leader has these questions. Fortunately, CommonBond has many of the answers to questions around financing your education.
In developing new updates to our MBA loan and launching a new student loan option for incoming undergraduate and graduate students, we conducted several rounds of research on students, parents and financial aid officers while also speaking with our current member base.
What we came away with are five must-know tips about funding your education. Turns out, they apply to both wide-eyed freshman and their big-dreaming business school peers.
1. Always Complete a FAFSA
It takes just 21 minutes, on average, to submit a Free Application for Federal Student Aid (FAFSA), and yet $2.7 billion of grant money went unclaimed by high school seniors and their families in 2015, according to a Nerdwallet study.
Not all potential aid recipients can claim ignorance of FAFSA. Some students don't bother submitting one either because they're receiving aid elsewhere or because they're skeptical of being eligible for grant money. If you fall into either of these buckets, consider the Department of Education's Fafsa4caster. The tool allows anyone (at any family income level) to estimate their potential federal award. You may be pleasantly surprised by the number it pumps out.
Consider that every year, the DOE's office of Federal Student Aid awards $150 billion in grants, loans, and work-study funds. The maximum award for 2017-2018 Pell Grants, for example, was expected to be $5,920. Isn't it worth your time to see how much you can put toward your tuition and school expenses?
2. Be Aggressive in Your Scholarship Search
As soon as you begin thinking about financing your education, it's never too soon to begin — revv up your scholarship search. Like grants, scholarships are a form of gift aid. They don't need to be repaid, but they do need to be earned.
You may score a scholarship based on your need, talent, or background or because of an inside connection or a killer essay. The first step is to take up the search online.
The Department of Labor, for example, hosts a searchable database of over 7,500 awards broken out by dollar amount, application deadline and the level of degree you're seeking.
Another way to take your search up a notch is to sign up with a scholarship matchmaker like Scholly. Its app requests eight pieces of information from you before pumping out scholarships in your wheelhouse. The intuitive interface also helps with application tracking.
3. Maximize Subsidized Federal Loans
Once you've secured as much grant and scholarship money as you can, seek out the money that must be paid back over time.
About 47 percent of undergraduates who took out student loans in 2011-2012, for example, didn't maximize their federal loans, according to the Institute for College Access & Success. It's most important to maximize subsidized federal loans.
These loans are need-based, and the federal government pays off the interest that accumulates while you're an undergraduate.
Unsubsidized loans, which can be taken out by both undergraduate and graduate students, accumulate interest while you're enrolled, and that interest capitalizes if you decide not to pay it off before graduation.
4. Stay in Touch with Your Financial Aid Officer
Prospective students who filed a FAFSA and were accepted to a school receive a college award letter that details the amount of federal aid (comprising 1 through 3, above) available to them. If you're sure about the school you want to attend, stay in touch with its financial aid officer.
Their allotment of aid may increase, as your peers accept and reject college offers. Stop short of pestering these financial aid reps, but do make sure to check in occasionally all the way up to the start of a new semester.
Each time, explain your situation and how you could benefit from additional financial support. Every little bit helps.
5. Consider a Private Loan
When you have subtracted all of the above and your own contribution from the cost of attending school, consider filling in the remaining void using a private student loan.
Private student loans offer more flexibility, such as a choice between fixed and variable interest rates. You would also have the option (or requirement, depending on the type of loan) to add a cosigner, which could lower your rate, whether it's fixed or variable.
One other advantage of private lenders: When you take out your loan, you may have the option to reduce the amount of interest that capitalizes by making small monthly payments while you're still in school. In addition, the more you commit to paying — whether it's $25 per month, the monthly cost of interest or the entire monthly loan payment the lower interest rate you can seal at signing.
Here are four types of repayment options that many lenders offer.
Potential Private Loan Repayment Options for Undergraduate, Postgraduate Students
Deferment — Completely postpone making your student loan payments until graduation. Fixed monthly payment of $25 — Pay $25 each month while you are in school.
Interest-only payment — Make interest-only payments each month while you are in school. In fact, making interest-only payments on a fixed-rate CommmonBond MBA Loan while you're in school will enable you to save $3,450.25 over the life of your loan. That's more than 5% of the average one-year MBA student loan.
Full monthly payment — Make full monthly payment of the loan (principal plus interest) while you are in school.
No matter what kind of repayment method and what kind of loan is right for you, remember you should always be an informed consumer, so understand your student loan options and ask questions.