10 common financial aid myths that trip up students

It's no secret that applying for financial aid can be a mystifying process for students and their families. 

According to GoodCall, a website that helps consumers make smart financial decisions, there are ten myths students often believe about college affordability and financial aid that can come back to haunt them in the long term. 

The myths were compiled for GoodCall by Terri Williams, and she incorporated contributions by Carol Stack and Ruth Vedvik, authors of The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford

Myth #1:  Cost equals quality

When it comes to the cost of college, the standard marketplace rules that students may have gotten used to do not apply, Stack argues. "The value of a college education is based on not only what is offered, but more importantly, what each student puts into the effort for obtaining that degree," she says. For instance, there are several ways students can gain leadership experience in college, but students only get the full benefit of these experiences if they participate in them fully.

The same is true for college and university career centers. A report by Gallup found that 67% of students who visited their university's career center at least once were employed full-time upon graduation, compared with 59% of their peers who did not.  

Equally important, says Stack, is that students are sometimes not aware that the price they pay to attend an institution may not be the same as the price another student pays.  

Myth #2:  I'll get more financial aid if my parents don't contribute

Often students forget that they are, by default, the primary backers of their education, says Vedvik. Even if their parents decide not to contribute, it is the student's responsibility to cover the costs, she says. 

One exception would be students who are financially independent, according to standards outlined by the federal government. Examples can include students who are homeless or unaccompanied youth, Vedvik says. In these cases, a different formula is used when students apply for financial aid. 

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Myth #3: The big state school is my most affordable option

Despite popular belief, state schools are not always the cheapest for students. The devil is in the details, Stack says. 

Students at four-year public institutions often take five, and in some cases, six years to complete their degree, Stack says. Accordingly, the cost of students' education there might be higher than if they had attended a different institution and graduated faster. Students should prioritize looking for programs that are a good fit for their needs.

Myth #4: Financial aid is scarce 

Every day the news reports about high student debt loads can understandably make prospective college students skeptical about the amount of aid that's available. But they should consider the wide range of college aid options available to them, says Joe DePaulo, CEO and co-founder of College Ave Student Loans

Students should also keep in mind that the federal Department of Education awards students over $150 billion to help them pay for college, he says.

Myth #5: My family income is too high for me to get any financial aid

There are many other factors that are considered in financial aid decisions beyond income, says DePaulo. For example, the size of a household, child support expenses, and home equity are all taken into account, he says. At a minimum, students can qualify for unsubsidized federal direct loans, because they are not based on financial need, DePaulo adds. 

Myth #6: I shouldn't worry about repaying my loans until graduation

Not only is it possible, DePaulo actually advises students to begin paying off student loans while they are still enrolled. If this is not possible, he says students should at least find out the monthly amount that they'll need to pay after graduation. 

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Myth #7: Private college loans are all the same 

Students should know that some private loans are ridden with fees, even if the interest rate is low, DePaulo says. He adds that if students need to use a private loan, they should ensure that it has flexible repayment options so that the monthly payments are aligned with what they can afford. 

Myth #8: A four-year college degree is the only way to make it in life

While it is true that a college degree is the surest way into the middle class, there are other pathways as well. For example, a two-year degree, licenses, certifications, and badges can deliver promising results if students choose high-demand fields such as health care, business, and technology. In addition, employers often offer free training for in-demand jobs such as welder, electrician, and manufacturing positions, DePaulo says. 

Myth #9: I'll be able to pay off my loans with any college degree

Students should be aware that some degrees can be very financially rewarding, while others may not be. This is contingent upon what students decide to study. "Some degrees don’t lead to a clear career path and some degrees don't lead to highly valued work," says Mackey McNeill, a tax and financial advisor and a member of the American Institute of CPAs who works on financial literacy issues. 

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Myth #10: I shouldn't worry about taking out loans, everyone has them 

It is true that many people have student loans. In 2013, for example, 70% of graduating seniors left school with loans averaging $28,400. Student loans have been around for so long that they are quite the norm. However, students should consider all other options before they take out loans, because "being broke—and that is what loans with no assets is—is not fun," says McNeill (Williams, GoodCall, 7/13).

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The head of America's largest community college system calls for a math makeover

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