Receiving an acceptance to college is a great feeling, but receiving your financial aid offer can unleash a whole different boat of emotions. Depending on the cost of attendance and your expected family contribution, you may learn that you qualify for federal grants at one school, but don’t qualify for anything but loans at another. Do your research before blindly accepting an offer.

Should I accept federal grant money?

If your financial aid offer includes federal grant money, congratulations! This is free money, and you should definitely take it. Is there a catch? Yes. If you drop out or leave school, you will be required to pay back a percentage of the grant money that you did not “earn” by staying in school. Changes in enrollment (e.g., switching from full-time to part-time status) or a reduction in financial need (e.g., by receiving other scholarships) may also affect your grant awards.

How do I make sure I don’t have to pay back grant money?

If there is a possibility that you will drop out or leave school before the semester is over, you may want to give extra consideration to your federal grant offers.

Here’s how it works: If you drop out, no matter the reason, you will have to pay back 50% of the aid not used for classes, based on when in the academic year you leave school. (Typically, once you’ve completed 60% of the semester, you are considered to have earned your full award for the term.) However, if you leave after midterms, you will have used only half of your aid. Of the unused portion (the other half) you will have to pay back 50%, meaning that you end up paying 25% of your total aid package back to the government.

If you’re having problems in school, you can consider taking a leave of absence (medical and family emergencies typically qualify). If you take a leave of absence during the last 60 days of a semester and are enrolled at least part-time the following semester, you will not have to repay your grant. You must still obtain the required number of credits to graduate.

Should I accept a federal work-study offer?

Federal work-study is a great opportunity that allows you to make money while working for your school or an agency in the community. This helps you build your résumé. Most schools work with you to place you in a job, so you are not required to send in applications or walk around the neighborhood looking for “now hiring” signs. Additionally, your boss understands that your classes take priority. Your schedule is built around your classes. You may only be required to work a certain number of hours per week, so that you can concentrate on your studies. If you are hoping to work during school, you should absolutely consider your federal work-study offer.

Some students are nervous about taking on college courses and new jobs at the same time. If this describes you, you may be able to defer your work-study a semester so that you can get used to your college course load first, then start a job. Some schools allow students to complete their work-study hours during the summer. Talk to your school’s financial aid office about your options.

What are the benefits of accepting federal loans?

• Low interest rates: Interest rates on federal loans are often lower than on private loans.
• No credit checks: You don’t need a credit check or a cosigner on most federal loans (but this makes you solely responsible for paying them back in the future).
• Delayed repayment: You don’t have to repay loans until finishing college or dropping below half-time enrollment, unless you are the parent of a college student, you took out a Direct PLUS Loan, or you did not request a period of deferment.
• No accumulated interest: Students who have taken out Direct Subsidized Loans and Perkins Loans will not have to pay interest while they are enrolled at least half-time or during grace periods. Students with Direct Subsidized Loans will also not have to pay interest during periods of deferment.
• Loan forgiveness: Working certain jobs after graduating from college or university may qualify you for loan forgiveness or deferment.
• Increased credit score: Being in debt can actually help build your credit score if you make your payments on time, every time.

What are the drawbacks of accepting federal loans?

• That loan is attached to you. You have to pay back the entirety of the loan, plus interest, even if you leave school (no matter the reason). You are still liable even if you enter a period of financial difficulty or cannot find a job after graduating.
• Loan repayment could take more than a decade. Depending on the amount of money you receive from loans and the repayment plan you choose, you could be paying off your student loans and accumulated interest for 10 years or more.

When I am deciding how much to borrow in loans, what else should I consider?

When you decide to accept a federal loan, you will have to sign a promissory note in which you agree to pay back the loan, in full and with interest, regardless of a change in circumstance. This is a legally-binding contract, so it should not be considered lightly. Before you sign, give some thought to the following:

• The amount you are borrowing: You will likely qualify for more loans than you may necessarily need to get through school. While the number on your FAFSA may seem reasonable, remember that it’s just the amount of loans for a single year. If you are enrolling in a four-year program, you’ll probably be quadrupling the amount of loans you take out (and thus your debt). Take out only what you need to supplement other financial aid and to get through the year. Loan and grant amounts are likely to change from year to year based on changes to your financial situation and the cost of attending school. If you don’t have quite enough money to make it through one year, you can take out a slightly larger amount in loans the next year to compensate, and vice versa. Minimizing the total debt you incur over the course of your degree will help you in the future.
• The amount of money you will make in the future: No, this isn’t something that you will be able to pin down with certainty, but there are ways to estimate how much money you will be making after you graduate. You can use the U.S. Department of Labor’s Occupational Outlook Handbook to learn about salaries for different careers in your field and area or ask your school to put you in touch with recent graduates in your field. Ask them about the kind of money they were making right after graduation and how easy or difficult it was for them to find jobs or advance past entry level. You want your loans to be a small percentage of your salary after graduation. With your estimated salary, loan amounts, and interest rate, you can also approximate your monthly loan payments following graduation using the federal government’s Repayment Estimator.

Is my degree worth the mountain of debt?

Many students find that their education is worth the cost, but only you can be the judge of your own situation. Before you take on thousands of dollars in debt, ask yourself the hard questions:

• How will your repayments affect your future finances?
• Is the program you are considering worth taking on the debt that you will accumulate?
• Do you need to accept the entire amount of the loans, or can you cover more of your expenses out of pocket?

How do I accept my financial aid package?

Your school will tell you how to accept your full or partial financial aid offer. Contact the financial aid office at your school if you have any questions. While there are few stipulations to accepting grants and work-study, there is a lot more required of you if you are going to take out loans.

Your school will require you to complete entrance counseling. The goal of this is to help you understand your federal student loans inside and out, including (but not limited to) the following: the definition of a Direct Loan, the process of receiving and maintaining a loan, managing educational expenses, your rights as a borrower, and other financial options to consider for financing your education.

Entrance counseling, online or in-person, is required for:

• All students taking out Direct Subsidized or Direct Unsubsidized Loans who have not previously received a loan from the Direct Loan Program
• Graduate students taking out Direct PLUS Loans who have not previously received counseling for a PLUS Loan
• All students who received Perkins Loans; as of September 30, 2017, no new Perkins Loans will be distributed

You must finish counseling before your school can release funds to you.

You will also have to sign a Master Promissory Note. This is a legally-binding agreement to repay your loan(s) and all accumulated interest to the U.S. Department of Education even if you do not finish school, can’t find employment after graduating, or didn’t like your education. It will also outline the terms of your loan (how interest is calculated, when interest is charged, repayment options, and deferment requirements).

Page last updated: 05/2018