Should I Accept All of the Financial Aid Offered to Me?

College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. I mean, who wouldn’t use all the offered financial aid?!

However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial aid options is very important. The general rule is to borrow only what you need for direct educational expenses (things like rent, tuition, books, etc.). Avoid wasting financial aid on non-educational items, as that could lead to greater issues in the long run.

To know whether you should accept the aid offered to you, it’s important to understand the different types of financial aid available to you. Here’s what you should know.

>> MORE: What are the different types of financial aid?

What is Considered Financial Aid?

Financial aid can be anything from grants, scholarships, work-study jobs, loans, and even aid from local or state sources. Essentially, financial aid is provided to students to help you focus on what’s important —your education. Using financial aid for other expenses can make for a sticky situation.

Do I Have to Accept All of My Financial Aid?

Absolutely not! In fact, many financial aid experts recommend that you only accept what you really need.

While accepting scholarships and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run. This happens as the cost of borrowing money is compounded by the interest rate of the loan. 

>> MORE: What is the average student loan interest rate?

Estimating your budget and expenses to determine the amount of money you will need to borrow is the best way to only borrow what is needed. 

Accept Aid in This Order

As mentioned before, financial aid comes in various forms: grants, scholarships, work-study jobs, and loans. If you want to save money,  however, you should accept aid intentionally and in this order: 

1. Scholarships and grants. If it is free money, take it.
2. Work-study. Any earned money should come second.
3. Federal student loans, followed by private student loans. Borrowed money should always come last.

Because scholarships and grants are practically free money, you should always try to use those first before looking at other options. One thing to note is that many scholarships and grants have conditions you must meet to either be eligible for or to continue receiving the funds over the course of your education. Thus, although there may not be financial terms like a loan, it is imperative that you understand the criteria for this financial aid option. 

A work-study program is quite simple. You work for the money, so you don’t pay it back. This means you will have to spend time both working and studying. While it may be a bit more to juggle, there have been studies that show students who have a part-time job and study are better at managing their time.

Federal student loans and even private student loans should come last. With loans, you will have to pay the money back, plus interest. Depending on the type of student loans, you may receive a subsidized loan meaning interest won’t start accumulating until you leave school. So, if you have the option, choose a subsidized loan before an unsubsidized loan. 

>> MORE: Find the best student loan rates

Know When to Decline Certain Financial Aid

With the basics of financial aid covered, let’s look at specific instances where it is favorable to decline certain financial aid.

You Are Paying Out of Pocket

If you intend to pay out of pocket for school, you don’t actually need to accept the loans in your financial aid package. Instead, you should look for more “free money” options, like scholarships and grants.

You Can Find Aid With More Favorable Terms Elsewhere

If you do decide to borrow a loan, you should look for the best lender that is offering the most favorable terms. For example, Parent PLUS Loans often have higher interest rates. Therefore, you may actually be able to find lower interest rates with private loan lenders. In this case, you may want to consider all your options before accepting the PLUS loan. 

>> MORE: Parent PLUS loans: Everything you need to know

Is It Okay to Accept All of It?

Now that we’ve gone over when to decline certain financial aid and how to sort through all the different options, let’s go back to the original question. Do you have to accept all financial aid?

No, you don’t have to accept all of the financial aid offered to you. However, it is still very important to note that it is okay to accept all of it. If you believe the financial aid options are favorable to your circumstances, then it is totally fine to accept it. Just make sure you do your research and have all your questions answered before rushing into something.

>> MORE: What is the best type of financial aid?

Final Words

Knowing when to accept and decline financial aid is very tricky. However, with the right guidance and due diligence, you can optimize your decisions and make the most out of your financial situation.

Don’t be afraid to say no to financial aid, and remember that although some aid may seem like free money, you should always research the terms of everything offered to you. Take your time to find the best options that will put you in a better position, both financially and mentally.

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