Money U Part I: Financing Your Way to a Degree

About the Episode

It’s not uncommon to rack up some student debt –  43.2 million borrowers currently have federal student loan debt. However, the amount can definitely vary, and the goal of today’s episode is to help students understand their options for earning their degree. CEO and Founder of Sojourning Scholar, Chuky Ofoegbu, is sharing the knowledge that students need to navigate their way to graduation! 

Applying for Financial Aid

5:21

Randy asks Question 1: “Can you explain the process of actually going to apply for a student loan? What does that process look like?”

Chuky responds: “Just like any process – you're looking to shop for a car, you're looking to put down a down payment on a house – you always want to first start by exhausting any options you have for getting free money. In the case of wanting to go to school, you want to look at scholarships. You want to look at grants. You want to look at fellowships. You want to look at assistantships. Now, things like fellowships and assistantships will apply to those who want to pursue grad school. If I'm speaking to an audience of people who are going to undergrad, scholarships and grants are going to be the free money you're going to be going after.”

Chuky follows up: “So once you have that out of the way, now we can start looking at all the alternatives. With student loans, you want to research your options. You want to talk to different companies. If you're going after private loans, then you're looking at loans that are coming from banks, credit unions, and other financial institutions. For the vast majority of people in the US who are US citizens and US permanent residents, you're eligible for federal loans. So, now you have that option. It's now time to think, let's move over and complete the steps to get a federal loan. So that's what brings us to FAFSA.” 

Chuky follows up: “When you're applying for schools, you want to complete your FAFSA application, and gather all the required forms you need to do that. At the same time you're applying for schools, many school financial aid offices will be telling you, ‘provide your FAFSA application and make sure that's complete’. What's the goal of FAFSA? Well, the main thing they want to get from FAFSA is to determine your financial need. So, your financial need is going to come from a pretty sophisticated calculation, where they look at your cost of attendance for any of the schools you're going to be attending. Then, they look at what they call your expected family contribution. So, that's what they expect your family to provide. They do the math and say, ‘based on the cost of attendance and your expected family contribution, here's how much financial need we think you're going to have if you want to attend our school.’”

Chuky follows up: “If you happen to have financial need, then you can move over to the next step and review any financial aid offers the school will provide to you. So, that could come in the form of any available federal grants or any available federal scholarships that the school has. And if federal grants and federal scholarships are not enough to cover you, then the schools are going to point you in the direction of the federal loans that you qualify for. Now you're looking at the federal loans you qualify for. If you have any gaps where it's not enough money to cover your cost of attendance, you start looking into private student loans. With private student loans, you definitely want to shop around to get the best rates you can possibly get. Once you've found a few lenders you want to work with and you like the terms, you go ahead and accept the loan and it's all about waiting for your loan to be disbursed. Usually those loans, both federal and private, will be paid out to the university. If there are any excessive funds, the university will ship out those funds to whatever account you have on file.”

FAFSA Mistakes to Avoid

9:54

Cristina asks Question 2: “What are some common mistakes to avoid when you're filling out your FAFSA?” 

Chuky responds: “There’s a lot to juggle when you're starting to apply to schools. You definitely do not want to miss out on the deadlines. That’s one of the biggest mistakes that a lot of people make when it comes to filing for the FAFSA. Not just wanting to make sure things are filed on time, but there are consequences when you miss out on not filing as early as possible. There are some grants that are on the first come, first serve basis. So like they always say, the early bird gets the worm.”

Chuky follows up: “You also want to watch out for avoiding any incorrect information. If you have any family assets or family income, you're making sure to provide as much accurate information as you can. When it comes to answering any questions that you're not sure what the answer should be, or you don't think it's applicable to you, you do not want to leave any spots on your application blank. If it's a monetary number, you want to put that down as a zero. You want to use the abbreviation ‘N/A’ if it doesn't apply to you. 

Chuky follows up: “The government is always going to look at your family financial situation every year. Things could change every year. So, just because you didn't qualify for FAFSA one year does not mean you should just give up on applying for FAFSA the next year. This is a good filing process, and you always want to stay on top of that when you're going into every new school year.” 

Grants for Students

12:11

Randy asks Question 3: “So, Chucky, what type of grants are available for college students”

Chuky responds: “Generally speaking, most scholarships will tend towards the merit based size, whereas grants tend towards being need based. Now you get some merit based grants, but typically the majority of grants out there are need based. And when it comes to the sources of where you can get grants from, those are going to fall into a federal source. For the federal grants, some examples are the very popular Pell Grant. Those are also need based as well. And then you have some other sources of federal grants, like the TEACH Grants. That targets people who are going to be pursuing educational degrees and going forward in their career to serve as teachers. So if you win a TEACH grant, you would have to teach for X number of years after you've got your degree. That's how you sort of pay off that free money. You have to work to pay it off.” 

Chuky follows up: “When it comes to state grants, there are also a lot of opportunities from across many states. Some states have multiple state grants that are provided. So you want to look out for those options as well. Most state grants tend to be need based, although you might have a few that have a merit based component. So those are the two you get from the federal and state level. But that doesn't mean that's the only option you have.”

Chuky follows up: “When you finally get into school, many institutions also have their own grants. I can speak from my experience where I didn't get any grants when I was coming into undergrad, but I did get a grant as an undergraduate thanks to my activities where I pursued research. So, there's a lot of money. At large public universities, they have a lot of money when it comes to research, and they encourage undergrad research. You can apply for several grants competitions. If you win those competitions, you can get a nice $3,000- $4,000 toward your tuition. So that's always nice to have. And finally, in the private sector, if you join any student organization that has a private chapter, there’s also a grant from those organizations that you can look into.”

Bright Futures Scholarships

14:49

Cristina asks Question 4: “All right, so what are some requirements that will qualify a student for the Bright Futures scholarship?”

Chuky responds: “So, the Bright Futures scholarship is a Florida-based scholarship. It is a merit-based scholarship. So that's the one thing you want to know about that – it’s not as need-based as other states. It’s Florida-based and is only available to people who are residents of Florida and also people who meet the citizenship requirements. You have to be a US citizen or you have to be an eligible permanent resident.”

Chuky follows up: “The next thing to look at is you need to be applying for the Florida-based Bright Futures scholarship right before you start your undergraduate program. So, the deadline tends to start October 1st of your senior year, and then the deadline ends shortly after you're done with your high school diploma. So obtaining a high school diploma is also another requirement. Then when it comes to your performance, they look at your GPA. And it depends on what type of bright future scholarship you're going after.”

Chuky follows up: “Then there's also a component of community service, where you either have to provide 100 hours of volunteer hours, or 100 hours which are paid hours where you held a job or something. Or you could have a combination of paid and volunteer hours. The cumulative amount has to come out to 100 hours.”

Where to Find Scholarships

17:51

Randy asks Question 5: “Where’s the best place to start looking for these scholarships that students might be eligible for?”

Chukly responds: “You can't ever underestimate the value of word of mouth. If you're in high school, go talk to your high school guidance office. That's a great place to have an idea of where you should be looking at local scholarships and also other scholarships or opportunities that they might be aware of that you don't find in your typical search for a scholarship. And if you get into college talking with your student financial aid office, they're always there to have your back. They look at your profile and can help you understand what grants or what scholarships – any kind of free money that you could qualify for. So those are some sources to definitely look into.” 

Chuky follows up: “I have that personal experience where, when I was in college, I pursued an engineering degree and I was an active member of the American Society of Mechanical Engineers. As part of that organization, you help out with certain kinds of volunteer work. When you participate in competitions held by that organization, you can get some free money. So those are some on the ground places people don't really think about sources of scholarships.”

Making It Count Essentials

19:39

Cristina asks Quick Question 1: “What are the main differences between federal and private student loans?”

Chuky responds: “So with private and federal student loans, I always like to tell my clients about three letters: IRS. So I is for interest rates, R is for repayment options, and S is subsidies. With federal student loans, interest rates are generally fixed interest rates, and they tend to have lower amounts than private loans. Private loans tend to have a combination of interest rates that are either fixed or interest rates that are variable.”

Chuky follows up: “When it comes to your repayment options with federal student loans, you have more flexibility. There’s something called the income-driven or income-based repayment plans. You pay back your loans based on how much money you're making. You don't get that kind of flexibility with private student loans. And when it comes to subsidies, if you happen to have financial need when you file the FAFSA, you could get subsidized loans. If you're pursuing an undergraduate degree with private student loans, there's no subsidy. So you're paying for your interest. The moment you sign that promissory note, your interest kicks in and you're going to be paying for that.”

21:14

Randy asks Quick Question 2: “How can students make a scholarship application stand out from the rest of the applicants?”

Chuky responds: “Days like today where we have things like ChatGPT and all kinds of AI writers, it really comes down to being very personal and authentic. I tell my clients this all the time, we want to paint the best picture of your profile as much as we can. You have to feel free to inject as much personality when you're crafting those essays, when you're crafting those personal statements. There are real people who read those essays, so make sure to inject as much personality as you can. That is the biggest tip I give people.” 

Chuky follows up: “Be careful on who you're asking to write your reference letter. Don't just go to a teacher who you happen to have the best grades with, and think they're the best fit to provide you with a letter of recommendation. Reach out to your teachers or reach out to whoever you have who's going to provide your letter of recommendation and ask them, ‘Can you write me a strong letter of recommendation?’ That's the key thing you want to ask, because some people will write you a letter, but then you get a generic letter. Only contact people who you know for a fact can provide you with strong letters of recommendation.”

22:40

Randy asks Quick Question 3: “So, Chucky, what about grants? Can they be used for expenses other than tuition, books, or housing?”

Chuky responds: “Absolutely. That is a possibility with several grants out there.”

25:33

In this episode, Cristina and Randy highlighted the Addition Financial Foundation, a great place to browse for the latest scholarships and understand your eligibility.