Financial Aid 101: A Guide to Getting College Funding

by Francine L. Huff

Getting a college degree means finding the funds to pay for it. The average cost of attending a four-year, public university during the 2007-08 school year was $6,185, and the average price at a private university was $23,712, according to the College Board. Although 43% of full-time students at four-year schools pay tuition and fees with a price tag between $3,000 and $6,000 a year, many still need financial aid.

Fill Out the FAFSA

Did you know that more than $130 billion in financial aid is available for students and their families? Whether you plan to attend a public or private institution, you need to complete the Free Application for Federal Student Aid (FAFSA). Most colleges and universities, as well as career schools, use the FAFSA to determine how much federal, state, or college aid a student can receive. Submit your FAFSA as early as possible (after January 1) for the academic year that you plan to start your studies.

Grants: Free Money

Grants can be either need-based or merit-based. The federal government funds need-based awards, such as the Pell Grant. The Federal Supplemental Educational Opportunity Grant (FSEOG) is a campus-based award, also funded by the federal government but administered by the school. It is awarded to the neediest students. Grants are also available from colleges and universities, private organizations, and businesses. Students do not need to repay grant funds as long as they fulfill all awarding criteria.

Merit-based grants are awarded based on GPA or other academic criteria and are often related to a certain field of study or intended to fund student research.

Scholarships and Fellowships

Like grants, scholarships and fellowships do not have to be repaid as long as the student fulfills the awarding criteria. Scholarships are available for members of racial and ethnic groups, graduates of certain high schools, residents of certain states, artists, math majors, people in the military, and many other specialized groups. Some companies award scholarships to children of employees and have tuition payment plans for employees. When preparing for college, apply for as many scholarships as you can and start the application process early.

Federal vs. Private Student Loans

There are several federal student loan programs for which you may be eligible. Stafford Loans, the most common, are available through the Federal Family Education Loan (FFEL) and the William D. Ford Direct Loan programs. These loans are available to students regardless of financial need. Stafford Loans can be subsidized, which means the government pays the interest on the loan as long as you're in school and during the grace period (usually 6 months) after you leave school. They can also be unsubsidized, which means you are responsible for paying the interest while you are in school (or the interest accrues and is added to your loan balance).

Independent students (usually adults) are more likely to be eligible than dependents, and graduate students typically have higher amounts available than undergraduates. Perkins Loans, which are funded by the federal government and administered by the school, are awarded to students who demonstrate the highest financial need. Like other loans, the amount a student gets may depend on other aid received.

Anyone can apply for a private student loan. However, they usually have higher interest rates than federal loans. When you apply for a private loan, the lender performs a credit check to determine the interest rate you'll receive. Generally, it's best to try for as much federal and school aid as possible before turning to private loans.

Work Programs

Work-study awards, which are part of your financial aid package, allow you to work part-time to earn money while attending school. Many jobs are available on campus, but some off-campus work may be available at nonprofit organizations or public agencies. To apply for work-study jobs, a student normally has to have received a work-study award and apply through the school's student employment office.

No matter how daunting it seems, you have financial aid options, no matter your situation. Competition is high, but the earlier you start lining up sources of funding, the more likely you'll get the financial aid you need.

Sources:
College Board
Federal Student Aid
FinAid

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.