Financial Aid For College Students

Even if you have not been able to save all the money you will need for college, several alternatives exist to assist you in making up the difference.

Financial aid comes in many shapes and sizes -- from scholarships and grants which do not need to be repaid, to federal loans which carry very favorable interest rates and terms. The following are a few of the most popular sources of financial assistance:

Financial Aid

Usually due before January 1, the standard federal Free Application for Federal Student Aid (FAFSA) determines how much, if any, financial assistance the government will award to your child. Both private and public schools use this standard form to dole out their own scholarship monies as well. Additionally, some schools now require the Financial Aid Profile for assessing the need for non-government dollars.

Working with a number of factors, a school will determine each family's financial "need." From there, financial aid officers will attempt to craft a package, often combining both grants, which don't have to be paid back, and loans, which must be repaid, usually with interest. Clearly, the better deal is the free money. Oftentimes the earlier one applies, the more of their funds will come from the "grant" side of the ledger.

Government Loans: Stafford

With a Stafford loan, the US Government either provides the funds for the loan, or guarantees the funds loaned by other institutions. The loans are available regardless of family income, but for families with incomes under $70,000 no interest accrues and no payments are required until the student leaves school.

Government Loans: PLUS

The Parent Loan for Undergraduate Students (PLUS) loans are federally funded and guaranteed loans issued through local banks, credit unions and savings & loan institutions. The maximum loan amount is defined as the total cost of college, less financial aid received. Repayment of principal and interest begins immediately with interest capped at 12%. Loan insurance is required to qualify for a PLUS loan.

Work / Study Grants

Many colleges and universities offer work/study grants. Sometimes their earnings are deducted from tuition and other times the student earns a salary.