Paying for college can seem a daunting task so it's important to have a plan of attack. Generally speaking, there are three types of financial aid--grants, scholarship, and loans.
- Investigate grants Grants are monetary awards that are usually distributed based on financial need. Grants do not have to be repaid; they are gifts. The federal government offers two grants: The Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG). To apply for these grants, the student must submit a Free Application for Federal Student Aid (FAFSA). This can be done online at FAFSA or the student can submit a paper application.
The FAFSA information is sent to the federal processor which then sends the information electronically to the schools listed on the application. The schools are responsible for determining the student's eligibility for these grants. States also offer grant programs. Most schools use the FAFSA information to determine state grant awards as well. To find more information about different state grants, a student should contact the financial aid office at his or her school or enter the name of the state and the word "college grants" into the Google search engine (i.e. Iowa college grants).
- Search for scholarships Scholarships are monetary awards that are distributed based on many different criteria, ranging from academic achievement to minority status to field of study. Many scholarships are awarded based on a combination of criteria. The best places to start looking for scholarships are at the student's high school advising center and the college's financial aid office. Many financial offices have a booklet listing all of the internal scholarships the school offers. A next step is to investigate the large corporations in the student's area. Oftentimes, they will offer scholarships. Finally, the website CollegeScholarship.Com is one of many a student can find by googling "college scholarship".
- Apply for loans Loans are awards that have to be repaid. The most common student loans are Federal Perkins Loans and Federal Stafford Loans. Schools use the FAFSA to determine a student's eligibility for these loan programs. Federal Perkins Loans are smaller loans that are awarded only to students who have the greatest financial need. For the 2005-2006 award year, an undergraduate student could receive a maximum of $4000.
There are two types of Federal Stafford Loans--subsidized and unsubsidized. The maximum amount a student can receive is fromn $2,625 to $8,500, depending on grade level. The better loan of the two is the subsidized one because the government pays the interest on that loan while the student is enrolled in college. With unsubsidized loans, interest accumulates while the student is in school. It is best to pay off this interest monthly, if possible, because when the loan enters repayment, any interest is capitalized. This means the interest is added to the loan principal so the borrower will be paying interest on interest.
Students with the greatest need are eligible for subsidized Stafford Loans. Repayment on all of these loans is deferred if the student is enrolled at least half time in college. There is also a six month grace period after the student ceases attending college. In addition to the Federal Loan Programs, many banks and other financial institutions offer student loans. It's recommended that students contact their college's financial aid office for a list of banks or institutions in the area that provide student loans.