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What You Need To Know About Student Financial Aid for College


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You Can Afford to Get an Education

If you believe a college education is out of your reach, think again. A tremendous number of financial resources can help make your dream of a college degree a reality. The key is educating yourself about the financial aid process.

Start by familiarizing yourself with the most common types of financial aid. The two basic categories are gift financial aid in the form of scholarships and grants; and self-help financial aid in the form of student loans and work-study programs. Financial aid can be federal- or campus-based. Most students use a combination of the two.

How to Apply for Financial Aid

If you want Uncle Sam or your college to help pay for your education, you must complete the Free Application for Federal Student Aid (FAFSA). When a college accepts you, they use this application to put together a personalized Financial Aid Package.

Once you've received your financial aid award letters and made your decision about which school to attend, you can accept the financial aid offer as is, reject it entirely, or accept some features and reject others. You can also request a reevaluation of the aid package.

Types of Financial Aid

Federal and campus-based student financial aid consists of:

  • grants, which do not have to be repaid

  • loans, which allow you to borrow money for school under federal loan programs

  • work-study programs, which allow you to earn money while going to school.


  • Federal Pell Grants are based on a combination of financial need, college costs, and your enrollment status (full- or part-time). The maximum grant for the 2004-2005 school year is $4,050. Pell Grants do not have to be repaid.

  • Federal Supplemental Educational Opportunity Grants (FSEOG) are campus-based grants awarded to students with exceptional need. They range between $100 and $4,000 per year and do not need to be repaid.


The US Department of Education administers Stafford Loans and Federal Perkins Loans (for students), and PLUS Loans (for parents of the student). Some loan funds come directly from the federal government and others come from a bank, credit union, or other participating lender.

  • Stafford Loans can be subsidized (the government pays the interest while you're in school and for six months after you leave school) or unsubsidized (you pay the interest from the date you receive the money, but you can defer payment until after you leave school). You can receive both types of Stafford Loans for the same school year, but the total is limited based on what year you're in and whether you're a dependent (your parents can claim you on their income taxes) or an independent student. Interest rates on Stafford Loans disbursed between July 1, 2005 and June 30, 2006 is 4.70% during in-school, grace and deferment periods, and 5.30% during repayment. The interest rate on Stafford loans will never exceed 8.25%.

  • PLUS Loans allow parents with good credit to borrow money at a favorable interest rate to help pay for education costs for their dependent undergraduate student. PLUS Loans are limited to your cost of attending college minus your other financial aid. They're not based on financial need. The interest rate is variable but can't exceed 9%. The rate for loans disbursed between July 1, 2005 and June 30, 2006 is 6.1%.

  • Federal Perkins Loans are campus-based, low-interest, fixed-rate loans of up to $4,000 per year for those with exceptional financial need. As long as you're attending school at least half-time, you won't have to begin repayment until nine months after you graduate, leave school, or drop below half-time status. No interest is charged until repayment begins.

  • Private Loans are obtained from private lenders for college costs not covered by federal and campus-based financial aid. They usually include higher interest rates than federal loans. They don't require federal forms.

Work-Study Programs

Federal Work-Study Programs are campus-based and provide part-time jobs for students with financial need. Your school will provide work hours based on your award amount, class schedule, and academic standing.

Other Types of Financial Aid

  • Scholarships: The beauty of scholarships is that they don't need to be repaid. The best way to find scholarships is via one of the online scholarship search engines. The largest and best is Fast Web, which compares your background with available scholarships and lists only those that fit your circumstances.

  • Most communities have local scholarhips that aren't listed in the large online databases. You may find some of these by searching Google or other search engines using the keyword "scholarships" and the name of your home town, state, or area of interest. Also check with your high school guidance counselor, local organizations, and your local library.

    Secrets to maximizing financial aid, plus many other money-saving tips for college students, can be found in my book "1000 Best Smart Money Secrets for Students,.

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