Paying for College

Master the Financial Aid Process

Don't spend a dime for financial aid advice. Simply learn the system and the sources, and apply early.

Applying for financial aid can be intimidating and confusing. That's why so many scams offer to do the work for you -- for an up-front fee, of course.

There are legitimate services out there, too, but you could get the same information yourself free. For example, (not to be confused with the Education Department's Web site) offers to review your FAFSA form for accuracy for $79.99 and walk you through the process over the phone for $99.99. FAFSA stands for Free Application for Federal Student Aid, and it is THE form when it comes to applying for federal financial aid (see below). It can be tedious to fill out, but note the key word: free. Remember that when considering any offers that require you to pay to prepare the FAFSA for you.

Also know that using one of these fee-based services won't necessarily increase your chance of getting funding. To make sure you get the most financial aid possible, learn about the various sources of aid and the application process. And don't delay.

"By completing the application early and in advance of state and school deadlines, students and families have a better chance of securing cheap or even free money for college," says Martha Holler, spokesperson for Sallie Mae, which provides education loans. The sooner you can apply the better, because aid is not an infinite bucket.

Sources of financial aid

Your final aid package could come from a variety of federal or state agencies, private lending institutions or, in the case of scholarships, your employer, club or church. The federal government provides the majority of financial aid -- more than $100 billion a year. The remainder of the aid comes from state agencies, private loans and scholarships.

Department of Education. Federal aid includes loans, grants and campus-based programs and is based, for the most part, on financial need rather than scholastic achievement.

There are four types of loans: Direct subsidized and unsubsidized loans, PLUS loans for parents and Perkins loans for high financial need students. The Federal Pell Grant, which doesn't have to be repaid, usually is awarded only to undergraduate students based on financial need, cost of attendance and other factors.

Campus-based programs, such as work-study, let you earn money to pay for school. To receive any of these forms of aid, students must first fill out the Free Application for Federal Student Aid, or FAFSA, which is discussed below.

Federal agencies. U.S. government agencies such as the Department of Health and Human Services, the Department of Veterans Affairs and many others provide a variety of scholarships, loans and education benefits.

State agencies. Aid programs vary from state to state. For information, check with your state's education department.

Private loans. Before 2008, there was abundance of private education loans that could be used to fill the gaps left by federal programs. Then credit seized up and dozens of lenders left the market. Now, the lenders who do offer the loans have made them harder to get and more expensive.

To get a private loan, your student will not only need good credit, but also a creditworthy cosigner-typically a parent. Rates on these credit-based loans are based on the prime rate, plus a margin, which depends on the applicant's and cosigner's creditworthiness. Ask the financial-aid office at your student's school whether it provides a list of preferred lenders. Compare lenders and loan terms at and

Scholarships. Finding and applying for scholarships is a time-consuming project that's often not as rewarding as you might hope. Most scholarships tend to be narrowly focused, extremely competitive and financially meager ($500 or less). And some colleges subtract the value of outside scholarships from need-based aid. If you do decide to seek scholarships, check with your school guidance counselor, college financial aid offices, scholarship directories at your library as well as your employer, community organizations, advocacy groups or associations related to your field of interest. Sallie Mae’s free scholarship database contains more than 3 million scholarships worth more than $18 billion in funds. Or search other free sites such as Peterson's and the College Board's Scholarship Search.

The process

Go for the free money first. Grants that do not have to be repaid are available from the federal government, state governments and higher education institutions.

Try your luck with the Education Department before moving on to other federal or state agencies or scholarship funds with smaller pots of money.

The first step is to fill out the FAFSA online or on paper -- you can generally pick up copies at your library, high school or college you plan to attend.

For the 2015-2016 school year, students have until June 30, 2016, to submit the FAFSA. If you want to qualify for state aid, though, you'll have to fill out the FAFSA much sooner (as early as March in some states -- see the deadlines). The application asks for your family's financial information, so you'll need documents such as tax returns on hand.

You also might be required to fill out the CSS/Financial Aid PROFILE. About 400 colleges, universities, graduate and professional schools, and scholarship programs use the PROFILE to determine eligibility for nonfederal student aid funds. If you have a short list of schools, call the financial aid offices to see if they require this form.

Three days to three weeks after submitting the FAFSA, you'll receive a Student Aid Report. It summarizes the information you reported on the FAFSA and tells you your Estimated Family Contribution -- how much you'll be expected to pay for your education.

Financial aid administrators at the colleges where you've applied will use your EFC to determine how much aid you'll get. You'll receive a financial aid award letter that tells you the amount of aid you'll receive for the school year and in what form: loan, grant or campus-based program. The letter usually will tell you what steps you need to take next.

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