The kind of financial aid any school can offer you will vary. Private and public schools operate differently when it comes to financial aid. Private schools—because they aren't funded with tax dollars—have more discretion when it comes to how they distribute scholarship dollars among students. Alums who have done well financially have been known to contribute to their alma mater to establish a scholarship fund to support students who show a particular aptitude or skill. Some of the largesse displayed by alums can be pure fun, too. (This writer graduated from a college where an alum left her entire estate to this woman's college to provide Baskin-Robbins ice cream in three flavors in all dining rooms at every lunch and dinner!)

But no matter where you are applying for financial aid, there are some basics. To begin with, to be eligible for federal student aid, you must:

• Be a U.S. citizen or eligible non-citizen
• Have a valid Social Security Number
• Register with the Selective Service, if required
• Have not defaulted on a prior student loan
• Show financial need

Your first step should be to contact the financial aid office of the school(s) you wish to attend. If you're a freshman applicant and are applying to more than one school, you'll want to communicate with every single school. Each school has it's own financial aid form to complete, plus it will require that you submit either the Free Application for Federal Student Aid (FAFSA) or the College Scholarship Service (CSS), or both.

The first step in applying for federal student aid is to complete a FAFSA form. You may access it and submit a FAFSA application over the Internet by using FAFSA on the Web.

Apply as soon after January 1 as possible. It is helpful to have completed preparing your income tax return for the year prior before completing the FAFSA. You will be asked to provide financial information for you and your parents if you are a dependent student.

About three weeks after you submit your FAFSA application, you will be notified that it has been received. Four to six weeks later, you will receive Student Aid Report (SAR) in the mail. Read the form to confirm that the information on it is accurate. If not, note the correct information and return it to the address provided. If the information is correct, you've finished your part of the process! The college or university you will attend will receive the SAR electronically.

Schools refer to the SAR to determine how much financial aid a prospective student needs to attend the coming year. While the SAR is informational, it is not binding to the college or university. A school may offer a student less financial aid than the SAR indicates the student requires to attend. Schools base their decision on:

• Cost of Attendance
• Expected Family Contribution
• Remaining Financial Need
• The amount the school has to allot to scholarships and grants

Financial aid programs vary from school to school. Check with the financial aid office at the school(s) you are considering to confirm which programs will be available to you if you choose to attend their school.

There are two basic types of financial aid: Scholarships/Grants or Loans/Work Study. Many students rely on federal government loans to finance their educations. These loans have low interest rates and do not require credit checks or collateral. Student loans also provide a variety of deferment options and extended repayment terms. Scholarships and grants do not have to be repaid including the following:

• Federal Pell Grant
• Federal Supplemental Educational Opportunity
• State Student Incentive Grant (SSIG)
• Private or State Scholarships

Some financial aid packages require repayment if the recipient does not fulfill his/her obligation to the school.

Loans and Work Study. Loans must be repaid. Students who are offered work study aid, work at a job on campus, generally for minimum wage, for a certain number of hours a week. They are paid by the school for this work, and the money can be used to pay for any aspect of attending school including books, food, housing, etc. Typically, schools offer a combination of aid to students who apply, part scholarship and/or grant and part loans and work-study. These plans include:

• Federal Stafford Loan Programs (Subsidized and Unsubsidized)
• Federal Perkins Loan Program
• Federal Parent Loans for Undergraduate Students (PLUS) Loan Program
• Federal Work-Study Program

To apply for a Stafford Loan, you must submit the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov. Although the unsubsidized Stafford Loan is open to all students regardless of financial need, you still must submit the FAFSA to be eligible. Students can receive both a subsidized and unsubsidized loan for the same school period.

The Stafford Loan comes in two forms, either as a FFELP or FDSLP program. The Federal Family Education Loan Program (FFELP) provides funds from private lenders, i.e. banks, credit unions, and savings & loan associations, which are guaranteed against default by the federal government. Or, if your school is a "Direct Lending School," the Federal Direct Student Loan Program (FDSLP) administers your Stafford loan. Direct loan funds are provided directly to students and their parents by the federal government through the schools.

All Stafford Loans are either subsidized (the government pays the interest while you're in school) or unsubsidized (you pay all the interest, although you can defer the payments until after graduation). You must be able to demonstrate financial need to receive a subsidized Stafford Loan.

Using an unsubsidized Stafford loan, you can defer payments until after graduation by capitalizing the interest. This adds the interest payments to the loan balance, increasing the size and cost of the loan. All students, regardless of need, are eligible for this unsubsidized Stafford Loan.

Dependent undergraduates can borrow up to $2,625 for their freshman year. That number increases to $3,500 for their sophomore year and $5,500 for their junior and senior year. Independent students can borrow an additional unsubsidized $4,000 for their freshman and sophomore years and $5,000 in their junior and senior years. Graduate students can borrow $18,500 each year, but only $8,500 of that is subsidized.

You can combine subsidized loans and unsubsidized loans to up to the maximum amount allowed each year.

Stafford Loans have variable interest rates (based on 91-day Treasury bill rates plus 1.7% during school with an additional .6% increase after graduation, which is capped at 8.25% or less. All lenders charge the same interest rate for the Stafford Loan and some give discounts for on-time and electronic payment.

The Perkins Loan is awarded to undergraduate and graduate students with exceptional financial need. This is a college or university-based program and the school acts as the lender using a limited pool of funds provided by the federal government. There is no origination or guarantee fee for the Perkins Loan and the interest rate is 5% with a 10-year repayment period. This is a subsidized loan with the interest paid by the federal government during the student's school years.

The financial aid office of the college or university you attend will determine the amount of the Perkins Loan you receive. The program limits you to $3,000 for undergraduate students and $5,000 a year for graduate students up to $15,000 for undergraduate loans and $30,000 for undergraduate and graduate loans combined.

Colleges and universities offering the Expanded Lending Option (ELO) may offer higher loan limits for the Perkins Loan. To participate in the ELO, a school must have a default rate of less than 15%.

Parents of dependent students can take out loans to supplement their children's aid packages. The federal Parent Loan for Undergraduate Students (PLUS) allows parents to borrow money to cover any costs not covered by the student's financial aid package up to the full cost of attendance. PLUS loans are either FFELP (private lenders) or Direct (funds provided by the government).

PLUS loans have variable interest rates based on a 52-week Treasury bill rate + 3.10% capped at 9%. Repayment begins 60 days after the funds are disbursed and the repayment term is up to 10 years. Some lenders offer a discount for electronic payment.

PLUS loans are the financial responsibility of the parents, not the student. If the student agrees to make payments on the PLUS loan, but fails to make the payments on time, the parents are held responsible.

Private Loans, also known as Alternative Loans, can help pay the difference between the actual cost of your education and the amount the government allows you to borrow through its programs. And if your parents want to defer repayment, some private loans offer this option. Private lenders don't require you to complete federal forms.

Loan Consolidation, also called a Consolidation Loan, combines several student or parent loans into one bigger loan from a single lender. The new, single loan is then used to retire the balances due on the other loans. Consolidation loans are available for most federal loans including Stafford, PLUS, and SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans, and Direct Loans.

Some lenders offer consolidation loans for private loans as well.

Depending on the loan amount, the term of the loan can be extended from 12 to 20 years when consolidated, which does increase the total amount of interest paid.

Consolidation simplifies the repayment process, but can also increase the interest rate. The interest rate for consolidated loans is usually an average of the interest rates on the loans being wrapped into it rounded up to the nearest 1.8 of a percent and capped at 8.25%.

Under certain conditions, the federal government will cancel all or part of the repayment of an educational loan. This is called Loan Forgiveness and requires that the student must:

• Perform volunteer work
• Enlist in the military
• Teach or practice in an economically depressed community

If you enroll in any of these specific volunteer programs you can expect some loan forgiveness:

• AmeriCorps. Serve for 12 months and receive up to $7,400 in stipends plus $4,725 to be used towards your loan.
• Peace Corps. Serve and have up to 70% of your loan forgiven while the rest is deferred while you're in the Peace Corps
• Volunteers in Service to America (VISTA). Provide 1,700 hours of service and receive $4,725 to be used toward your loan.
• Enlist in the Army National Guard and you may qualify for the Student Loan Repayment Program offering up to $10,000.
• Military and veterans' associations provide many scholarships and tuition assistance programs.
• Students who become full-time teachers in elementary or secondary schools that serve students from low-income families will have a portion of their Perkins Loan forgiven under the National Defense Education Act. This program forgives 15% of loans for your first and second year of service, 20% of your third and fourth, and 30% for your fifth year of teaching. Contact your school district administration to see which schools qualify.
• Also many law schools and medical schools (physical therapists can also be eligible) for forgiveness if they practice for a given number of years in communities lacking lawyers and doctors. Contact your law school, medical school, or physical therapy school for details.

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