Hello, and welcome to Financial Aid 101. Here’s the bad news: According to the National Center for Education Statistics, college grant funding has not been keeping pace with tuition. The good news? More than half of all students will qualify for some need-based funding. Everybody, regardless of family income, should apply for need-based money.

However, before you even think about applying for financial aid, you must complete and submit the Free Application for Federal Student Aid, or FAFSA. The FAFSA provides universities with the information necessary to determine your need for financial aid.

If you are at all Internet savvy, I recommend filing the FAFSA application online. The processing is greatly speeded up, both from you to the Department of Education, and from the DOE to the school. Also, if you need to update or modify information, it is easily accomplished.

Grants
Grants can come from public or private institutions, but the vast majority comes by way of the FAFSA. If there is sufficient need, you will be offered a federal Pell Grant. These grants are based on the cost of the education and your family’s ability to pay. Low and middle range wage earners qualify for a considerable amount of grant money each year.

Even if you make too much money to qualify for a Pell Grant, you should still apply. It is a requirement for getting student loans as well as grants from the college. Grants do not need to be repaid.

Scholarships
Scholarships can come from private organizations as well as the university itself. There are many scholarships available and you should avail yourself of the many resources to find them.

Ben Kaplan’s How to Go to College Almost for Free (HarperCollins, 2002) is perhaps the best source for learning how to be successful in finding this money. He walks you, step-by-step, through the process that he used to attend Harvard University for free. In a little over a year, he was able to raise $90,000 in scholarship money. That’s good money, even for Harvard. Scholarships do not need to be repaid.

College Work-Study
When you fill out the FAFSA, there will be a box to check asking whether you would like College Work-Study. The theory behind this is that you can work for the college and the funds are split between you and the school. Whether this is a good deal depends on what sort of part-time employment options are available to you.

College Work-Study is basically a guaranteed job. If you plan on working, but know that there are few jobs available where you are going to school, it may be worth it. However, if you attend school in a place where jobs are plentiful, you can get one, pay off whatever the CW-S would have paid, and likely still come out ahead. This only works if you are disciplined enough to take part of your earnings and pay it to accounting office. Otherwise, take the work-study. It does not need to be repaid.

Student loans
Student loans should be a last resort. The problem is that most colleges now wish to force them upon you. They are considered part of most financial aid packages. My advice is to only consider them if you have no other possibility. It is currently quite cheap money, a few percentage points, but my preference is to collect as much from other sources, such as scholarships and grants, before tying yourself down to long-term debt. However, they are readily available. Student loans must be repaid and they will hunt you down and incinerate your credit report should you elect not to do so.

If you find this all thoroughly confusing (and most of us do), the College Board offers a college financing calculator that will give you some sense of how your contribution will play out.