Given the increasing costs of higher education, figuring out how you will pay for college can be more of a challenge than getting into school in the first place. It is rare that one form of assistance will fully cover your tuition and expenses. More often college funds are cobbled together from a variety of sources, adding up to a tidy sum. Financial aid, in different forms, can be awarded by the federal government, your state, your school, and private organizations.

Federal Financial Aid

The federal government awards aid to eligible students attending eligible programs. Eligibility depends on need. Make no assumptions about your need. All students should submit the Free Application for Federal Student Aid (FAFSA) and should submit it as soon as possible.

Financial aid is based on a very specific definition of need. The Free Application for Federal Student Aid (FAFSA) initiates the process by which your need is determined. The FAFSA gathers both parent and student financial information from one year, called a base year - the year prior to college enrollment. Using Federal Methodology (FM), a formula applied to income, assets, and other figures, The Department of Education's Office of Federal Aid calculates an Estimated Family Contribution (EFC). Your need is the difference between your Estimated Family Contribution and your anticipated Cost of Attendance. Need dictates your financial aid eligibility. This information is provided to schools as indicated by you on the FAFSA. Note: The FAFSA4caster is a calculator that helps families estimate federal aid awards ahead of official notification.

The federal government awards three different forms of financial aid.

• Grants: Grants do not need to be repaid. Most grants depend on undergraduate status and full-time enrollment; those awarded to half-time students are less in amount. Adults that already have a bachelor's degree do not qualify for grants, with exceptions made for teacher certification programs. The Federal PELL Grant is a prerequisite grant - qualifying for a PELL grant opens up eligibility for other federal grants.

  PELL Grant: PELL Grants are based on EFC, college or university costs, full or half time status, and how many students qualify in the award year. Maximum PELL grant amount for 2010-2011 is $5,500.

  Federal Supplemental Educational Opportunity Grant (FSEOG): FSEOG grants are awarded to students with exceptional need. Grant money is distributed through schools. Current award amount maximum is $4,000 and award is determined in context of aid a school awards to all its students with need. PELL recipients enjoy priority status.

  Academic Competitiveness Grant (ACG): Eligible students are first- or second-year undergraduates that receive a PELL grant and show grade point excellency. Only U.S. students are eligible. Current maximum amounts are $750 for first-year students and $1,300 for second-year students.

  National Science and Mathematics Access To Retain Talent Grants (National SMART Grants): Eligible students are third- or fourth-year full-time undergraduates that receive a PELL grant, maintain a consistent 3.0 GPA, and are majoring in science (physical, life, computer), math, technology, engineering, or a critical foreign language. Award maximum is $4,000.

  Teacher Education Assistance for Higher Education Grants (TEACH): Eligible students are undergraduates and graduates enrolled in courses to become an elementary or secondary teacher. Grants stipulate a term of service: four years, in an eight year span, as a full-time teacher in a high-need field in a low-income school; failure to complete this requirement will convert grant into a loan that students are obliged to repay. Maximum award amount is $4,000.

• Federal Work Study: Federal Work Study (FWS) is based on need. Eligibility extends to both full-time and part-time students enrolled in undergraduate and graduate programs. Federal aid is administered by individual colleges and universities. Typically, work study jobs are on campus; off-site jobs are community-based. Students in the FWS program earn federal minimum wage, with a maximum award total based on need and college funding quotas.

State Financial Aid

Schools and universities may cover state aid in its financial aid process but contact your state financial aid agency for a comprehensive overview of available aid. Don't let federal aid awards stand as indicators for state aid awards. States typically provide need-based aid but many states offer merit-based aid, as well. Attending school in your state of residence can help eligibility. Residency stipulations, aid awards, and eligibility requirements vary from state to state.

Institutional Aid

Depending on your financial aid package and available institutional funds, your school may be able to offer you additional aid. Most aid is awarded via merit-based scholarships but schools also have their own forms of grants, fellowships, and work-study programs. Your school will create a financial aid package based on your qualifying aid. Some private schools require additional financial aid information in order to determine your award package. The College Scholarship Services Financial Aid Profile (PROFILE) is a more detailed evaluation of family assets and will generally yield a greater Estimated Family Contribution.

Scholarships

Scholarships do not need to be repaid. In most cases scholarships are merit-based. Beyond institutional scholarships, scholarships are funded by public companies, private institutions, and other organizations. Dig for scholarship opportunities. Students may find it easier to procure small scholarships that add up in the end rather than one scholarship that covers all education expenses.

Education Loans

Despite college savings and award money, many students need to take on student loans. Loans are commonly the last piece of the financial aid puzzle. Education loans are loans like any other: they need to repaid, with interest and strict terms of repayment. Loans can be financed by the federal government or private lenders. Refer to companion article on this site for more information about education loans.

Sources:

• College Financial Aid for Dummies, Dr. Herm Davis & Joyce Lain Kennedy, IDG Books, 1997
• "Understanding Grants and Loans" Federal Student Aid (http://studentaid.ed.gov/PORTALSWebApp/students/english/loanGrantFactsheets.jsp
• "Campus-Based Aid" Federal Student Aid (http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp)