Prepare Financially

As tuition prices escalate, the cost of a college education may seem increasingly out of reach. But planning ahead and a little boost from financial aid can ease stress. In 2016, there were 44.2 million U.S. borrowers with student loan debt.

In order to receive financial aid for college, students will need to apply each year online at www.fafsa.ed.gov, which provides loans for almost all two- and four-year colleges, universities and career schools in the country.

Remember that not everyone who applies receives aid. Grants and loan packages are awarded according to your income and the tuition of the school you're applying to. You can estimate how much aid you might be eligible for by using the federal government's Student Aid Eligibility calculator.

When it comes to financial aid, you have two main options:

• Scholarships and merit-based aid – Did you get good grades in high school? That will help when you apply for scholarships and merit-based aid . Even if the answer is no, there are still plenty of opportunities — you'd be amazed at the sheer variety of scholarships out there. Do your research — there's money waiting for you depending on where you were born, what your career goals are and what extracurricular activities you've been involved in.
• Student loans and need-based aid – If you're not eligible for scholarships or merit-based aid (or if these don't cover the whole bill), there are other options. Find out how much need-based aid you're eligible for through your school or through a lender. If that's not enough, other institutions also offer financial assistance, though they may use different formulas, with different results.

Be sure you understand your loan repayment responsibilities before accepting financial aid. If it's a grant, it doesn't have to be repaid. Loans do have to be repaid with interest upon graduation. If you're going to go that route, shop around for a good interest rate – you'd be surprised how much difference a couple of percentage points make over time. To find out just how much, explore your options using the Repaying Student Loans calculator.

Federal Financial Aid
The William D. Ford Federal Direct Loan Program is the sole government-backed loan program in the United States. Also known as Stafford Loans, these provide funding directly to students and their parents or guardians in two general varieties:

• Subsidized – Available only to undergraduate students. Eligibility is based on demonstrated financial need. The federal government pays the interest while you are in school on at least a half-time basis.
• Unsubsidized – Available to undergraduate and graduate students. Eligibility is not based on financial need and the borrower is responsible for paying all the interest.

Federal Perkins Loans
The Federal Perkins loan is a campus-based loan program, awarded by the college or university's financial aid office to undergraduate and graduate students with exceptional financial need. The interest rate on the Federal Perkins loan is fixed at 5 percent.

PLUS Loans
As its name suggests, the federal Parent Loan for Undergraduate Students (PLUS) loans are loans that parents can take out on behalf of a dependent undergraduate child who is enrolled at least half-time at an eligible school.  The child must meet general eligibility requirements for federal student aid.  These loans can also be taken by graduate or professional students to supplement other financial aid packages.  The loan amount is the total cost of attendance minus the borrower’s total financial aid package. For example, if tuition costs $30,000 per year and the student is receiving $25,000 from other sources, the maximum PLUS loan would be $5,000.

Loan Limits
Most student loans have several types of limits on the amount you can borrow:

• Annual loan limits determine the maximum amount you can borrow in a single academic year.
• Aggregate loan limits, sometimes called cumulative limits, describe the total amount you are allowed to borrow during your academic career.
• Cost of attendance (COA) limits specify that the loan amount must be less than the school's official cost of attendance minus other financial aid received.