College Financial Aid for the Young and Old: Step by Step Instructions on How to Get Started

Many people find applying for, and dealing with, financial aid for college more of an obstacle than a blessing. If you are an average financial aid beginner then this article is for you. It is designed to address some of the challenges of financial aid and provide a clear cut path to success.

So what exactly is Federal Student Aid (FSA) and how does it differ from private loans? FSA programs are administered by both the Department of Education and the Office of Federal Student Aid. The FSA disburses money to colleges to post to student accounts and is not based on the students credit score. Private loans are funds issued by a lending institution, such as a credit union or bank, and are in fact based on the students credit score. FSA cannot be denied unless you have already received the maximum amount for the grade level you are in; private loans can be denied by the lender based on the students credit score.

Stafford loans come in two flavors; subsidized and unsubsidized. Subsidized loans are loans which the government pays the interest on while you are enrolled in school. Unsubsidized loans are loans which the borrower is responsible for the interest on from the date the funds are dispersed. Students may avoid paying the interest while they are in school by capitalizing the interest, which increases the loan amount. Unsubsidized loans are not based on financial need and may be used to finance the family contribution.

The FAFSA is where to start! FAFSA is short for Free Application for Federal Student Aid; free meaning you should NEVER have to pay to complete it. I have talked to students in the past that said they paid upwards of $1000 just to complete a free form! The FAFSA is a federal form, just as the title states, and is not school specific. The FAFSA allows you to enter a school's code and that ensures the form gets submitted to the school you wish to attend. You must complete a new FAFSA for each aid year you attend school; it does not get done automatically. You can complete your FAFSA by visiting http://www.fafsa.ed.gov and you can even find your school code there!

Now that you know where to start, what is there to completing the FAFSA? The FAFSA gathers information such as your name, sex, date of birth, marital status, and certain financial information. You will want to make sure you have the previous year's federal taxes on hand to refer to (example: for the 08/09 aid year you want the 2007 federal taxes). You want the information on your FAFSA to be as accurate as possible to prevent hold ups later on down the road. You will be assigned a Personal Identification Number (PIN) which will allow you to e-sign your FAFSA as well as access it later. If you are a dependent student then your parents will also be assigned a PIN and you will need to include their financial information as well. If you are considered dependent and your parents fail to e-sign the FAFSA with their PIN, it will end up being rejected.

The Department of education reviews each FAFSA that is submitted and determines what your Estimated Family Contribution (EFC) is based on a formula that they use. Your EFC will determine whether or not you are eligible for the Pell Grant, and if so for how much. You may also be selected for what is known as verification. This is a random selection conducted by the department of education and roughly 30% of students are selected each year. This process is in place to verify the information given on your FAFSA and will require that you complete a verification worksheet and submit a signed copy of your federal taxes; the same federal taxes you had on hand when completing your FAFSA.

So you completed your FAFSA, now what? It's time to go the website of the school you wish to attend. Each and every college has its own financial aid application which you will now need to complete. Most colleges have the form available online for your convenience but if for some reason you don't see it, contact the school directly. Just like the FAFSA, the financial aid application is something that must be resubmitted each year. The financial aid application gathers basic information and you don't really need to have too much available on hand when completing it. It will cover whether you are managing your funds or whether you allow the school to manage your funds. If you manage your own funds then most of the money (minus lenders fees adn what not) will be sent to you directly and you will be considered a cash paying student by the campus. If you elect to have the campus manage your funds than anything left over once all of your classes are paid for is yours to keep. It is referred to as excess funds.

The next step is to select a lender. Federal student aid consists of student loans, also known as Title IV (4) funding or Stafford loans. The school you wish to attend will most likely have a list of their preferred lenders and you will need to complete a master promissory note (MPN) in order to obtain funding from the lender. The MPN will need to be submitted to the school because they will need to have that on file to later request your funds from the lender. Again, if you are considered a dependent student than your parents will have to complete the forms for what is known as the Parent Plus Loan and this is a credit based loan. If they are denied for whatever reason, you will need to submit the denial letter to the school and they will then you, the dependent student may be eligible to borrow money under the Unsubsidized Stafford Loan program.

In addition to those forms, you will also have to complete an entrance interview. This consists of the school's guidelines for attendance, grades and what not as well as lists the Stafford loan interest rate, the loan term, number of payments and other information relating to your student loans.

f you have other resources to help you pay for college then you may be required to complete what is called the Other Resources Form. So for example, if you have tuition reimbursement from your employer, you would indicate that on the Other Resources Form. You will also need this form if you receive the Montgomery GI Bill, Veterans Education Benefits, any other veteran's benefits, scholarships, tribal aid and any other available form of aid.

That's Financial Aid in a nutshell. Of course there are instances where additional documentation may be required; this article by no means covers every single scenario that one might experience. The main thing to keep in mind is that for things to go more smoothly have your taxes on hand; you will be referring to the frequently. Also keep in mind that this is a process and no college will have you certified for funding in a matter of days; this is a process and in that the process can take time. Be patient and everything will be just fine. Good luck in school!