If you are like the vast majority of American’s in our sagging economy, your family will be looking for additional funds to help cover the cost of a college education. The largest share of this need-based supplemental money comes from the federal government through its financial aid system.

But the government also assumes that you are able to participate in the expense of educating your child prior to considering how and to what level they will participate in funding your child’s education. Therefore, in order to determine your initial level of participation, families are required to fill out the Free Application for Federal Student Aid, or FAFSA form.

The FAFSA captures the required financial information used to calculate how much your family is expected to pay via a formula known as the Federal Methodology (FM). Your initial or beginning monetary participation level is known as your Expected Family Contribution (EFC).

The data used to generate the initial EFC calculation is collected beginning in January of your child’s junior year in high school and ends on December 31 of that same year, which would be his or her senior year in high school. This time frame is referred to as your “base year.”

In essence, if you’re in your base year, you are now under the financial aid microscope and any financial moves being considered (including the sale of real estate or stocks, withdrawals from IRAs, contributions to retirement plans, receiving monetary gifts, etc.) must be weighed not only from a federal tax standpoint but also in relation to the financial aid system. The catch is that what makes sense from a 1040 point of view may have adverse consequences on your chances of receiving financial aid.

Case in point: Consider contributions made to your 401(K) plan at work during your child’s base year or any year prior to financial aid application. In order to encourage individuals saving for retirement, the federal government does not tax contributions made to 401(K) plans up to a specified annual limit. This money enters the retirement plan on a pre-tax basis with taxes being accounted for as money is withdrawn to supplement retirement.

The Federal Methodology used to calculate your EFC treats these contributions from an entirely different prospective. The financial aid system believes that you can stop contributing towards retirement and apply these contributions to college expenses. They anticipate you playing “catch up” with these contributions after your child is out of school.

Accordingly, your pre-tax retirement contributions, which are not considered taxable 1040 income, are considered “untaxed income” by the financial aid system and are added back into the EFC calculation and assessed at the applicable rate.

If we assume an assessment rate of 30 percent and $10,000 of retirement contributions, your initial EFC just increased by $3,000 for the year in which federal aid is applied for. This could very well eliminate you from being considered for preferred financial aid.

This is not to suggest that you discontinue your retirement contributions. However, the harsh reality of the situation is that the enormity of funding your child’s college education and your retirement collide with each other at an inopportune time, especially as our national economy struggles. As you make decisions regarding college education versus retirement funding, you should carefully weigh how each decision will impact your wallet, both during the base year and well into the future.

Understanding the pros and cons of any financial moves made during your base year – or any year in which financial aid is applied for – from both a tax and financial aid standpoint goes a long way toward determining what you pay for college. The process is complicated and should only be done in consultation with a qualified professional.

Marc R. Hill is a financial planner who coaches and educates families on how to dramatically reduce their college costs up to $12K or more! Now you can learn how to cut your family’s college costs and protect your retirement account with Hill’s FREE e-newsletter: “College Savings Tip Sheet.” Subscribe now for FREE at http://www.reduceyourcollegecosts.info and & receive two complimentary issues of Hill’s members-only newsletter “Affording College.”

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FAFSA stands for Free Application for Federal Student Aid and is the main form used to determine eligibility for federal aid, including Pell Grants and student loans. The majority of parents will fill out the FAFSA application online. It is the first step to getting financial assistance for college. Many student financial aid programs are on a first come, first served basis. The FAFSA is the critical connection between you and your student’s future financial aid package.

The key is to complete the entire FAFSA financial aid application and file it no later than the specific deadlines set by colleges and states. If you are unsure about an answer, wait to submit the form; if the answer is zero, put a “0″ on the line. File your taxes as early as possible because it is helpful to have that information available. Otherwise, you can estimate the amounts from previous years and correct the amounts on the form later at the corrections page on the FAFSA website.

FAFSA deadlines include federal, state, and college deadlines. Any outside scholarships you apply for may also have a FAFSA requirement and deadline. FAFSA deadlines vary from state to state and from school to school. Some deadlines are as early as mid-January, while others are later.

Parents can even “talk” live online with a customer service representative if they have questions. You can also get additional assistance by calling (800) 4-FED-AID or going to the FAFSA website at http://www.fafsa.ed.gov/. Applications are accepted beginning in January for the fall semester.

Parents need to avoid making mistakes on the FAFSA form because this will only delay the application from being processed. Some common mistakes that parents make include the following:

1. Not listing all of the colleges to which your student is applying
2. Writing in incorrect tax amounts
3. Not updating your information once your taxes are filed
4. Leaving a question blank
5. Not signing the FAFSA form

Most colleges and universities start sending out admission acceptance letters between January and April. Financial-aid award notices come close behind. Expect a financial-aid award letter to arrive within two to three weeks after an acceptance letter. If you have not heard from a school, it is appropriate to contact the financial aid office and inquire about your financial aid package
and when you can plan on receiving it.

You cannot expect financial aid if you never apply. Many parents are overwhelmed just thinking about college and wondering how they will afford it. For other families, our tough economy has changed the financial situation and security they once had. There is still time for parents to go to the FAFSA website and apply. Give your student the opportunity to receive the financial aid you need to make attending college affordable. Who get financial aid? Only parents who apply for it.

Susie Watts is an educational consultant in Denver, Colorado. She is the founder of College Direction and has been working with students for more than twenty years. She assists with the college search, essays and applications, help with paying for college, and college planning to help students become stronger college applicants. To find out how College Direction can help your student, go to http://www.collegedirection.org.

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For those seeking financial aid, begin with the federal financial aid form known as FAFSA. Families can file the FAFSA online at fafsa.ed.gov, or via mail. Completing federal income tax forms makes filling out the FAFSA form a lot easier, and makes it less likely that you will have to provide more information later. Note: Funds are more readily available for those who apply early!

Following are some often overlooked tips for those seeking financial aid for their college education:

* Consult your guidance counselor. Guidance counselors receive a lot of information about financial aid programs, scholarships, and deadlines, as well as information from schools. Some guidance counselors send out newsletters to parents and students, while others keep it for those who ask.
* Check within your community. Many scholarships are available based on where you live, who you are and what you do. Be sure to inquire at work, your place of worship, the local Rotary Club, American Legion and businesses.
* Meet with your school financial aid officer. Some college and trade school financial aid officers have some discretion on financial aid packages and can adjust awards based on the information you provide and extenuating circumstances.
* Verify student loans. Parents and students often feel compelled to accept whatever student loan package is offered by their school. Students should research interest rates and payment schedules to get the best deal and to understand what they are getting into.
* Meet with university department heads. Students already in college should get to know the department head of their major since many departments have dedicated financial aid and scholarship opportunities for deserving students. Also, they may have job opportunities within the department.
* Monitor your funds. Financial aid programs assume that you will live within your means. Many students learn the hard way that paying for what you need means waiting for what you want.
* Conduct online research. Following are good resources for beginning your online research: Federalstudentaid.ed.gov (federal financial assistance), FinAid.org (scholarship searches and other forms of financial aid), Scholarships.com (free scholarship search), nasfaa.org (educates parents and students on borrowing student loans), and Sallie Mae (the largest issuer of student loans).

Obtaining financial aid for a college education is toughest on those who need the most help, but there are people and organizations out there who value education and can help kids succeed once they take that first step.

Hilary Basile is a writer for MyGuidesUSA.com. At http://www.myguidesusa.com, you will find valuable tips and resources for handling life’s major events. Whether you’re planning a wedding, buying your first home, anxiously awaiting the birth of a child, contending with a divorce, searching for a new job, or planning for your retirement, you’ll find answers to your questions at MyGuidesUSA.com.

Find scholarships, grants and financial aid tips and resources for prospective and current college students at http://colleges.myguidesusa.com

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1. What is Financial Aid? Financial aid is monetary aid to help you pay for your college education. Aid is made available from grants, college scholarships, student loans, and part-time employment from federal, state, institutional, and private sources. The types and amounts of aid awarded are determined by financial need, available funds, student classification, academic performance, and sometimes the timeliness of application.
2. What is the FAFSA? FAFSA stands for Free Application for Federal Student Aid. The FAFSA is the Federal Department of education’s primary application for financial aid and is the gateway form to just about any other federal, state or private grants, college scholarships, student loans or college work study programs. The FAFSA form must be filled out each year between January 1 and March 10th (although some colleges have their own earlier deadlines) and can be completed online or by mail. Four to six weeks after you file the FAFSA (two to four weeks if you filed electronically), you will receive your Student Aid Report (SAR) which will contain a summary of the information you submitted on your FAFSA and presents your Expected Family contributions (EFC) which tells you the amount your family is expected to contribute towards your education. The amount of financial aid is then determined approximately by the tuition of your college subtracted by your EFC. If you do not receive the SAR within a reasonable amount of time, you can call the Federal Processor at 1-319-337-5665. Review the SAR carefully for errors. If necessary, make any corrections on Part 2 of the SAR and return it promptly to the address listed on the form. You will then be sent a new SAR with the changes made.
3. What is the College Scholarship Services Profile (CSS Profile)? Some colleges also require you to fill out a College Scholarship Services Profile form in addition to the FAFSA. It is a secondary financial aid form that supplies further information about your family income. Be sure to check whether this form is necessary and about specific deadlines with your college directly.
4. What is the difference between a Grant, a Student Loan and a College Scholarship? A grant is free money from government or non-profit organizations that does not need to be repaid. Grants are usually determined by financial need but can also be influenced by academic merit. Unlike grants, student loans are money loaned from an academic institution, financial institution, or federal government that must be repaid. Like a grant, a student scholarship is free money, but is generally offered through colleges, businesses, private individuals and outside sponsors. Those awarded by the college itself are often called MERIT AID. While grants tend to be issued according to financial need, college scholarships are awarded on a broad-base of criteria, the most common being academic merit. Furthermore, to receive any grants or loans you must complete a FAFSA, however, many scholarships may not require you to complete a FAFSA to be eligible. Instead, you may need to obtain application material directly from the donor of the scholarship.
5. What are the different kinds of grants? There are federal as well as campus-based (institutional) grants. Federal Grants are free gift money from the Federal Department of Education while campus-based grants are government funds issued directly from your college. The campus-based grants provide a certain amount of funds for each participating school to administer each year. When the money for a program is gone, no more awards can be made from that program for that year, so make sure you find out about the types of grants awarded by each college you are considering as well as their specific deadline. Below are some of the most common grants.
6. Federal Grants Pell Grants are considered a foundation of federal financial aid, to which aid from other federal and non-federal sources might be added. Pell Grants are usually only awarded to undergraduate students who have not earned a bachelor’s or a professional degree. The amount you get depends on your financial need, your college’s tuition, your status as a full-time or part-time student and your plans to attend school for a full academic year or less. The Academic Competitiveness Grant is a new grant available to first year college students who graduated from high school after January 1, 2006 or for second year college students who graduated from high school after January 1, 2005. Only students who are eligible for a Federal Pell Grant and who has successfully completed a rigorous high school program as determined by the state or local education agency and recognized by the Secretary of Education. An Academic Competitiveness Grant will provide up to $750 for the first year of undergraduate study and up to $1,300 for the second year of undergraduate study for full-time students who are eligible for a Federal Pell Grant. The National Science and Mathematics Access to Retain Talent Grant (AKA the National Smart Grant) is available during the third and fourth years of undergraduate study to full-time students who are eligible for the Federal Pell Grant and who are majoring in physical life, or computer sciences, mathematics, technology, or engineering or in a foreign language determined critical to national security. The student must have also maintained a cumulative grade point average (GPA) of at least 3. 0 in coursework required for the major. The National SMART Grant award is in addition to the student’s Pell Grant award. Campus-based Grants
7. The Federal Supplemental Educational Opportunity Grant (FSEOG) The FSEOG is a campus-based grant aimed at assisting students with exceptional financial need. Pell Grant recipients with the lowest expected family contributions (EFCs) will be considered first for a FSEOG. You can receive between $100 and $4,000 a year depending on when you apply, your financial need, the funding at the school you are attending, and the policies of the financial aid office at your school.
8. What are the different kinds of student loans? A student loan is money that needs to be repaid after you have completed your studies. Generally, interest rates are low- so that you do not rack up as much debt as you would with a credit card or bank loan. There are campus-based loans, which you repay directly to your college, as well as federal loans which you repay either directly to the U.S. government or to your financial institution.
9. Campus-based LoansFederal Perkins Loan The Federal Perkins loan is a campus- based loan because it is administered directly by the financial aid office at each participating school. In other words, your school is the lender although the loan is made with government funds. Your school will either pay you directly or apply your loan to your school charges. You’ll receive the loan in at least two payments during the academic year. You can borrow up to $4,000 for each year of undergraduate study with a maximum of $20,000 for your entire undergraduate degree. The amount you receive depends on when you apply, your financial need and the funding level at your school. The Federal Perkins Loan is a low-interest , 5 % loan for students with exceptional financial need. You must repay this loan directly to your school and you have nine months to begin your repayment plan after you graduate. Generally you will make monthly payments to the school that loaned you the money over a 10 year period. Federal LoansThe U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are generally known as 1. Stafford Loans (for students) and 2. PLUS loans (for Parents). Schools generally participate in either the FFEL or Direct Loan program, but sometimes schools participate in both. For either type of loan, you must fill out FAFSA, after which your school will review the results and will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you’re borrowing, and the terms under which you agree to repay the loan.
1. Stafford Loans Stafford loans are federal loans for students. Eligibility rules and loan amounts are identical under both the FFEL and Direct loan programs, but providers and repayment plans differ. For all Stafford loans first disbursed on or after July 1, 2006, the interest rate is fixed at 6. 8 percent. However, you can be considered for a subsidized loan, depending on your financial need, in which the government will pay (subsidize) the interest on your loan while you’re in school, for the first six months after you leave school and if you qualify to have your payments deferred. You might be able to borrow loan funds beyond your subsidized loan amount even if you don’t have demonstrated financial need. In that case, you’ll receive an unsubsidized loan. Your school will subtract the total of your other financial aid from your cost of attendance to determine whether you are eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for you’re the interest from the time the loan is disbursed until the time it is repaid in full. After you graduate, you will have a six month ‘grace-period’ before you must begin repayment. During this period of time, you’ll receive repayment information, and you’ll be notified of your first payment due date. You are responsible for beginning repayment on time, even if you don’t receive this information. You will receive more detailed information on your repayment options during entrance and exit counselling sessions provided by your school.
* Federal Family Education Loan (FFEL)Funds from your FFEL will come from a bank, credit union or other lender that participates in the program. Schools that participate in the FFEL program, will usually have a list of preferred lenders. Student loan borrowers may choose a lender from that list, or choose a different lender they prefer. Your loan money must first be applied to pay for tuition and fees, room and board and other school charges. If money remains, you’ll receive the funds by cheque or in cash. Besides interests, you will pay a fee of up to 4 % of the loan, deducted proportionately from each loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the FFEL Program in your state) to help reduce the cost of your loans.
* Direct LoanUnder the direct loan program, the funds for your loan come directly from the federal government and you will need to repay your Direct Loan to the U.S. Department of Education’s Direct Loan Servicing Center. Like the FFEL loan, you will pay a fee of up to 4 % of the loan. For a direct Stafford Loan, the entire fee goes to the government to help reduce the cost of the loans.
2. PLUS Loans (Parent Loans)Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the Direct Loan Program. Your parents can get either loan, but not both, for you during the same enrolment period. They must also have an acceptable credit history. For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your school’s financial aid office. For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.

10. What are the different kinds of scholarships? Scholarships are awarded on a broad-base of criteria, the most common being academic merit. Many scholarships carry conditions besides academic merit, such as financial need, affiliation with a group-, leadership, athletic talent, artistic or musical ability etc. Some scholarships are awarded by the college itself, often called MERIT AID. Other scholarships are awarded by outside sponsors. For some scholarships, you need to be nominated. For most of them, you apply directly to a sponsor. Because there are so many different types of scholarships, you should check directly with your financial aid office at your college.
11. Can I apply for a grant, a loan and a scholarship at the same time? Yes. You can team up different types of financial aid or simply have one kind. Nevertheless, some types of financial aid are contingent on others. For example, you can only receive an Academic Competitive Grant or a Federal Supplemental Educational Opportunity Grant if you have received a Pell Grant. While you cannot team up a FFEL loan with a direct loan, you may be eligible to receive a subsidized loan (in which the interest is paid by the government) and an unsubsidized loan (in which you are responsible for the interest) at the same time. You can also combine grants with loans and scholarships, so it never hurts to try to get as many different varieties of aid as possible!
12. What is the Federal Work Study Program? The Federal Work-Study Program (FWS) is a campus-based program that provides part-time jobs for undergraduate and graduate students with financial need, that allows them to earn money to help pay education expenses. The program encourages community service work and work related to the recipient’s course of study.
13. How often should I apply for financial aid? You will need to apply for financial aid each year. Even if you did not qualify this year, you should reapply next year since financial circumstances can change. The number of family members in college, for example can have a big impact on your eligibility for financial aid. If you submitted a FAFSA during the previous year, you may be able to complete the shorter Renewal FAFSA form instead. The renewal FAFSA will be mailed to your home. The renewal FAFSA preprints most of your answers from the previous year’s FAFSA. Verify that the old responses are still accurate and provide corrections or new answers where appropriate. If you don’t receive a renewal FAFSA by February 15, fill out a new FAFSA form.
14. How do I know whether I am eligible for financial aid? Don’t assume that you will not qualify for financial aid. Nearly all U.S. citizens or eligible non-citizens enrolled at least half the time are now eligible for some form of financial aid. Even if you don’t qualify for a grant, free college info is still available, and you may still be eligible for other forms of financial assistance. Many families don’t apply for financial aid, because they believe that they earn too much money. However, you don’t need to be from a low-income family to receive financial aid. Some loans and scholarships are available regardless of need. Many factors are used to determine your eligibility for financial aid and there is no simple cut-off base on income. You can’t get aid unless you apply!!

CampusCompare facilitates the college search and selection process by providing free information, student college reviews, and interactive media, connecting students to over 3000 colleges. Its helpful tools include the What Are My Chances tool and the Financial Aid Calculator to help students in the “match me with a college” process.

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Luckily accredited online colleges and universities now allow you to earn most any degree online and there are lots of options to gain the financing you need.

Here are three (3) easy ways to secure your online student financial aid.

Government Aid

The government has several options of financial aid at your disposal but you must follow their guidelines to receive the funds.

Your first step is to fill out the Free Application for Federal Student Aid (FAFSA)form online. You’ll need your tax information and other paperwork. The FAFSA will determine how much you can get from the government in grants, loans, and work-study money.

Student loans from the government often have the best payment plans, and you never have to pay back grant or work-study money. It’s a very good deal for the distance learner and one that you should pursue.

Even if you’re unsure whether you want to follow through with government aid, you should still complete the FAFSA form just in case. Without the form, you can not obtain government help. With the form completed, you have the option of accepting their financial aid or not. That way the decision is up to you.

Scholarships

In the search for financial aid, scholarships might be the first thing that comes to mind. Your best bet as a distance learner may be a free online scholarship search site. Sites like FastWeb and FinAid scour the web for essay contests, corporate scholarships, and special-interest awards.

You can get money based on your age, income, cultural background, and more. Remember, you should never pay for an online financial aid search–the best ones are free.

Private Loans

If you’ve checked out government aid and scholarships and you still need a little more help, private loans should be your next step.

Loans from banks and private institutions may have a higher interest rate than the government, meaning you may pay more, and private loans are also based on a credit check.

However, you can often borrow more money, and many student private loans include a grace period, so you have time after you graduate before you have to think about paying back the loan.

Returning to school as a distance learner can be a great benefit and possibly a big financial investment, but financial aid can make that investment a greater possibility than you might think.

Nancy Lambert is an executive for Accredited-Online-Colleges.com Accredited-Online-Colleges.com provides information on hundreds of degrees offered online through accredited colleges and universities. From online certificates to Associates, Bachelors, Masters and PhD degrees, Accredited-Online-Colleges.com helps students and adults discover the advantages of earning their degree online.

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