On January 1st the 2010-2011 FAFSA (Free Application for Federal Student Aid) was released. The FAFSA is probably the most important part of the financial aid puzzle. If you are planning on attending college in the fall of 2010 you should be in the process of submitting this form. The FAFSA determines how much federal financial aid you are eligible to apply for. There are three basic types of federal student aid:

* Grants: Grant money is financial aid that does not have to be repaid. Most grant money is based on financial need.
* Work-study: Work-study money is earned through a job or near campus. Work-study money does not have to be repaid.
* Loans: Loan money, including subsidized Stafford loans and unsubsidized Stafford loans, is awarded by the government and must be repaid with interest.

Federal financial aid can be a huge help when paying for college, but since most federal financial aid is awarded based on need, not everyone who files a FAFSA will be awarded sufficient aid to cover their education. So what happens when your federal Stafford loans and grants are not enough? Luckily, there are other pieces of the financial aid puzzle that can help you pay for college.

PLUS Loans are federal student loan options that are not based on financial need, but rather on credit. There are two types of PLUS loans; Parent PLUS loans and Graduate PLUS loans. If you are an undergraduate student, your parents can apply for a PLUS loan to help supplement the cost of your education. If you are a graduate student you can apply for a PLUS loan for yourself. With the federal PLUS loan you can borrow up to 100% of unmet financial need. PLUS loan money can also help you pay for educational costs not covered by your tuition including housing and supplies.

Some students choose to add private student loans to their financial aid puzzle. Private Student Loans are an alternative student loan option. Although you should always apply for federal financial aid before pursuing this option, private student loans have a few advantages. Private student loans are awarded based on credit rather than on need. You can use private student loans for any education related cost including textbooks, housing and transportation. If you are looking for a private student loan, the new private student loan comparison tool on PrivateStudentLoans.com can help you determine which lender and loan best meets your needs.

Because private student loans are based on credit, most students need a parent, family member, or close friend to cosign the loan. A cosigner is an individual who agrees to pay any debts if the primary account holder is unable to do so. This ensures to the lender that the loan will be paid back even if the student borrower does not have the funds to make payments.

The final, and quite possibly the best, piece of the puzzle is scholarships. Scholarships are favorable because unlike loans they do not have to be repaid. Hundreds of thousands of organizations around the country award scholarships to students based on their backgrounds, interests and accomplishments. StudentScholarshipSearch.com is a website that helps you find and apply for scholarships that you qualify for.

Every student’s financial aid puzzle is put together differently. Many students take advantage of all of these financial aid options while some students only need to use one or two. Some student might qualify for more financial aid while other students might be awarded more scholarship money. Whatever your financial situation is, remember that all of these options exist to help you complete your education.

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To decide which type of student financial aid would suit your educational pursuits, the following information on loans and scholarships should come in handy. Before enrolling at any school to acquire your online college degree, however, you need to make sure that it’s accredited, the degree program you’re interested in is eligible for student financial aid, and you’ve discussed your situation with the college’s representatives in the financial aid office.

FAFSA: Student Financial Aid

The Free Application for Federal Student Aid, or FAFSA, is an office of the U.S. Department of Education that provides student financial aid or monetary assistance to eligible individuals who wish to continue their educations well beyond high school and receive a traditional or online college degree. FAFSA strives to encourage all Americans to achieve a higher education and realize the power that it has within our society.

By partnering with a large number of postsecondary schools in the U.S., FAFSA is able to play a vital role in ensuring that interested individuals have ample student financial aid to continue their schooling and receive an online college degree. The program, which processes 14 million applications each year, distributes more than $80 billion per year in student financial aid to eligible applicants (1). To apply online or learn more, please visit FAFSA’s website.

Students Loans

In essence, student loans are low-interest monetary assistance from the government to help cover the cost of education (tuition) as well as books, housing, and incidentals. However, upon graduation and receipt of your online college degree, the loan must be re-paid. There are three types of student loans: federal student loans doled out to the students themselves; federal student loans to parents, which are normally referred to as PLUS (Parent Loan for Undergraduate Students); and private student loans, which are funded by banks and/or financial companies rather than the government.

Advocates for private student loans say that this type of student financial aid combines the best of the low-interest rates, but with a higher loan amount and a longer grace period. Private loans have two methods of disbursement of funds – school to channel (money is distributed to the school) and direct to consumer (money is given to the individual to use as he or she sees fit). Before deciding which type of loan is appropriate for your particular situation, do your homework! Federal student loans require that you are enrolled in college for a certain amount of hours each semester, while private student loans begin accruing interest rather quickly (2).

Loan Forgiveness Programs

While loan forgiveness is not necessarily a way to fund your way through school, it is an excellent way to eliminate your loan debt quickly once you’ve received your traditional or online college degree. The government has devised a way to purge most (and sometimes all) debt for students who involve themselves in community or military service or work for AmeriCorps, Volunteers in Service to America (VISTA), Teach for America, Peace Corps, National Health Service Corps, or teach students in a low-income area (3).

Most of these programs, which serve underprivileged families and individuals, will forgive a large portion of your loan debt if you work full-time upon graduation. The National Health Service Corps, for instance, pays up to $25,000 per year towards your debt. To learn more, visit the Sallie Mae website.

Scholarships

Attend the college of your choice and acquire your online college degree – for free! How is that possible? Student financial aid in the form of scholarships from organizations, clubs, and fund programs all over the United States offer billions of dollars to students around the nation to help them realize their dreams. Scholarships recognize scholastic achievements or merits, while some focus on personal interests, community involvement, and/or financial need. You may be required to write at length on a topic or simply submit some detailed information on your educational interests.

Best of all, scholarships are free money in your pocket – you do not have to re-pay this gift! To learn more about scholarships or to find a few that may be of interest to you, please visit Fastweb.com.

Realize Your Dreams with an Online College Degree

If you receive a loan, the important thing to keep in mind is that you’ve been given more money than needed. Try not to spend it all; tuck some away and save it for when you must begin re-paying the loan. Otherwise, you may find yourself with a large loan bill each month (with all the interest to boot). If you’ve received a few scholarships or other type of student financial aid, congratulations! This money is yours and you can do what you wish with it. You are off the hook and are released from re-paying these generous contributions to your educational pursuits to receive an online college degree.

Regardless which student financial aid route you decide to take, enrolling in college, learning all you can, and acquiring your online college degree are things to be proud of!

Sources

1. federalstudentaid.ed.gov

2. finaid.org

3. collegeanswer.com

Kimberly Diane, now a frequent contributor to EducationAdvancementOnline.com, previously served as a direct consultant to numerous accredited online colleges and universities for several years. Education Advancement Online, which promotes higher education for non-traditional students seeking an online college degree or certification program, is a premier online education directory that is a one-stop shop for available degree programs from institutions all over the United States. For more information on Education Advancement Online or to search for degree programs, please visit www.educationadvancementonline.com

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- Revenue sharing. When a college sets up a revenue sharing agreement with a student loan company, the loan company may offer the college a payment based on the loans taken out by that college’s students, usually a percentage of the loan. While some argue that revenue sharing gives colleges more money to work with for defraying administrative costs or funding additional scholarships, it has been deemed a conflict of interest when colleges have a financial incentive to push students to a preferred lender when it may not offer the best benefits or lowest rates.

- Opportunity pools. Not every student who applies for a student loan will receive it, especially with private student loans, which are credit-based. When a college sets up an opportunity pool agreement with a student loan company, the loan company agrees to approve some students who would otherwise not be approved for a loan. This allows more students the chance to afford college who might not otherwise be able to, but can also provide loans to students whose families may not have the financial resources to repay the loans.

- Call center contracting. Running a financial aid office can be an overwhelming task, particularly at large colleges and universities with tens of thousands of students. When a college sets up a call center agreement with a student loan company, the loan company dedicates a portion of its customer service center to act as customer service for the college. The student loan company’s employees may identify themselves as employees of the college or employees of the loan company, depending on the contract terms. There are benefits to the college in that call center contracting reduces the burden and cost of a financial aid office for a college. However, call center employees may recommend their employer (the lender) over other lenders, even if other lenders have products with better benefits or lower rates.

- Advisory councils. To stay in touch with what’s happening in the financial aid world, student loan companies often convene advisory councils and invite college financial aid officers to participate. In some cases, the student loan companies pay travel expenses for financial aid officers to attend advisory council meetings. In other cases, financial aid officers may be paid for their time. While advisory councils can help student loan companies stay in touch with what colleges and their students need, some may perceive the lender has an ulterior motive. By serving on an advisory council and accepting payments or reimbursements for expenses, financial aid officers may have an incentive to recommend a specific lender over others that may have better benefits or lower rates.

- Payments and gifts. In a few of the recently publicized cases, financial aid officers have accepted gifts of significant value from student loan lenders, ranging from consulting fees to company stock. There are no positives to this practice as offering gifts of significant value implies a quid pro quo, meaning that reciprocity is usually expected, such as placement on a lender list.

- Preferred lender lists. Typically, a college assembles a list of preferred lenders which it recommends to students. In most cases, financial aid officers solicit proposals from lenders for product benefits and rates. A list of lenders is then drawn up and given to students, typically along with their financial aid award package. For the most part, financial aid administrators place lenders who offer the best benefits and rates to students on the list, helping simplify the task of choosing lenders for students and families. However, the process by which lenders are chosen is not always disclosed by colleges. If there is a conflict of interest as described above, lenders who don’t offer the best benefits or lowest rates may still be placed on the list.

Some of the practices outlined above are clearly a conflict of interest and need to come to an end, such as offering gifts of significant value in exchange for promotion or list placement. Others, such as opportunity pools and revenue sharing, are more of a gray area because there’s a definite benefit to some students and families, but potentially at the cost of value to other students and families.

Despite the recent uproar in the press, it is important to keep in mind that financial aid officers are for the most part honest and ethical people trying to stretch every dollar they have to help you pay for the ever increasing cost of college. There are a few who have made very bad judgment calls and have behaved unprofessionally, but the majority of financial aid professionals do have your best interests in mind and can be trusted.

Incidentally, it’s worth pointing out that the Student Loan Network has never and will not engage in these practices. We play by the rules very strictly, and hope that when you choose a student loan company you’ll choose us as the best balance of competitive products and great customer service. If you have any questions about our loan services, or would like help and advice with the financial aid process, please give us a call toll-free at (877) 328-1565.

Christopher S. Penn is the producer and creator of the Financial Aid Podcast, a daily free Internet radio show about making college affordable, as well as Chief Technology Officer of the Student Loan Network.

This organization offers federal student loans and student loan consolidation for college students, both undergraduate and graduate. His work has been featured in several books, newspapers, and conferences.

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