Applying for financial aid isn't anybody's idea of a good time. In fact, it's probably less fun than watching your mom relive her old cheerleading days in that uniform that she refuses to throw away. (Just close your eyes.)

But if you're like the vast majority of American families, you'll need help paying for college. The best place to start your quest for cash is by educating yourself—and your parents—about all things related to financial aid. Use this primer to get started and learn what's new, and then head online to for more great information.

The Basics

The first step fpr determining what amount of financial aid you may receive is filling out the Free Application for Federal Student Aid (FAFSA) in January of your senior year. It’s a family affair; you’ll need info from your parents’ tax forms to complete it, so you might just want to let them do it.

The Department of Education processes your form and churns out your Estimated Family Contribution (EFC)—or what your family is expected to pay toward your college education. Your financial aid package will be the difference between the total cost of your college education for the year (tuition, fees, room and board minus any scholarships you earn) and your EFC.

Tip: Just for New Yorkers: Once you complete your FAFSA, apply for the New York State Tuition Assistance Program (TAP) grant, which helps residents pay for in-state schools.

Financial aid packages comprise several elements: grants (your favorite because they don’t have to be repaid), loans and work study, or an on-campus job. There are two types of loans: public (meaning federal) and private. Public loans are the best because they almost always have lower interest rates than private loans. And subsidized public loans are the best because the government pays the interest while you’re in school and for a short time after you graduate.

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What’s New

Direct lending: Tucked in the health-care reform bill that passed in the spring was a major overhaul of how students and parents borrow money for college. Until July of this year, students could borrow money from federal loans through private banks or directly through a program run by the federal government. The bill shifted all lending from private banks to the government’s Direct Loan Program.

The good news here is that the Congressional Budget Office estimated that the move would save about $61 billion, more than half of which would go to increasing Pell Grants—a form of aid for low- and middle-income families. The max this year is $5,500 per student; by 2017, it will reach almost $6,000 per student.

Looser PLUS standards


Now that the government is approving loans, many parents are seeing easier access to Direct PLUS Loans, designed to lend money to parents who need more help paying their children’s college bills. Recent media reports suggest that the government is approving a greater percentage of PLUS Loan applications than private banks did last year. The upside is more access to money for parents; the downsides are that the interest rate is higher than on other federal loans (but still better than private banks). Some education pundits wonder if the looser standards mean families are borrowing more than they should. Use online loan calculators to see how much you and your parents will have to pay at the end of four years before you accept any loan.

Repayment relief

The new legislation also loosened repayment requirements. Students who borrow money after July 2014 (this one’s for you, freshmen and sophomores) will be allowed to cap payments at 10 percent of their income (instead of 15 percent). If you keep up with your payments, your loans will be forgiven after 20 years (instead of 25). If you opt for a job in public service—teaching, nursing or serving in the military—your loans will be forgiven in ten years.

Sure, it would be awesome if you could skip this part and go straight to the moment when you’re playing Ultimate Frisbee on the quad with your new college buddies. But know the facts and borrow wisely—and your college days will be here soon enough.

Get a Jump Start

advertisement | advertise on newsday Download a worksheet here that will estimate what your EFC will be.

Financial aid offices

When you visit colleges, ask about financial aid sessions. Often, you can learn about school-specific grants and other inside info here. You can also ask to meet with a financial-aid rep to learn about the school’s aid policy.

Use this tool to decide ahead of time what you and your parents can borrow comfortably. Setting a baseline before you get financial-aid offers will help you review the packages more objectively.