Source: U.S. Department of Education

Families are not alone in paying the costs of college: every year millions of students apply for and receive financial aid and almost half of all students who go to college receive some kind of financial aid. Because college represents an investment in our most precious resource -- our children -- no child who wants to go to college and is willing to work hard should be prevented by financial need. Here's what to do:

Start saving early. Saving money is the best way to prepare for meeting the costs of college. Set aside money each month, starting now, to build a college fund. Think about where your child might attend college, how much that type of college might cost, and how much you can afford to save. The earlier you and your child begin saving, the smaller the amount you will have to set aside each month.
Apply for financial aid. All needy students can apply for federal, state and other student financial aid to help them pay for college. The two major types of aid are grants or scholarships, which do not have to be repaid, and loans, which are available to students and parents and, like a car loan or a mortgage, must eventually be repaid.

Applying For Financial Aid

The federal government will supply $67 billion this year in student aid, about 70 percent of all student aid.

Pell Grants are the most important form of student financial aid for the nation's neediest students. In 1999-2000, almost 4 million needy students received Pell grants. The size of the grant depends on the student's need.
The Work-Study Program lets students work during the summer or part-time during the school year to help pay for college. Colleges help find jobs for students, and the federal government helps pay the salary. Work-Study jobs give students valuable work experience and are often related to the student's classes or future career -- in addition to helping pay the costs of college. The new additions to the Work-Study program, the America Reads Challenge and America Counts, let students work as reading and math tutors for young children -- helping students give back to the community and pay for college.
Federal Loans are available to both students and parents. Stafford Loans for students are either subsidized, for needy students, where some of the accumulated interest is paid by the government, or unsubsidized, where the student pays all of the accumulated interest. PLUS Loans are loans to parents for any costs that are not paid for by other aid.

Students usually do not have to start repaying their loans until after they finish school, and the interest rate is usually lower than for other kinds of loans. Many students are hesitant to take out loans, but remember: college graduates usually make a good deal more money than people who do not have a college education, so paying a loan after graduation will be easier than it might seem.

Nevertheless, it is important that both students and parents understand the terms of the loan before agreeing to them and know when repayment will begin and how much their payments will be. There are many different education loans, so before taking out any loan, be sure to find out what the exact conditions of the loan are.

More Information: Department of Education Financial Aid Info