Paying for college with grants, gifts and discounts

Federal student aid comes in two flavors: self-help aid and gift aid.

Self-help aid programs allow you to earn money or to borrow money for school. The borrowed money, as it implies, must be repaid. The best kind is gift aid -- you don't have to work for it and you don't have to pay it back.

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Gift-aid programs include the Federal Pell Grant Program and the Federal Supplemental Educational Opportunity Grant, or FSEOG, program. These grants are generally available only to students who do not yet have bachelor's degrees, but in some cases, they might be awarded to students enrolled in post-baccalaureate teacher certification programs.

Pell Grants vary from several hundred to several thousand dollars, depending on your need, the cost of attendance and whether you attend full time or part time.

FSEOGs go to students with exceptional financial need -- those with the lowest expected family contribution, or EFC. As with Pell Grants, FSEOG award amounts range from several hundred dollars to several thousand a year, depending on the student's financial need. Students who receive Pell Grants also are at the top of the priority list for receiving FSEOGs.

FSEOGs have a few limitations that Pell Grants don't. For one, the amount of your FSEOG can be reduced if you receive other forms of student aid. Also, each school receives a limited amount of FSEOG money; when it's gone, it's gone. That's why it's very important to apply for financial aid as early as you can. You'll have a better chance of obtaining FSEOG money if you're eligible for it.

States cutting back
In recent years, states have been bucking the tradition of giving aid funds directly to colleges, allowing them to offer lower tuition rates. The new game in town involves giving aid directly to students and families. So it's more important than ever to get the scoop on offerings. You can find your state agency's home page online at FinAid.

In addition to outright grants, there is other free state money -- and discounts -- you may want to pursue:

• Merit scholarships. Often limited to students attending college in-state, these awards are based on a student's academic achievement and help encourage the "best" students to remain in their home state. Some states promise merit scholarships to any graduating senior meeting a minimum requirement.
• Portable grants. Some state grants allow recipients to attend college elsewhere. There may be restrictions on what states and colleges these grants can be used for, however.