Figuring out financial aid awards
By Lucy Lazarony • Bankrate.com

Be sure to report all outside scholarships to your school's financial aid department. Your financial aid award may need to be adjusted. Schools take this stuff seriously. If they find out about an outside scholarship later in the semester, they won't hesitate to yank something else, such as a grant, out of your aid package.

Early bird gets the money
The sooner you and your teen get a jump on all this financial aid stuff, the better off you'll be. Most schools give applicants until May 1 to select a school and accept a financial aid package. Some state universities have April 1 deadlines.

"Too often the student will grab the award letter and see a scholarship or grant and figure it looks good," says Jack Joyce, director of college planning services at the College Board. "The letter will then find its way to a drawer and stay there."

Not a good move if you want to land all the financial aid you're entitled to. And don't make the mistake of assuming that accepting admission into a university will somehow secure your financial aid package.

You've got to accept both separately and meet each deadline.

Stay on top of things. Make a list of all key deadlines. Keep a file with copies of all completed forms.

Once you understand the details of your college aid package, the next step is figuring out how to pay your family's share of the bill. There are three basic options: delve into savings, set up a monthly payment plan or borrow.

Experts advise families to have a plan in place before they accept a college financial aid award.

Colleges charge a nonrefundable deposit ranging from $200 to $600 to hold a spot for an incoming freshman. If something happens and your family can't afford that dream college after all, you'll be out a few hundred dollars and in for a whole bunch of last-minute stress.

You'll have to forfeit your deposit to the dream school and your son or daughter will have to rush to get into another college. You can spare your family this drama by realistically assessing your family's financial situation before accepting a financial aid award.

Families who need to borrow should be sure to exhaust all federal loan options before turning to private lenders.

"The federal loans are definitely the best way to go," says Martha Holler, spokeswoman for Sallie Mae. "They have lower interest rates and they have more flexible repayment policies."

Federal loan types
Students may be eligible for subsidized or unsubsidized Stafford Loans. A subsidized Stafford loan is based on need and the federal government pays the interest on the loan while the student is in school. With unsubsidized loans, the borrower is responsible for the interest from the date the loan is disbursed.

Subsidized Stafford loans are basic components of many financial aid packages. Students may take out unsubsidized Stafford loans to help pay for their family's share of their college expenses.

Federal loans also are available to parents. Parents may borrow up to the full cost of a student's education minus any financial aid with a PLUS -- Parent Loan for Undergraduate Students. These loans are government-sponsored and have a variable interest rate that is capped at 9 percent. Families must pass a credit check to qualify for a PLUS loan. Monthly payments begin within 60 days of the loan disbursement.

Going private
When choosing a private lender, the most important things to look for are cost and customer service. Seek out the advice of the university's financial aid department. Most schools have a list of preferred lenders.

"Your best bet is to work through the financial aid office because they'll have an established relationship with a lender," Holler says.

The whole financial aid process can get a bit overwhelming. It's natural to have concerns and questions. Be sure to speak up. If you don't ask, your family could lose out on aid.

"If they have anything that would seem to be remotely involving a question about something in the award letter or financial aid process, be sure to ask," Joyce says. "It's very clearly a complex process.

"If this whole process makes sense to the family, they should be worried."

-- Updated: March 10, 2004