State aid programs

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.

Private college grants.Choosing an independent institution of higher learning doesn't have to mean foregoing state aid. Special need-based grant programs may apply to in-state private universities.

Conditional grants. Meet the stated obligations, which may include maintaining a certain grade point average, and these grants are simply gifts. But for those who don't meet those requirements these gifts become loans.

Interest-free loans. Speaking of borrowing, some states offer loans without the burden of interest. Sure, you have to pay them back, but as long as you do so within a stated amount of time, you won't be paying more than you used.

Special purpose programs. Looking at nursing or teaching? These and other occupations with an employee shortage have been the impetus for some state programs that provide reduced, or even free, tuition for students planning to enter the field. Special purpose programs may also be geared toward veterans, parents or spouses of people killed or disabled during service to the community or country, and other groups.

Higher education vouchers. In 2004, Colorado became the first state to authorize this type of system. Under the College Opportunity Fund program, money traditionally used to subsidize tuition at state colleges goes directly to students as a stipend and can be used at the private or public institution of choice. The program was implemented in part because students, particularly low-income students and minorities, often went unaware of the state's potential contribution to their college education. In addition, colleges now have to compete for the state funds by making their programs and services attractive to students.

How to get it: Staking claim to state aid

To apply for most state loan, grant and scholarship programs, look no further than that trusty Free Application for Federal Student Aid (FAFSA) form. The U.S. Department of Education forwards the information on FAFSA applications to the state student assistance agency in any state where the student is applying. And don't miss those deadlines, or the state aid may be gone.

One more tip: Consider carefully when to spend the funds invested in pre-paid tuition programs or 529 savings plans. With pre-paid tuition plans, it's generally best to use them up on early tuition bills so the family has a better chance of receiving financial aid in subsequent years. With 529 plans, consider holding off as long as possible before tapping the funds. After all, the longer money is in a 529, the more chance it has to grow tax-free. After the last financial aid form of a student's undergrad career is filed (typically January of junior year), it's time to spend. Any leftover funds can be rolled into a family member's 529.


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