If you're like most students, you look forward to the financial aid process as much as studying for exams. While it can be time consuming, for the most part it is straight forward and easy to understand. To begin, start with three primary sources for traditional financial aid: government, colleges and universities, and private lenders. Traditional aid sources are commonly known as merit-based (scholarships), need-based (federal, state or university grants) and supplemental (student loans or work study).

Merit-based aid or scholarships from schools are given for a variety of reasons, ranging from debate skills to academics, or even for being the only left-handed tuba player applying to John Doe University. Check out these awards by first talking to the schools' admissions offices. They can provide you with a list of scholarships at their school and information about any special application process required. Usually you will automatically be considered for these scholarships when you apply to the school (with the exception of athletic scholarships, which have an award process determined by the NCAA). Another option to use is to peruse the Internet for scholarship search engines.

Need-based financial aid is offered by nearly all colleges and universities. Expect a lot of paperwork, but it's worth it: students receive the most financial aid through this process. Fortunately for you, there are several ways to influence the process to ensure you get the largest award possible. Your first step toward financial aid is for you and your parents to complete the Free Application for Federal Student Aid (FAFSA), which is available through your guidance counselor, local library, the U.S. Department of Education (DOE) at 1-800-4FED-AID, or via the Internet, http://www.fafsa.ed.gov.

Filling out the FAFSA is similar to your parents filling out tax forms: it's fairly long and very tedious. The DOE, the school and your state use the information from the FAFSA to determine your Expected Family Contribution (EFC), or, what they believe you or your parents can pay toward college. To determine how much money you might get in need-based aid, subtract your EFC from the total cost of the college (remember, total cost is tuition plus books, fees, housing, meals, travel expenses and other related costs. Your college can tell you the amount of your "student budget"). Cost minus EFC equals your need, which can be met with a mixture of scholarships, grants, loans and work study. Your goal: aim for the most money possible in grants and scholarships (which you never have to pay back) and less in loans and work study.

Be a smart shopper. Believe it or not, your need-based aid package may be negotiable. Most students take the aid that's offered and never question it. But be aware that schools have the flexibility to make adjustments to your EFC if you have "special circumstances," such as parents that are divorced or separated, a reduction in family income or large medical expenses - all which may lead to an increase in your need-based aid. Also, schools have discretion over awarding their own aid and some may ask you to complete their own additional financial aid forms, or use the PROFILE form (which you can get from your guidance office) to gather more detailed information than the FAFSA provides.

You should also compare the packages you receive from different schools. If one school gives you a generous offer, another might be willing to match it. This is often referred to as "bidding," a process financial aid and admissions officers downplay. While some schools may adjust your aid package, those who won't may have given you as much as they can. Often schools will not increase your overall amount of aid, but will increase your grant amounts while decreasing your loans or work-study. But be careful of "bait and switch" tactics, meaning that a grant-heavy aid package given to you as an incoming student could turn into a loan-heavy package when you are a junior or senior.
 

Here's where smart shoppers really can make a difference. Borrowing money for college has become a common practice. According to the College Board, loans comprised 60 percent of all student aid in 1998. And, the Department of Education estimates that students borrowed $35 billion last year alone. Competition among lenders has increased as well, which has meant good news for savvy borrowers.

Depending on the school you attend, your student loan will come either directly from the government, through the Federal Direct Student Loan Program, or private lenders, such as banks and credit unions, through the Federal Family Education Loan Program, (FFELP). While the federal government has set virtually identical terms (i.e., interest rates, borrowing limits, origination fees) among the two loan programs, smart shoppers would be wise to borrow from lenders who offer interest rate discounts, flexible repayment options, internet account access, and superior customer service.

There are four federal loans you and your parents will want to consider. First, Perkins loans are need-based loans that carry a low (5%) interest rate and are administered by the borrower's school (but funds are limited). Second, the Stafford loan, is the federal government's most plentiful loan program. You may qualify for a subsidized Stafford loan, in which the federal government pays the interest on the loan while you are in school, for six months afterward, and during any deferment periods. Like the Perkins loan, eligibility for subsidized Stafford loans is also based on need.

The third option is the unsubsidized Stafford loan, a loan for which most students are eligible. The difference here is that borrowers are responsible for interest on the loan while they are in school. Interest that is not paid will be "capitalized," or added to the principal when

the borrower is ready to enter repayment. (You'll save money in the long run if you can swing those interest payments while you're in school.)

Finally, make sure your parents know about PLUS loans. Unlike Stafford loans, which have strict borrowing limits, PLUS borrowers can borrow up to the total cost of education, less any other financial aid received.

Your family might also need a private loan to pay for your education. A home equity loan may have potential tax advantages; or, consider a private supplemental loan that allows you to borrow the total cost of education, less other eligible aid. Some of these private loans offer discounts or repayment options that lead to substantial savings. To apply for any of the loans mentioned above, talk to your financial aid office, which can provide the forms, instructions and tips on completing the application.

Again, be a smart consumer! The key to finding the right loan - private or federal - is to shop around. Find a lender that offers special discounts on your loan, interest rate reductions and rebates of origination fees to borrowers with good repayment records, all which can often save students hundreds of dollars, or even more, in the end. Look for banks or lenders who allow you to apply for loans online, access your account through the Internet and even receive monthly bills electronically.

Wait - there's more! Make sure your lender offers toll-free, 24-hours-a-day, seven-days-a-week service on your loan - you never know when you'll have an important question that needs an answer right away. And don't sign on the dotted line until you are clear on all loan requirements.
 

The Taxpayer Relief Act of 1997 offers a number of higher education incentives, especially for student loan borrowers. For example, the HOPE Scholarship allows you to deduct up to $1,500 a year for the first two years of college education.which will be effective for tuition paid after December 31, 1997. After that you can receive a "Lifetime Learning Tax Credit" which is a 20 percent nonrefundable tax credit on $5,000 of tuition expenses (in 2003, this credit increases to 20 percent of the first $10,000 of tuition expenses). This tax credit took effect June 30, 1998.

And, for those students with education loans, the tax bill allows an annual write-off of up to $2,500 for five years of student loan interest payments. This deduction will be effective for taxable year 1998 and subsequent years. The maximum deduction begins at $1,000 in 1998 and increases by $500 per year to a maximum of $2,500 in 2001 and thereafter.
 

In addition to the federal aid and loans, there are other sources available for finding college money. Your library has a number of great books that will help you find and apply for the right scholarship. Also look into civic and community groups, foundations, corporations or labor unions that may offer scholarships. And don't forget to browse the Internet for some of this information. Some great places to start are www.finaid.org; www.salliemae.com; and http://www.fastweb.com.

Finally, be cautious. Some companies claim to "find" scholarships for a fee. Any offer that boasts that the "scholarship is guaranteed or your money back," or requests a credit card, bank account number or money to "hold" the scholarship may be what the Federal Trade Commission calls a "scholarship scam." You shouldn't have to pay to find scholarship information.

Remember, to get the best financial aid package available, follow these three easy steps: 1) APPLY EARLY - some financial aid is awarded on a first-come, first-served basis. Get your materials out as soon as you and your parents can safely estimate their income for the past year. Estimates are acceptable, but must be realistic as schools may ask for proof. 2) BE THOROUGH - fill out every form carefully and sign everywhere indicated. If you miss even one signature, your forms can be delayed for weeks. 3) BE A GREAT STUDENT - the better your grades, scores and other accomplishments, the more schools want you.

You've worked hard to get where you are. The long hours of study, a rigorous course load and a full plate of extra-curricular activities are now primed to pay off. But transferring into the college of your choice is a hollow victory if you can't come up with the funds to pay for it. So, in addition to being a smart student, be a smart shopper. Research all of your financial aid options. Invest the time to labor over the proper forms and applications.

Enlist your college financial aid office for help and compare everything from financial aid packages to the borrower benefits offered by student loan lenders. In the end, you'll not only get a great education, but one great deal.