Grants and scholarships are the best type of college money, because they are usually tax-free and don't have to be paid back. Scholarships are offered by colleges, non-profit organizations, and government agencies. In addition, although not officially a scholarship, the IRS allows parents to take a tax credit when their child goes to college, thus reducing the amount of taxes paid.
Scholarships and Grants
Many scholarships are offered by non-governmental organizations. The search process is long and complicated, but the Internet has made the scholarship search process much easier. Consider unorthodox sources of scholarships. For example, while your child is still in high school, urge him or her to get a part-time job which awards scholarships. Although the search and application processes are long and hard, the fruits of your labor will be well awarded with free college money that does not have to be paid back.
The Federal government offers several grant programs that are primarily need-based. The maximum awarded by the Federal Pell Grant for the 2012-2013 academic year (July 1, 2012 to June 30, 2013) is $5,550 and is offered to low-income families. The Federal Supplemental Educational Opportunity Grant offers an annual grant amount that ranges from $100 to $4,000. In addition to these grants, the federal government also has other programs such as federal loans and work-study programs to help families with the large financial burden of college.
Free Application for Federal Student Aid
To participate in federal and state programs, a FAFSA (Free Application for Federal Student Aid) form must be filled out by the student and his or her parents. The purpose of the FAFSA is to ascertain the amount the family will have to contribute to fund the child's college education. These forms are available straight from the colleges themselves, your child's guidance counselor, public libraries, or from the FAFSA web site. Applications for the next academic year can only be completed after January 1st of that academic year. After the FAFSA form is sent to the appropriate processing center, your EFC (expected family contribution) amount will be determined. This is the amount that you will be expected to pay from your own pocket. The remainder of the cost of college can be financed through various state and federal programs.
Other Sources of Financial Aid
State governments also offer grants to students based on need and academic performance. The types and amounts of grants that are awarded are determined by each separate educational institution.
Although not officially a "grant" or "scholarship", the work-study program offers students an opportunity to work at the college they are going to attend. When filling out the FAFSA, there is a question that asks whether or not the student would like to participate in a work-study program. The federal government grants funds to colleges to finance this program. Typical work-study jobs include library clerks, cafeteria workers, and departmental clerks. Earnings from the federal work-study program do not affect a child's financial aid eligibility. Funds for this program are limited, so apply early if the student would like to participate.