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During these tough economic times, students need to find solutions to possibly the most important of questions regarding college: How do I pay for school? The answer to this question is the phrase financial aid. While the term financial aid may provide some answers, often aid seekers are left feeling puzzled as to the myriad of forms and formulas used to factor what a student's need may be.

In 1965, President Lyndon Johnson signed a bill called the "Higher Education Act." This act created many of the college assistance programs helping quite a few students who otherwise would have no feasible way of paying the extreme cost of attending college. The first step to obtaining aid monies is filling out a form called the Free Application for Federal Student Aid (FAFSA). There are approximately 130 questions a student must answer on the FAFSA. In order to answer these questions, students must submit an array of documents, including full disclosure of their parent's financial assets because of the assumption (realistic or not) that parents will pay for their child's college education.

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For the 2009-2010 school year, the federal government estimates that prospective college students will receive approximately 8 billion in funding through need-based and merit-based packages. It's important to know the difference between the types of aid. Need-based financial aid is for students who, despite their family's income, can't afford the cost of attending colleges. Some private institutions require a supplemental form in order to demonstrate need because in some cases these colleges will dip into their massive endowments to help students attend. Merit-based monetary aid is typically awarded in the form of scholarships or grants. To be awarded these, students must perform at a consistently higher level than their peers, but sometimes they'll get awards due to high SAT or ACT scores. Typically a college will put together a merit-based package to entice students whom admissions officers feel would be a good fit for the environment at that specific school.

Part of the legislation known as the Higher Education Act of 1965 is the Pell Grant. Named for Senator Claiborne Pell of Rhode Island, this grant is intended for students who demonstrate economic need based off of the FAFSA form's calculations. The maximum award for the Pell Grant is currently ,800. In the future the Pell Grant award will be tied to the Consumer Price Index. Rationale for the change is that the Pell Grant does not cover as much of the cost of college as it used to. According to the Washington Post, the Pell Grant covers 31% of the cost of attending college while 20 years ago it covered 60% of all costs. As with all grants, the Pell does not require the recipient to repay the government.

The Higher Education Act of 1965 contributed many programs towards the aid of students who would like to go to college but can't afford it. Besides the Pell, another provision of the Higher Education Act is the Federal Guaranteed Student Loan Program, which today is known as the Stafford Loan in honor of Senator Robert Stafford of Vermont. The drawback of the loan having to be repaid by the student upon graduation is deferred by the fact that these loans are guaranteed by the full faith of the U.S. Government, which means that these loans are offered at a lower interest rate. The Stafford Loan is offered as a subsidized or unsubsidized loan, the difference being if the loan is unsubsidized the student must pay the loan back while they are enrolled in college.

One aspect of student aid requiring students to work for their money is the Federal Work-Study Program. After the student has filled out the FAFSA, if financial need has been demonstrated then students are eligible for employment at the college they choose to attend. Colleges must pay the students at least the current federal minimum wage. This program is beneficial for students because the jobs are usually low-stress jobs that do not clash with a student's schedule.

Pell Grants, Stafford Loans and Work-Study programs are probably the most famous aspects of the college aid universe, however there are two other programs that should merit attention. The Federal Supplemental Educational Opportunity Grant awards up to ,000 per student on a yearly basis provided that the student's FAFSA demonstrates extreme need. Another grant for students who are in the greatest of need is the Academic Competitiveness Grant. This grant awards up to ,300 per year for each student who qualifies.

Uncle Sam Wants To Help You Go To College - Financial Aid Comes In Many Forms