09/25/2013 12:25 pm ET Updated Nov 25, 2013

Don't Dawdle on Student Loan Search

Millions of young Americans recently began their senior year of high school. If your kid is among them, he or she is probably busy juggling homework, extracurricular activities and maybe a part-time job -- all while trying to savor the last official year of childhood and simultaneously prepare for impending adulthood.

You, on the other hand, are likely just wondering how the heck you're going to pay for college.

College may be a year away, but scholarship and loan application deadlines are just around the corner. And, if you haven't been down this path recently, you'll soon learn that there are tons of decisions to make and documents to fill out. Waiting until the last minute can risk costly mistakes.

Plus, some states award aid on a first-come, first-served basis, meaning funds for your child's dream school could be exhausted by the time you get your paperwork together. In fact, according to a recent study by Sallie Mae, grants and scholarships paid for 30 percent of college costs for the average family in the 2012-2013 academic year, followed by parent income and savings at 27 percent.

If that doesn't make you want to get the jump on financial aid, I don't know what will.

Your first step is to complete the Free Application for Federal Student Aid (FAFSA) form, which is required by virtually all colleges, universities and career schools for federal student aid, as well as for most aid from states and individual colleges. Head's up: The FAFSA is 10 pages long and asks detailed income and tax information, so allow adequate research time.

It's easiest to file an FAFSA online at the Federal Student Aid website. You can also get a hard copy from your child's school or by calling 1-800-4-FED-AID. The FAFSA filing deadline for federal loans isn't until June 30, 2014, but many state and individual school deadlines fall months earlier. Plus, you may be required to complete additional forms. (Find your state's deadline HERE.)

Your child's FAFSA can't be finalized until you've filed your 2013 federal income tax return. If need be, you can initially submit the FAFSA with estimated tax information and later update it using the IRS Data Retrieval Tool embedded in the online FAFSA application -- it securely transfers required tax data from the IRS. Click here to see if you're eligible to use this tool. Many types of student aid are available to help cover costs at four-year colleges and universities, community colleges, and trade, career or technical schools, including:
  • Hundreds of thousands of free scholarships and fellowships are awarded each year, generally to students with special qualifications such as academic, athletic or artistic talent. Others are given to students interested in particular fields of study, who are members of underrepresented groups or who demonstrate financial need. Several free, searchable scholarship databases are available, including FastWeb and the College Board's Scholarship Search tool. For more on scholarships, visit this FinAid Scholarship site.
  • Federal Pell Grants are needs-based grants given to low-income students to pursue post-secondary education. The maximum annual Pell Grant amount is $5,500; but students can receive Pell Grants for no more than 12 semesters. They need not be repaid.
  • Federal Supplemental Education Opportunity Grants for up to $4,000 a year are awarded to undergraduates demonstrating exceptional financial need. They are administered by participating schools' financial aid offices and there's only a finite amount in the funding pool, so apply early.
  • Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.
  • Federal Perkins Loans are low-interest loans for students who demonstrate exceptional financial need. They are "subsidized," meaning the government pays yearly interest while students are enrolled. They have no origination or default fees. Not all schools participate and funds are limited.
  • Direct Stafford Loans are low-interest federal government loans that have no origination fee and come in two varieties: needs-based "Subsidized" loans for undergraduate students where the government pays the yearly interest while students are enrolled; and "Unsubsidized," for undergraduate and graduate students of any income level, where students are responsible for interest that accrues while enrolled.
  • Private Education Loans are offered by banks and other lenders to supplement government loans. They aren't government-guaranteed or subsidized and typically carry higher interest rates, although you can borrow greater amounts. Details and rates vary widely.
  • Some colleges sponsor their own loans. Interest rates may be lower than federal loans. Check each college's aid materials to see if they're available.
  • PLUS loans are federal loans that graduate or professional-degree students and parents of dependent undergraduate students can use to pay for education expenses. They are made through participating schools at a fixed interest rate. There is an origination fee.
  • Private parent loans are offered by banks and other lenders, usually at higher interest rates than PLUS loans. They may also have an origination fee.
  • Some colleges also offer their own loans to parents, usually at rates below PLUS loans. Check each college's aid materials to see if they're available.

Besides housing the FAFSA application, the Federal Student Aid site also features such helpful tools as the FAFSA4caster, which gives you an early estimate of your eligibility for federal student aid, discussions about Student Loan Repayment, Scholarship Scams to avoid, and much more.

Another excellent resource is, a nonprofit source of student financial aid information and tools, including calculators that can help you determine the Expected Family Contribution required to apply for government grants and loans, Loan Payment Calculations and more.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.