02/27/2015 10:58 am ET Updated Apr 29, 2015

Financial Aid Guide for Families

By Paula Pant, contributor

College is a big expense. According to the College Board, the average annual cost of tuition and other expenses for the 2013-14 academic year is $30,094 for private colleges and between $8,893 and $22,203 for public colleges, depending on whether the child attends an in-state or out-of-state school. That's a steep number, and it only represents one single year.

Tuition and fees also historically outpace inflation, which means that if your child is still several years away from applying for college, your cost could be considerably higher.

Most families aren't able to cover the full cost of their children's college experience, which means financial aid will play at least a part of their college planning. If you're thinking about applying for financial aid for your college-aged student (or thinking ahead for a child who's got some time left to go), here are the fundamentals you need to know.

Start Planning Early

Don't wait until your child's senior year of high school to start thinking about how you'll pay for his or her college education. There are lots of factors that affect how much that education will cost, such as what major your child is interested in pursuing, whether he/she wants to attend a private school or a public school, and whether he/she wants to stay in-state or not.

Start opening up a dialogue with your children around sophomore year (the time most students take the PSATs) about what they envision for their college careers and what they're doing now to prepare (such as keeping their GPAs high in order to increase their likelihood of winning scholarships). If everyone is on the same page, it will be easier to develop a plan and avoid the stress of any eleventh-hour decisions.

Know Your Expected Family Contribution

Certain financial aid programs are need-based, meaning only students who demonstrate a certain level of financial need may qualify for them. If your household income and Expected Family Contribution (EFC) are too high, it can restrict the amount of financial aid your child is able to receive.

If you're concerned about this, you may want to sit down with a financial planner to discuss strategies for maximizing your child's eligibility. On the flip side, if you know you won't be able to contribute very much, be aware that it opens your child up to additional financial aid opportunities.

Conduct Research

We won't lie; there's a lot of terminology out there, and it can be overwhelming at times. Grants vs. loans, subsidized vs. unsubsidized, federal vs. private... If you're having trouble making heads or tails of it all, reach out to your child's guidance counselor, check out trustworthy sites like, and, and speak to the financial aid office at your child's future college (if they've already been accepted).

Here's a quick primer:

The U.S. Department of Education (DOE) issues four types of direct federal loans: Direct Subsidized, Direct Unsubsidized, Direct PLUS and Direct Consolidation (the last one is a combination of the first three). The DOE also supports the Perkins Loan Program, targeted at students with "exceptional financial need"; colleges, rather than the DOE, issue those loans. You might hear lots of chatter about the Federal Family Education Loan (FFEL) Program, but this program ended in 2010.

Non-governmental lenders like banks, credit unions, schools and state agencies provide private student loans. These vary broadly based on the borrower's credit history, income and other lending criteria.

Consider Alternate Funding

Don't forget that traditional financial aid like loans and grants aren't the only options available to cover the cost of college. In fact, as a financial planning rule-of-thumb, you should look towards student loans as a last resort -- not the first.

Scholarships (both from colleges and private organizations), work-study programs and part-time jobs can all help your child pay for tuition and other expenses without having to take on any student loan debt. Maximize these opportunities first and foremost. Reputable federal websites like can help you connect with lists of scholarships, which you can sort based on criteria such as GPA, community service history, athletic performance, major, city and state of residence, and demographics.

Don't fall into the common trap of believing that you'll get "a scholarship" -- imagining a solitary silver bullet that will cover all costs. In reality, you'll more likely get "many scholarships," each in increments of $500 or $1,000 that, added together, will slowly make a dent in your overall costs.

Consider Alternate Arrangements

You can cut the costs of your children's education by considering alternate scenarios for their college experiences. Can they attend a local college so that they can live at home and save money on room and board? Can they attend a less expensive, two-year community college to get their basic credits taken care of, then transfer to a more prestigious four-year school to finish their degree? Can they take enough Advanced Placement (AP) and College Level Examination Program (CLEP) courses during high school that they can skip a semester of college -- thereby saving one semester's worth of expenses?

If you've done all you can to secure financial assistance and find you've still fallen short or will be stretched too thin, it's worth thinking of alternate arrangements that might help ease the burden.

Apply Yearly

Don't make any assumptions about your eligibility. According to, your child should apply for financial aid each year, "even if you think you won't get any. More than two-thirds of families qualify for financial aid."

If you've had a change in your financial situation, you may find your child is eligible for additional aid they didn't qualify for in previous years. After all, it never hurts to try.

States With Highest Average Student Debt - TICAS - Class Of 2012