What this section covers:

• Types of financial aid
• Am I "dependent" or "independent"?
• Is a credit card right for me?
• The FAFSA and other financial aid applications

Scholarships
Awards based on some kind of special achievement, either academic, athletic, or service. These are merit-based and do not need to be repaid. Many schools and local organizations also provide scholarships.

Work-study
Part-time employment that lets a student earn money toward a college education either on or off campus. This can be through the Federal Work-Study Program or a college's work-study program.

Student loans
Money borrowed, either from a bank, the government, or a school. A student loan must be repaid. However, low interest rates are available, and repayment doesn't start until you've either left school or graduated. The major loan programs are Federal Perkins Loans, Federal Stafford Loans and Federal PLUS Loans (for parents). In addition, some schools have their own loan programs, and some lenders offer alternative, or private, loans.

Conversion scholarships/loans
Scholarships that require you to provide certain services for a period of time. If you don't, you have to repay the money with interest. These include the Alabama Nursing Scholarship.

Waivers
An arrangement offered by some schools to eliminate certain costs for students who meet certain qualifications. These include waivers for dependents of blind parents and survivors of police officers and firefighters killed or permanently disabled in the line of duty.

Military benefits
Financial assistance offered to individuals (or their dependents) who either were or are going to be in the U.S. Armed Forces.

Prepaid tuition
A contract guaranteeing fully paid tuition for a fixed number of credit hours at a participating school. You have to pay a certain amount up front. The Alabama Prepaid Affordable College Tuition (PACT) is such a program. Alabama also has a college-savings program, the Alabama Higher Education 529 Fund. Both are administered by the State Treasurer's Office.

National service award
An award received for education expenses in return for national or community service. AmeriCorps is such a program.

• You were born before January 1, 1980.
• You're married.
• You're enrolled in a master's or doctorate program during the 2003-2004 school year.
• You have children or other dependents who receive more than half their support from you through June 30, 2004.
• You're an orphan or ward of the court (or were a ward of the court until age 18).
• You're a veteran of the U.S. Armed Forces. "Veteran" includes a student who attended a U.S. military academy who was released under a condition other than dishonorable.

What are some of the advantages of a credit card?
The number one advantage is convenience. If you have an emergency, need to purchase something online or by telephone, or need the safety of not carrying cash, credit cards fit the bill. Credit cards can also help you establish a credit history. This can be either good or bad, depending on how the card is used and how it's paid. Your credit history will follow you all of your life.

What are the disadvantages?
The number one, two, and three disadvantages are . . . debt . . . debt . . . and more debt! There are other disadvantages as well. With credit cards comes the temptation of spending more money than you have. Although $3,500 may seem like a lot, you can reach it easily when you start treating your friends to pizza, buying clothes, buying CDs, and decorating your room. In fact, $3,500 is probably a pretty conservative number.

If you accumulate large amounts of credit card debt and are unable to pay it off, it can affect your credit rating for many years. A poor credit rating can affect many areas of your life, including getting a job, buying a house, or even finishing school. Before you ever obtain a card, decide what you're going to use it for and how you're going to pay for it.

How can you avoid getting yourself into trouble with this "convenient" money. One thing to remember is that a credit card has to be paid back . . . with interest.

One avenue to explore is the use of a debit card, which is issued by most banks. Any time you use it, the amount will automatically be deducted from your checking account.

Another option offered by some banks is a credit card that's been prepaid by your parents. They're notified every time you make a transaction, and you can only use the amount of money that's "loaded" into the card.

If, after weighing all the pros and cons, you decide you still want to have a credit card, use it wisely. Be sure you review the bill once it comes in and pay it before the deadline. Only charge as much as you can pay off when the bill comes. If circumstances arise that you do have to charge more, pay more than the minimum charge in order to avoid accumulation of interest.

Don't let credit card debt and a poor credit rating haunt your future. Use good judgment . . . either decide not to use a credit card or to use it sparingly. It's your future that's at stake.

Did you know that if you are 18 years old, charge $3,500 at 18 percent interest, and only make the minimum payment, you will be 45 years old by the time you pay the charges off? Not only that, but you will have paid almost $8,000 in interest on top of the original $3,500. If you charge even more than that, it multiplies dramatically.

The FAFSA is the Free Application for Federal Student Aid and it's a very important part of your preparation for college. This is the form that needs to be filled out before you can qualify for any federal or state student aid. Not only does it need to be filled out, it needs to be filled out correctly. The financial aid information provided on the form will automatically be sent to the school(s) listed on the FAFSA and to KHEAA.

The best way to obtain and file the FAFSA is online. You can use your library, high school, or home computer to apply for federal student aid via FAFSA on the Web (an interactive Web page). You can complete a FAFSA online and send your data over the Internet at www.fafsa.ed.gov. A brochure titled FAFSA on the Web is available from the U.S. Department of Education (USDE) by calling (800) 4FED-AID ([800] 433-3243). The computer you use must have one of the following browsers: Netscape Navigator 4.76 or higher, MS Internet Explorer 4.0 or higher, or AOL 5.0 or higher. If you have any questions about FAFSA on the Web, call (800) 4FED-AID.

You are less likely to make errors filing electronically because your answers are edited automatically. Also, you will receive your report 7 to 14 days faster than you will with a paper FAFSA.

The paper FAFSA is available from high school counselors, college financial aid offices, or by calling the USDE toll free at (800) 4FED-AID ([800] 433-3243). If you want to be notified when your application is received, fill out the postcard contained in the FAFSA packet and enclose in the return envelope with your application. When the application is received, the FAFSA processor will stamp the card with the receipt date and location and mail it back to you.

The school's financial aid office will use this information to determine whether you're eligible for need-based financial aid and, if so, for how much and what type. From this information, the school will create a financial aid package for you. Each college you list on the FAFSA will consider you for financial aid and will notify you of its decision in late spring or early summer.

Gather documents you will need to refer to in completing the FAFSA. These include the following:

• Your Social Security card and driver's license.
• Your W-2 forms and federal income tax return.
• Your parents' W-2 forms and federal income tax return if you are dependent.
• Records of other untaxed income received such as Social Security benefits, Temporary Assistance for Needy Families (TANF), or veteran's benefits.
• Current bank statements and records of stocks, bonds, or other investments.
• Business or farm records if applicable.
• Your alien registration card if you are not a U.S. citizen.
• A blank diskette if you are applying via FAFSA on the Web. You will need it to save your data.

Don't forget to:

• Read and follow the FAFSA instructions carefully.
• Submit the FAFSA as soon as possible after January 1 of your senior year (when the family has its federal income tax preparation data) to make sure you have the best chance of receiving aid for which you're eligible.
• Keep copies of your FAFSA and a record of the date you submitted or mailed it.
• If you need to make corrections on your FAFSA, follow the instructions on the Student Aid Report (SAR) you receive in the mail and return it immediately for reprocessing.
• Read financial aid award letters carefully and comply with requests from schools for clarification or additional information as soon as possible. Any corrections or additional information should be submitted to the USDE Central Processor of the FAFSA forms, so KHEAA and the administrators of other federal and institutional programs will have the information too.

Other Financial Aid Applications

• Check with the financial aid office of the school you plan to attend to determine if you should file any other applications.
• Read and follow directions. Filling out an application properly and neatly is important. You may be disqualified for failing to complete all questions, answering them incorrectly, or missing the deadlines.
• Pay close attention to mailing addresses and filing deadlines. Like the FAFSA, other application forms should be filed as early as possible.
• Keep copies of everything you mail and a record of the dates you mail the materials. You might want to send your materials by registered mail, return receipt requested.
• Talk with your counselor about scholarships available in your community. If you think you may be eligible, obtain and complete the appropriate application.
• Check the school's catalog or Web site for descriptions of any additional scholarships or financial aid for which you may be eligible to apply. Web site addresses can be found in Chapter 3.
• Apply, apply, apply. By applying for several types of aid, you increase your chances of receiving enough to pay your school costs.

STEP 2: STUDENT LOANS >>>