Here are the ins and outs of Pell Grants, SEOGs, Federal Perkins & Work-Study Programs, and Stafford & PLUS loans.

How will you pay for your children’s college education, an expense that is as important as it is daunting? Some families have their tuition covered, partially or fully, by financial aid. This might include grants, scholarships, loans, or work-study placements. Aid-granting institutions often focus mostly on those with greatest need, leaving middle- and even upper-middle-class families scrambling. To gain a sense of your eligibility, try the “five percent test.”

First, add 5% of your total family assets to your adjusted gross income on last year’s tax return. Now divide that by how much you think one year of college will cost. If the answer is six or less, you may be eligible for financial aid. If the answer is higher, it is likely that you aren’t.

However, don’t give up hope! It is worthwhile to apply anyway. Many things determine the outcome. You never know; there is a wide range of organizations offering aid, at a wide range of levels.

If you are rejected, you still have options, especially considering the programs offered by the U.S. government:

Pell Grants

Depending on their family income, undergraduates may receive these grants. The maximum award for the 2008–2009 school year was $4,731.

Supplemental Educational Opportunity Grants (SEOGs)

SEOGs usually go to families who are needier than the average recipient of Pell Grants. Individual colleges distribute the funds, which come originally from the government. They pay from $100 to $4,000 per year.

Federal Perkins Loans

These loans are usually for the very neediest. Eligibility is determined by: (1) when the application is submitted; (2) financial need; and (3) the funding level for the school. Undergraduates can borrow up to $4,000 per year of study, and it can’t exceed $20,000. Graduate students can borrow up to $6,000 per year of study, and it can’t exceed $40,000. Recipients who are more than half-time students start to pay back the loan nine months after graduation or leaving school. This is called the “grace period.” It may be shorter for those who attend school less than half-time. You can spread payments over ten years (maximum) after the grace period.

Federal Work-Study Program

Students work in exchange for funds for tuition. You work on campus or, sometimes, off. If it’s off-campus, the job may be with a nonprofit organization. Otherwise, it’s usually with a government agency. Often the work relates to the student’s course of study. The wage is usually modest. The amount you earn cannot go above the amount you received from the Work-Study program.

Direct Stafford Loans

These are a way to get a loan for school at a good rate of interest. The U.S. government provides the money, usually through for-profit companies. You can pick from a range of ways to pay back the loan.

PLUS (Parents’ Loans for Undergraduate Students)

Parents who do well enough on a credit check can borrow the actual “cost of attendance” (less any financial aid received). They have to start paying back the loan sixty days after the last loan disbursement for the school year. The rate of interest is determined by the disbursement date. How well the student does in school can be a basis of evaluation in several states. You must reside and attend school in that state.

Again, no matter what you think your chances are, apply for financial aid. It is possible that you will be eligible! Request a personalized college savings proposal for your children/child or call (866) 972-3262 to speak with one of our college savings specialists now.