The cost of college has been rising the United States an average of 6% for the past several decades. In 1989, one year at the most expensive college in the U.S. cost $20,000 for tuition, room and board (Sarah Lawrence College, NY, and Bennington College, VT). Twenty years later, for the academic year 2008-2009, the most expensive education in the U.S. costs $51,110 (George Washington University, Washington, DC), more than double the 1989 figure. In-state schools are substantially cheaper than private schools, but they average $10,000 to $20,000 per year.

Tuition rates traditionally rise in a weakened economy, like the one in 2008 and 2009. Federal funding is often cut, endowments shrink, and institutions are forced to raise tuition. At the same time, charitable organizations have fewer funds available, more parents are out of work and private incomes, savings accounts and investments dwindle or disappear entirely.

For all but the most affluent families, tuition has grown faster than income since the year 2000. Student borrowing has doubled in the past decade, particularly among middle-class families. Fortunately, there are several options available for financing education, depending on eligibility. 

Scholarships

A scholarship is a no-strings grant of free financial aid for a qualifying student. More than 1.7 million scholarships totaling more than $7 billion are awarded  in the United States every year. They generally fall into   three categories.

 *Academic scholarships are awarded by a secondary school, college or university based on a student's grades and academic performance. In some cases, grades are not a factor and the scholarship is granted solely on an essay or other proof of accomplishment. A scholarship is usually linked to a particular area of study.

 *Athletic scholarships are funded by corporations, philanthropies and athletic associations to reward and encourage athletically gifted students. Colleges and universities offer athletic scholarships to athletes to encourage enrollment in their particular institution.

 * Private scholarships can be obtained from thousands of corporations, religious organizations, trade unions, chambers of commerce, family philanthropies and trusts, or the U.S. military.

Federal Aid

Government programs are available to every economic group. The major forms of government funding for education in 2009 are listed in the following outline. More information can be obtained from the U.S. Department of Education.

Perkins Loan - a student loan offered by the U.S. Department of Education. There is a fixed interest rate of 5% over a ten-year repayment period. Students begin repaying in the tenth month after graduation, on withdrawing from school, or falling beneath half-time student status.

Stafford Loan - a student loan available through the U.S. Department of Education or intermediary such as a bank or loan corporation. Interest varies based on the year the loan is funded. Subsidized loans, based on financial need, are interest-free to the student while in school. Unsubsidized loans got higher-income groups accrue interest while the student is still in school. In 2009, the interest rate is 6.0% for a subsidized loan or 6.8% for an unsubsidized loan. Repayment begins six months after graduation, on withdrawing or dropping below half-time status.

PLUS Loan -  a loan made to the parent of a student. As of 2008, the parent has the option of beginning repayment 60 days after the loan is funded, or 6 months after graduation, student withdrawal or less than half-time enrollment. These loans have higher interest rates than loans granted to students. The interest ranges from 7.9% to 8.5%. The loans are available from the U.S. Federal Direct Student Loan Program or a bank or loan company.

Pell Grant - financial aid awarded by the U.S. Department of Education based on need determined by the U.S. Congress. Pell grants do not have to be repaid. A high level of need is required to obtain this aid, and most grants go to guarantee higher education to low-income students and to ensure the economic diversity of a college or university. The maximum grant increases every year depending on congressional funding. For 2008-2009, the maximum award was $4,731. By 2012, the amount is scheduled to increase to $5,400.

Private Student Loan

A private student loan is made to a student to supplement or replace federal loans such as Stafford, Perkins or Plus. These are unsecured loans with various interest rates and options for repayment set by the financial institution that grants the loan. This loan process is complicated by the fact that students usually do not have a credit history and interest rates vary considerably by lender. Banks and loan companies are recommended by a school's financial aid office, but students are free to seek the most favorable terms on their own.

FAFSA

The first step in applying for financial aid is to fill out the Free Application for Federal Student Aid (FAFSA). This is a definite prerequisite for federally funded programs and many institutions require this application for aid from the school. After the financial and personal data submitted is reviewed, the student receives a letter that summarizes their financial status, outlines eligibility for aid and sets an expectation for family contribution. The government and the school will use this information in determining the amount of aid to be awarded. Both student and parent or guardian must fill out the form. The application is free and online application is recommended.

Resources:

Federal Family Education Loan Program (FFELP), United Student Aid Funds, Inc., 1-888-272-5543
www.usafunds.org

Federal Direct Student Loan Program (FDLP), U.S. Department of Education, Federal Student Aid Information Center (FSAIC), 1-800-433-3243
www.studentaid.ed.gov

''Free Application for Federal Student Aid'' (FAFSA), U.S. Department of Education, FSAIC, 1-800-433-3243
www.fafsa.ed.gov