By Tim V.

So you’re looking to go to college in the next few years to earn a degree and be successful in your field of work. With the cost of tuition rising, you have to find a way to pay for the degree. There are many ways to do this, but if you choose to go through a federal student loan (the most popular form of financing a degree), you’ll need to start with a FAFSA (Free Application for Federal Student Aid). Here’s what you need to prepare before filling out the form, and some things to consider before taking out a loan that will leave your spending plan in a pinch later on.

First, print out the FAFSA worksheet located here. You can manually fill in the answers you need so you’re not searching for them when you go to submit the electronic form.

Second, know the difference between subsidized and unsubsidized loans. While neither loan requires you to make payments while you’re in school (or for six months after you graduate or stop enrollment), a subsidized loan doesn’t accrue (or collect) interest on the money you borrowed while you’re in school. Most people aren’t eligible for the subsidized loan. The unsubsidized loan, on the other hand, will start accruing interest from the moment you borrow the money.

Third, know what school you’re going to attend. You’ll be asked this question on the FAFSA and the government will use the tuition rate at your school to determine how much money they’ll lend you.

Fourth, find out if your parents claim you as a dependent on their taxes. (Hint: If you live at home, they probably do!) If you’re being claimed as a dependent, both you and your parents should file income taxes as soon as possible. Their income will have an effect on how much money you can receive and the government requires the most recent tax-year to be filed and complete before they make a decision. You’ll also want these filed early so you can submit your FAFSA earlier in the year. Some grants have early deadlines (think February or March) and the earlier your FAFSA is submitted, the more grants you could be eligible for.

After your FAFSA is submitted and reviewed, you’ll likely receive a Student Aid Report. This report tells you how much you can borrow in student aid, whether the loans will be subsidized or not, and the interest rate you’ll pay on the money. Once you receive this report, you should not automatically accept every penny you’re offered or you could end up with a mountain of student loan debt later. Here are some things to consider:

  • Do you need to borrow all of the money they are offering you? Accept what you need to pay for tuition, fees, books and supplies. Then, consider getting a part-time job to pay for rent, food or spending money. It may seem like a great idea to live off of the loans and not work during school, but the money is borrowed and you’ll have to pay it all back later.
  • Look for scholarships to cover part of the cost of tuition. There are thousands of scholarships waiting to be awarded based on merit, involvement in extracurricular activities, your situation and more. Start looking here.
  • Decide if you want to pay the interest on your unsubsidized loan during school. Just because you’re not required to pay the interest until after you graduate, doesn’t mean you can’t make payments on it. When you don’t pay the interest, it rolls in to the balance of the loan and you start accruing interest on the interest (also known as compound interest). While this is good for savings, it’s not so good for loans. If you can afford to make the payments, we suggest going for it.

While paying for college may seem overwhelming, help is available. Start by meeting with your high school guidance counselor or a financial aid officer at your future college. They can provide advice, help locate scholarship opportunities and answer questions you might have about FAFSA.