With tuition costs rising, most college students these days cannot afford to pay for college on their own.  Instead, they rely on financial aid.

Financial aid is a rather broad term that covers everything from grants and scholarships to help you pay for college, to loans that must be repaid after graduation.  The entire thing can be confusing and overwhelming, and if you don't know what you're doing it's fairly easy to make bad decisions.  To help you learn the ropes and make informed decisions, here is a rundown of the basic types of financial aid.

Scholarships and Fellowships

Sometimes you can find an organization that is willing to give you money to help pay for tuition.  The money might be from your school or another organization.  Like most other types of financial aid, you will need to submit an application, which most likely will include an essay on why you are deserving of the scholarship or fellowship.  The benefit is that, unlike loans, you will not have to repay the money.

Government Grants

If you meet certain criteria, for instance if you are a first generation college student (i.e. the first person ever in your family to pursue a college degree), the government may give you a grant to help pay for your college education.  A grant is like a scholarship, in that it doesn't have to be repaid.

Government Issued Student Loans

If you do not qualify for a grant from the government, you may still qualify for one of their loans.  Government issued student loans are preferable because they typically have lower interest rates.  However, there is a limit on how much you can borrow from the government, and you will probably not get enough this way to pay your entire tuition.  This leaves you to consider other types of student loans.

Private Student Loans

Most banks offer some type of student loan program to help supplement the limited government loans.  You will need to be careful to pay close attention if you are seeking a private student loan, as the interest rates are typically higher.  Also, be sure you talk to your bank about what kind of loans you are getting.  Even if it means you are borrowing money from two different entities, you should be sure to take full advantage of the amount you can borrow from the government, before turning to private loans.

Where to Look First?

Of course, when pursuing financial aid, the idea is to try to get the best deals first.  In other words, your first priority should be the money you don't have to repay.  Before you even consider applying for a loan, be sure to exhaust all of the scholarship and grant opportunities available to you.

Only once you have applied to all the scholarships and grants you can think of should you start looking at loans, government or otherwise.  Again, apply for government assistance first, as those loans usually offer the best deals on interest rates.  The rule of thumb is to borrow as little money as you can in order to make it through school.  That way you have less debt to start repaying on when you graduate!