Intro
Sorting out the world of student loans is about as easy as trying to create world peace. Both the federal student loan program and private student lenders have made such a confusing mess of things that it takes quite a bit of patience to make sense of it all.

The process actually begins with applying for financial aid and doing everything possible to manage your future debt right from the start.

Before you do anything, you want to fill out the FAFSA (Free Application for Federal Student Aid). The government and the school will use this form to determine your eligibility for federal loans, work-study programs as well as state and institutional aid. The form also determines something called the Expected Family Contribution, which is what the government thinks you—and your family if you are still a dependent—ought to be able to shell out each year out of pocket towards your education. The gap between your EFC and total college cost, is your need— the amount you should be awarded in financial aid.

If you want to have an idea of what your financial-aid package will look like before filling out the FAFSA, use the FAFSA4caster tool . The tool asks for some basic information such as your or your parents’ income, household size, and tax deductions and then estimates your eligibility for federal aid.

Even if You Don't Think You Need It
Even if you don’t think that you will be eligible for federal aid because you or your parents make too much money, you should still fill out the FAFSA. There are certain federal loans with excellent terms that are available to anyone—regardless of your income—but you still need to fill out the FAFSA before you can apply for them. You want to exhaust these federal loans before turning to private loans, which almost always cost more.

Fill the FAFSA out as early as possible. You can’t technically submit the form before January 1st of the year you plan to enter college (typically Jan. 1st of your senior year) due to required tax information, but you should download it and begin filling it out as early as November. Deadlines for aid from state institutions that dole out their own grants and loans are often earlier than federal deadline, but the states use the FAFSA too (More on state aid later) . Also, some colleges distribute financial aid on a first-come first-served basis, and they’ll need a completed FAFSA in order to consider your application.

Submitting the FAFSA online speeds up the process and it can help eliminate errors too, since the system will alert you when you’ve entered information incorrectly. Be sure to print out a copy and remember the pin or tracking number it gives you when you submit the form, in case anything gets lost.

A few schools will require you to fill out some additional forms. Some colleges may ask you to complete a supplementary form called the CSS/Financial Aid Profile, while other selective private colleges will often have their own financial aid forms.

Graduate and professional students sometimes have to also fill out the Need Access Application. These additional forms are a way for schools to get a more accurate picture of your finances than the one provided by the FAFSA. You should always call the schools directly and find out what is required.

Deciphering Your Financial Aid Package
Eventually, you’ll get a package back from your school along with your admission letter, telling you what sort of aid they think you’re eligible for and asking you to reply by accepting or rejecting the various types of aid. That aid may come in any or all of the following categories: grants or scholarships from the school, a federal Pell grant, state grants, federal loans of various sorts, work-study and perhaps others too.

The best kind of aid is grants and scholarships because these have to be paid back. This is basically free money that you never want to reject. In fact, you should try to put a lot of effort into seeking these out on your own. 

Federal loans— Stafford, Perkins and Plus loans—are also good because they have much better terms than private loans.

Your financial-aid packet should indicate the total expenses of the school (tuition, room and board, etc.) minus the aid that the school is offering you, although each award letter is organized differently. The number that is left over is what you will be expected to cover on your own. However, this number—your EFC—may not always be realistic in terms of what you can afford to pay, even if the people who compute the EFC think it is.

Don't Forget to Haggle
What many people don’t realize is that you can often go back after receiving your financial aid package and negotiate a better one. Federal aid programs give financial aid officers authority to make adjustments. If you can’t afford to attend the school with the aid that you’ve been given, you should call a financial aid officer and say so. Sometimes this involves filing an appeal form that takes some time to process.

Just be polite but firm and draw attention to anything the school may have overlooked, like a death in the family, when examining your family finances for a particular year. Have documentation ready to prove any big change in circumstances.

You might be surprised how cooperative schools can get when they think they might lose you. In fact, you can file an appeal every year that you’re in school if you feel you have been awarded too little.