College is a huge investment for students and their families. College tuition, especially out of state and private schools, can cost over $200,000 for a four-year education now, and that does not include housing, food and travel expenses.

The very good news is that there are many ways to drastically reduce the out-of-pocket costs of that education. Here is what you need to know.

Let’s start with some basic terminology:

FAFSA is Free Application for Federal Student Aid.

Need-based aid is given for students with proven financial need.

Merit-based aid is given for scholastic or talent-based (athletic, artistic, dramatic) achievement.

A scholarship is merit- or need-based aid that does not need to be repaid, a grant is need-based aid that does not need to be repaid, and a loan is need-based aid that must be repaid.

Work study is need-based on-campus jobs, and institutional aid – given directly by the college itself – can be need- or merit-based.

The first and most important thing that all families need to do is to complete the FAFSA. This is the information that all schools use to determine your basic level of NEED. Even if you don’t think you will qualify for need-based grants or scholarships, you should complete this because it might qualify you for federal loans or work study.

Because most schools practice “need blind” admissions (meaning they do not take into account that you will be applying for financial aid when making their admissions offers), there is no downside to completing the application. The application opens on Oct. 1 for seniors applying to college this year. The earlier it is completed, the better. The application can be found online at FAFSA.gov.

Merit-based aid is usually made in the form of scholarships. Scholarships can be given for either exceptional academic performance or for athletic, artistic or musical talent. There are scholarships that are awarded from the schools themselves or scholarships that are awarded by various organizations.

Scholarships for academic performance are usually automatically applied for when the application to the school is made. This should be verified with each individual school to which you apply. Scholarships for talent will require things like videos and coach’s recommendations for athletic talent, presentation of portfolios for artistic talent, and auditions for musical or dramatic talent. Scholarships will require that a certain standard of performance be maintained to continue to qualify for it throughout the four years.

Because a scholarship does not need to be repaid, this is the type of aid you really want to strive for, and taking a college preparatory curriculum from the start of high school and doing your very best work will put you in a good position to earn scholarships from more than one school if you are applying to the right places. For a list of resources for local and state organizations that award scholarships, please visit my website on the financial aid page.

Grants are another form of aid that do not need to be repaid. The federal government awards Pell Grants to students based on financial need (as determined by the FAFSA) and cost of attendance. This is only for undergraduate students, and the maximum amount for the current school year was $6,095. You can get up to an additional $4,000 through FSEOG grants as well. For a detailed description of these grants, follow the links on my website.

Work study can be a great way to earn extra money while at school. Schools will offer on-campus jobs to qualifying students based on demonstrated need. Jobs can vary in required hours and difficulty, but it not only can provide extra cash for books and other incidentals, it can be a fun way to get to know people and be involved. Most schools will have a link to on-campus job offerings on their webpages (sometimes only available to admitted students to view), so if you are offered work study, make sure to take advantage of this and apply early for the available jobs.

Finally, and the least appealing of the choices, are loans. The FAFSA will determine the amount of loan money that you will qualify for from the federal government, but there are other sources of loans to explore before you accept the federal option. It is important that when making a final selection of loan to accept, you are choosing the one with the lowest interest rates. Sometimes personal loans from local banks will offer a better interest rate, especially if it is backed by home ownership (line of credit or second mortgage). Loans need to be repaid though, so you will need to fully understand the payment schedules before you accept this option.

Many students will ultimately end up with a combination of sources of funding to make up their final financial aid packages. To position yourself best, make sure to do well in school and file your FAFSA early!

Links for all of this information can be found on my website at thecollegeauntie.com.

Maryanne Hogan is an Independent College Admissions Consultant working with students on Maui. Visit her website, thecollegeauntie.com, for more information or to make an appointment.