College is expensive. Very expensive. Which is why most students receive some form of financial aid to help them pay for it. There's all kinds of terminology for all kinds of different financial aid, but let's first look at two broad categories.

Merit aid. This type of aid isn't based on financial need. It's a school's way of trying to entice you to enroll by lowering the cost for you. So even wealthy students who can afford to pay full price for a college will sometimes get financial aid through merit awards if any colleges want them so badly that they're willing to lower the price to convince the student to enroll. It's best not to think of merit aid as a reward that you deserve for doing well. Hundreds of thousands of graduating seniors each year do really well in high school, but they won't all get merit aid offers.

Instead, think of merit aid as a discount or sale price they're going to give you because they want you to choose them. This can be very flattering, and you should go ahead and be flattered. It means they think you'll be valuable to them. But it may not be valuable to you, so remind yourself to be rational and not just flattered. If, for example, a school offers you $10,000 per year in merit aid, but it would still be $5,000 more expensive for you than another school that's a similar match, then it's not a good idea to take the aid.

Because merit aid is basically an enticement, understand as a general rule that the more selective a university is, the less likely they are to offer you merit aid. A school that's turning away 85% of their applicants doesn't need to lure people. Many, like this one, will let you know up front that they will not be awarding anybody merit aid.

Merit aid is almost always in the form of grants or scholarships. Offering you a loan or a minimum-wage job on campus just isn't as alluring.

Need-based aid. This type of financial aid, which is much more common, is a way for colleges to help you bridge the gap between how much they cost and how much you can afford. (There's almost always a gap.) Who decides how much you can afford? For the most part, the federal government does. To get financial aid, you fill out the Free Application for Federal Student Aid, or FAFSA. Using the detailed information you supply, they use a formula to decide how much your family can afford to pay for college. And no, lying isn't easy or legal.

Individual colleges may adjust the number a little bit, but the federal pronouncement of what you can afford is pretty much universally used as the starting point. To make these adjustments, colleges may like to have more financial information, or for you to fill out the College Board's CSS Profile.

Need-based aid may include scholarships or grants--money that doesn't need to be paid back--but it usually also includes loans and work study. Work study is an on-campus job that the school provides you, but the government reimburses them for your pay. Work study can sometimes be a pretty nice job, like working the check-in desk of a school building.

Merit aid and Need-based aid often overlap in weird ways, though. It's completely possible and even normal to get both. Generally, merit aid you receive will be deducted from the need-based financial aid package, because you technically no longer need that money to go to college since it's provided to you. So if your need to afford a school is $35,000, you may get $35,000 in need-based aid. Or you may get $5,000 in merit aid and then only $30,000 in need-based aid.

One of the most frustrating things about financial aid is that you don't get an aid offer until you've been accepted to a school, because they don't have the time or resources to make aid packages for everybody who's interested. This means that you don't know how much a college will cost you until after you decide to apply. However, you can get an estimate by using a net price calculator. A net price calculator asks some basic financial questions and then gives you an estimate of how much money people with similar profiles actually pay to go to a school. It's not exact, and it's not an actual offer, but it gives you a chance to see something closer to the actual cost. Each school ought to provide a net price calculator on their web site.

To help you make decisions, schools will also tell you what their average financial aid package looks like, and you can see how much of students' financial need is, on average, actually met. Be careful if that number is less than 100%. It's often less than 100%.

Use those tools, but remember: never assume you know how much a school will cost until you get an actual financial aid offer. Never choose not to apply to a school because you think you can't afford it--you don't know for sure until they tell you.

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