For example, the maximum amount potentially awarded by a Pell Grant—the most famous and widespread form of government need-based grant—has recently increased to $5,350, with an added option for receiving an additional $2,675 in the summer. And those maximums are slated to keep climbing through 2012.

Additionally, the interest rate on a Stafford Loan, the most common type of unsubsidized government loan, has recently dropped to 5.6%, and will continue to drop—to 4.5% in June, and then to a very low 3.4% at the same time in 2011 (before jumping back to the former rate of 6.8% in 2012). And while this next bit of information doesn’t help new college students, older friends and siblings who borrowed prior to July 2006 would do well to reconsolidate now, if they haven’t done so already, as a locked-in rate of just 2.5% is currently available (along with a rate of 3.38% for parents in the process of repaying PLUS loans). And while exploring post-graduation career options, students should bear in mind that borrowers entering nonprofit or civil-service (government) careers will have the remainder of their debt written off by the feds after ten years. And there are more jobs that count as “government” ones than you might realize (teaching in a public school, for example)!

A new policy known as Income-Based Repayment (IBR) is more welcome news. Borrowers who find themselves struggling with their payment plan will be able to cut a deal enabling them to pay 15% of their discretionary income (i.e., income in excess of 1.5 times the poverty level for their family size) per month instead of a flat minimum. What happens if you’re making less than 1.5 times the poverty level? You pay nothing, for as long as that remains the case. And no matter how much (or how little) you pay, the government forgives the remainder after 25 years. Of course, the longer you take to repay a loan, the more interest builds up, so a good educated guess about your future will save you money: if you think you’ll end up paying off your student loans in less than 25 years, do it fast; if not, do it slow. This now applies to any federal student loan, from any lender, no matter when you took it out!

It’s clear that the current environment has made the increased affordability of higher education a greater priority. New policies, or more changes to the current ones, are certainly possible, so keep your eyes and ears open—but the bottom line is that, now more than ever, pursuing loans from private lenders is definitely a last resort.

The fact is, 75% of students pay, on average, less than $8,500 for their educations, and most students pay far less than the official “total cost” of attending any particular school. At most colleges and universities, it’s very common for a high percentage of students to receive some sort of financial aid, so it’s important for applicants to become familiar with their aid options. And don’t be put off by a more expensive school: the good news is that schools that charge higher tuition also tend to have more financial aid available!

Students may be eligible for financial aid based on their family’s demonstrated financial need. There is also non-need aid available – this is sometimes referred to as “merit” aid and may be rewarded to students based on their academic records or for achievements in sports, music, theater, etc. Both types of aid require filling out the same standard application forms. Financial aid is not just for tuition – this money can also be put towards the cost of books, room and board, personal expenses and transportation.

There are two types of financial aid available: “gift aid” refers to grants and scholarships that you do not have to pay back or work to receive. “Self-help” aid includes campus jobs or educational loans you’ll have to start paying back after graduation. While loans may be necessary to pay for college, it’s important to think carefully about how much debt you will accrue before you’ve even entered the work force.

The amount of money you get from a school may depend on whether it’s a reach school, a safety school or something in between – schools tend to give more financial aid to more qualified students.

For many, attending a state university as a state resident can be a great way to obtain a high-quality education at a significantly lower cost. Tuition at these schools is much less expensive than at private colleges, despite the fact that state schools can be very selective. For some families, however, the cost of attending a higher-priced private college may actually be cheaper because of more generous financial aid packages.

No matter what, college is not an inexpensive way to spend four years. But think of this time as an investment: with a college degree you will earn, on average, over one million dollars more in your lifetime than you would with a high school diploma.