You have filled out applications, written countless essays, agonized over career decisions, picked out a school and some new clothes, and then suddenly, it hits you. How am I going to pay for this?

Before you press the panic button, understand that you have plenty of options, and most won't take a bite out of your pocketbook.

First off, it's important to determine how you intend to pay for your education. The concept of financial aid centers on the idea that students and families should pay as much as they can reasonably afford toward the cost of education.

To qualify for financial aid, all students must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA determines eligibility for federal and state money—including loans, work-study programs, and grants. The FAFSA is available online at www.fafsa.ed.gov.

After the FAFSA application process determines the amount your family should contribute toward your education, you can explore student loan options to meet the costs of education.

Stafford Loans
Stafford Loans represent the bulk of federal student aid. Dependent students can borrow $23,000 in Stafford Loan money over a four-year period, beginning with $2,625 in the first year, $3,500 the second year, and then $5,500 a year during the remainder of the time spent as an undergraduate student. Independent students can borrow an additional $4,000 the first two years and $5,000 a year thereafter.

Your family must demonstrate financial need (as determined by FAFSA guidelines) to receive a subsidized Stafford Loan. Any student can receive an unsubsidized Stafford Loan. With subsidized loans, the government pays the interest while you are in school. Unsubsidized loans force the borrower to pay all interest associated with the loan.

Rates on the Stafford Loan vary based on the 91-day Treasury Bill plus 1.7 percent while the student attends school. After graduation, the rate jumps to 2.3 percent. The total amount will never exceed 8.25 percent, and repayment begins six months after you graduate or drop below half-time status.

Perkins Loans
Students with great financial need (as determined by the FAFSA) may qualify for the Perkins Loan. You can borrow up to $4,000 a year with a $20,000 limit over the course of your undergraduate education. The interest rate on the Perkins Loan is five percent, and the federal government pays interest on the loan while you remain in school. Repayment begins nine months after you graduate or drop below half-time status.

PLUS Loans
If aid has been determined by the awarding school's financial aid office and the cost of the education still hasn't been met, you or your parents may apply for a PLUS Loan. PLUS Loans can be up to the cost of education minus the financial aid awarded and no more. Rates on a PLUS Loan are 3.1 percent plus the 91-day Treasury Bill, but cannot exceed nine percent. Repayment begins 60 days after disbursement.

Alternative Loans
Loans from private financial banks and credit unions (commonly referred to as alternative loans) offer another financing option. Alternative loans are not supported or funded by the federal government and typically have higher interest rates.

Alternative loans are useful if you don't qualify for financial aid, if all your expenses aren't met by the school's financial aid package, if you're attending a school that doesn't implement federal loans, or if you are a part-time student and therefore ineligible for federal financial aid.