By AnnaMaria Andriotis

    More than 25 states award some financial aid to college students based on academic achievement, as opposed to need. Thirteen states award more than half of their financial aid based on merit.

    But students who don’t quality for merit-based aid aren’t entirely out of luck. Several sources of free aid—such as grants and scholarships that don’t need to be paid back—are still available. And many are still being distributed based on a family’s finances rather than a student’s grades. Here is a primer on where to look.

    1. Federal grants

    Federal grants for undergraduates are strictly based on need. To get them, families will first need to fill out the Free Application for Federal Student Aid. Most popular is the Pell grant, through which students can currently get up to $5,550 in aid per academic year.

    There’s also the Federal Supplemental Educational Opportunity Grant through which families can receive up to $4,000 per year.

    Though it’s not traditional aid, families should also consider taking advantage of the American Opportunity Tax Credit, which can help offset some of the tuition costs they pay out-of-pocket. That’s currently up to $2,500 per year for up to four years, though it’s scheduled to expire at the end of this year unless Congress acts to extend it.

    2. Scholarships

    Thousands of companies, foundations and other groups offer college students scholarships. Parents should begin their search online at sites like Fastweb.com and CollegeBoard.org which help match students with scholarships.

    Many scholarships are based on hobbies and interests, even including activities like skateboarding and golfing. Here’s a list of unusual scholarships that are up for grabs.

    Also inquire about scholarships offered within your community, including places of worship and high school.

    3. Corporate assistance

    Many companies provide their employees with aid to spend on college courses. Referred to as “employer tuition assistance,” it’s often also available for employees’ children. Parents should ask their employer’s human resources department whether it offers such a benefit.

    Separately, families might want to consider applying for scholarships offered by large corporations, such as Tylenol and Best Buy , or foundations affiliated with them. (Here’s one helpful list.)  These tend to be based on a mix of merit, community service and other factors.

    4. Alternative payment plans

    Many colleges offer payment plans that can make their out-of-pocket costs more bearable. Experts recommend asking your child’s college if it offers a tuition-installment plan that allows parents to split their tuition bill over nine to 12 months. Some 90% of colleges offer these plans, according to the National Association of College and University Business Officers. Most plans don’t charge interest, but there is often a one-time enrollment fee of around $40 to $75, according to NACUBO.

    Many colleges also offer their own loans to families at 0% interest with repayment periods that range from one semester to 10 years after graduation; the terms vary by school. In some cases, families must display need in order to qualify.

    5. Low-cost schools

    It’s surprising, but some colleges don’t charge tuition to their undergraduates. They include the highly selective New York-based Cooper Union, a school known for its engineering, architecture and arts programs. Students interested in pursuing a degree in music can consider the Curtis Institute of Music, located in Philadelphia. There’s also Alice Lloyd College, based in Pippa Passes, Ky., which offers free tuition to Central Appalachia residents. FinAid.org maintains a list of colleges that don’t charge tuition. Keep in mind, no tuition doesn’t necessarily mean college will be totally free; with many of these schools, families still need to pay for fees and room and board.

    Separately, 74 colleges have a “no-loans policy” that guarantees grants and other free aid instead of loans in the financial aid packages they dole out to students, according to FinAid.org, which tracks financial aid issues. Many private colleges offer this and the aid is often pegged to a household’s income levels.

    6. Low-cost federal loans

    Families who have no choice but to take out loans should first turn to subsidized federal loans where the federal government covers interest payments while the child is in school. Students qualify for them based on need.

    The Perkins loan has a fixed rate of 5%, and undergrads can get up to $5,500 per year with a $27,500 total limit. There’s also the subsidized Stafford loan, which currently has a fixed rate of 3.4% through June 2013. Congress will need to decide whether to extend this rate or allow it to go up to 6.8% for the 2013-14 academic year. Freshmen can borrow up to $3,500 for the year, while sophomores can take out up to $4,500 and juniors and seniors can get up to $5,500.



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