Now that you have figured out that you want to attend college the other challenge is figuring out how to pay for it. Whether it is at a more cost-effective community college, or a big money four-year private university, tuition bills continue to rise higher than the rate of inflation at the nation's institutions of higher education.

Ironically, American colleges report that one of the reasons tuition is rising is because more students require financial aid, making that one of the most rapidly growing components of a college's budget.

Since more students from low-income families are now going to college, as compared to a few decades ago, financial aid has become critical. Financial assistance is now available to help defray the mounting costs of everything from tuition, fees, and even books and materials, especially for students with the greatest economic needs.

You can pay for college from a variety of resources. Some parents started preparing early, saving up for your higher education since your childhood, by investing in College Savings Plans, such as Prepaid tuition plans. 19 states offer Prepaid options and some even offer options to cover room and board.

With these plans, parents lock in tuition rates at a state college or university by paying a lump sum or making payments. The state pools the money and invests it, then pays the tuition when the child starts college. Some of the plans, such as the Independent 529 College Savings Plan, allow tuition to be transferred to private colleges in another state. Click here for more information.

But financial experts predict a bleak future for these popular plans, forcing states to eliminate them because of soaring tuition rates and inadequate investment returns.

There are many other funding options available to future college students such as institutional funds, (the grants or scholarships given directly from the college). The scholarships are "free money," also known as Gift Aid, which you don't have to pay back. This is usually awarded based on academic achievement or talent.

A Grant is based on financial need and your eligibility will depend on family income. This one must be paid back with interest after you graduate but not while you are in school. Grants that are given by the government have the lowest interest rates and offer the most flexible re-payment plans after graduation.

Another source of college funds is Work Study in which you basically work to pay for some of the costs of your education, such as books or course materials. The school's financial aid office finds you the jobs.

For the most financially-needy students, a Federal Pell Grant is available. This type of aid is also "free money" but there has been a sharp drop in this type of government grant because Congress has not increased the Pell Grant for low-income students since 2003.

The maximum Pell Grant is about $4,000 a year so, according to statistics from Project on Student Debt, low income students are being forced to borrow more from other sources to make up the difference.

If you want to know if you qualify for these dollars you must fill out the necessary government paperwork here.

For those whose parents' incomes are too high to qualify for government aid, but not sufficient to cover the full cost of college, the most viable option is to borrow from private lenders.

These loans carry higher interest rates than government grants. Financial advisors warn that with rising interest rates the best option is to consolidate these loans and lock in a lower rate for the life of the loan.

While recent statistics put the average cost of a four-year university at around $22,000 per year, tuition and fees at some top colleges can top out at about $40,000 a year.

You should not necessarily rule out these top-dollar schools. They may be able to offer a hefty financial aid package or scholarship awards because they often have larger endowments and thus bigger financial aid packages to distribute to worthy students.

Whatever the potential funding source is, college counselors advise applicants to get all financial aid applications completed early, including the FAFSA—Federal Student Aid forms. Applying for aid early—be it Federal student loans, private student loans, or grants—gives you an edge.

If you apply between September and February you will have an advantage in receiving financial aid, plus you will know your acceptance status in early May. The US Department of Education can provide you with more student aid information.

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