Source: Sandra Block, USA Today

f worries about paying for college disrupt your sleep, here’s news that will keep you up until dawn: More students than ever are competing for a shrinking pool of financial aid.

Several states have reduced scholarships or toughened eligibility criteria for financial aid. Eligibility for the maximum Pell grant, the largest source of federal financial aid, has also been tightened. Meanwhile, the number of families applying for financial aid has soared. More than 21 million families filled out the Free Application for Federal Student Aid (FAFSA) for the 2010-11 academic year, last fall, up 49% from two years earlier.

That doesn’t mean you shouldn’t bother to apply. The FAFSA is the foundation for most federal, state and institutional aid. You’ll also need it to qualify for federal student loans, which are available for all full-time students, regardless of income.

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